2010 (9) TMI 551 - AT - Central Excise

SSI exemption - Value of clearances - The assessees are registered merchant-manufacturer of ready-made garments availing the benefit of exemption with effect from 1-5-2001 - Alleged by the department that the total value of clearances exceeded Rs. 3 crores limit and therefore the assessees were not eligible to the exemption under Notification No. 8/2002 - The real purport and meaning of the words whether on payment of duty or otherwise occurring in the proviso and it is incorrect to mean retailer s sales turnover - The proviso will have application only to a physical manufacturer or to a merchant manufacturer who also had physical manufacturing facility and not to cases like that of appellants who had no physical manufacturing facility at any point of time but are retail traders. Held that the exemption is available to the assessees - The lower appellate authority is correct in not including the value of clearances of ready-made garments on job work - Therefore, uphold the impugned order and reject the appeal.

Summary

Issues:
Interpretation of exemption notification under Notification No. 8/2002 - Eligibility criteria based on the value of clearances for home consumption - Inclusion of value of clearances for calculating aggregate value - Applicability of proviso to condition 3 of the Notification - Distinction between merchant-manufacturer and physical manufacturer - Retail sales turnover in determining eligibility for exemption.

Analysis:
The case involved the interpretation of an exemption notification under Notification No. 8/2002 for registered merchant-manufacturers of ready-made garments. The dispute arose regarding the eligibility criteria based on the total value of clearances for home consumption during the relevant period. The department alleged that the total value of clearances exceeded the prescribed limit, making the assessees ineligible for the exemption. The proviso to condition 3 of the Notification specified that clearances between certain dates should be considered while computing the aggregate value of clearances for the financial year.

The adjudicating authority initially held that the assessees were not eligible for the exemption, leading to a demand for duty payment, which was contested by the assessees. The Commissioner (Appeals) later set aside the demand, prompting the Revenue to appeal the decision. The appellate tribunal considered the arguments presented and the lower appellate authority's findings.

The tribunal emphasized that the value of clearances for home consumption by the assessees themselves should be considered, excluding clearances of ready-made garments made on a job work basis. It was clarified that the term "clearance for home consumption" typically refers to clearances from a factory or approved place, not retail sales of bought-out goods. The tribunal also distinguished between the turnover of the assessees and physical manufacturers, highlighting that the value of clearances should be attributed only to the merchant-manufacturer in the context of the exemption.

Furthermore, the tribunal analyzed the interpretation of the phrase "whether on payment of duty or otherwise" in the proviso, emphasizing that it should include clearances of physical manufacturers and merchant manufacturers with physical manufacturing facilities, not retail traders without such facilities. The tribunal agreed with the lower appellate authority's reasoning and held that the exemption was available to the assessees, thereby upholding the impugned order and rejecting the Revenue's appeal.

In conclusion, the tribunal's decision clarified the eligibility criteria for the exemption under the Notification, emphasizing the importance of considering the value of clearances for home consumption by the assessees themselves and excluding clearances made on a job work basis. The judgment highlighted the distinction between merchant-manufacturers and physical manufacturers in determining eligibility for the exemption, ensuring a clear interpretation of the relevant provisions and criteria.