2010 (12) TMI 715 - AT - Central Excise

SSI Exemption - whether the assessee should be required to include the clearances made to merchant-exporters also in the computation of aggregate value of clearances of specified goods for home consumption - Board s Circular No. 648/39/2002 - Held that - the assessee in the present has established that the corrugated boxes were not cleared for home consumption but cleared for export in terms of Rule 19(1) of the Central Excise Rules and, therefore, such clearances are not liable to be reckoned as part of aggregate clearances for home consumption for the purposes of SSI notification for any of the financial years comprised for the period of dispute in this case.

Issues Involved:
1. Eligibility for SSI benefit.
2. Inclusion of clearances to merchant-exporters in aggregate value of clearances for home consumption.
3. Proof of export and use of Sales Tax Forms (H-Forms).
4. Compliance with the simplified procedure for export by exempted units.
5. Imposition of penalties under Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Eligibility for SSI Benefit:
The assessee claimed SSI benefit for the period from 1-4-2001 to 31-7-2007, during which they did not pay excise duty on their product (printed corrugated boxes). The aggregate value of clearances for home consumption remained below the prescribed limits under the relevant SSI notification, thus no duty was paid on goods cleared for home consumption.

2. Inclusion of Clearances to Merchant-Exporters:
The department issued show-cause notices alleging that the corrugated boxes cleared to merchant-exporters should be included in the aggregate value of clearances for home consumption. The notices claimed that since the goods were not directly exported from the assessee's factory and no correlation was established between the goods exported and the boxes cleared, these clearances should be accounted for home consumption.

3. Proof of Export and Use of Sales Tax Forms (H-Forms):
The assessee produced Sales Tax Forms (G-I Forms up to 1-4-2005 and H-Forms from 1-4-2005) as proof of export for the corrugated boxes cleared to merchant-exporters. The Tribunal referenced the case of Vadapalani Press v. Commissioner of Central Excise, Chennai, where it was held that clearances to merchant-exporters could be excluded from the aggregate value of clearances for home consumption if H-Forms were used as proof of export.

4. Compliance with Simplified Procedure for Export:
The learned Jt. CDR argued that the simplified procedure prescribed by the Board for export by exempted units was not followed, as the goods were not directly exported from the assessee's factory. The Tribunal considered para 4.1.2 of Chapter 7 of the "Central Excise Manual of Supplementary Instructions" and previous Tribunal decisions, concluding that the assessee was entitled to use H-Forms as proof of export even if the goods were exported through merchant-exporters.

5. Imposition of Penalties:
The Commissioner confirmed the demands of duty and imposed penalties on the assessee under Section 11AC of the Central Excise Act. Separate penalties were also imposed on one of the company's directors. The Tribunal, following the precedent set in Vadapalani Press and other similar cases, found that the assessee had established that the corrugated boxes were cleared for export and not for home consumption, thus setting aside the penalties.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders and confirming that the clearances to merchant-exporters were for export purposes and should not be included in the aggregate value of clearances for home consumption. The reliance on H-Forms as proof of export was deemed valid, and the penalties imposed were annulled.

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