2017 (8) TMI 546 - AT - Central Excise

Value Based Exemption - intermediate product - N/N. 5/98-CE dated 02.06.98 and N/N. 5/99-CE dated 28.02.99 - The Department was of the view that since the final products were cleared availing full exemption, the plastic sheets emerging as intermediate goods were subject to duty liability @ 24% - Held that - The plastic sheets (39.20) are specified as finished goods under N/N. 16/97, which grants exemption to such goods to a value of clearance of ₹ 50 Lakhs for home consumption - In the present case, the appellants are not liable to pay duty on the plastic sheets since, they are eligible for exemption even though they are also availing the benefit of value based exemption of SSI unit - Even as per the SCN, the value of clearances of plastic sheets for the disputed period on which duty is demanded is less than ₹ 50 Lakhs. There is no ground for denying the benefit of exemption on plastic sheets under N/N. 16/97 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Notification No. 16/97-CE regarding duty exemption on plastic sheets.
2. Eligibility of the appellants for exemption on intermediate product plastic sheets while availing value-based exemption for finished products.
3. Applicability of Notification No. 67/97-CE and its explanation on duty liability for plastic sheets.

Analysis:
1. The case involved a dispute regarding the duty liability on plastic sheets emerging as intermediate goods during the manufacture of plastic articles for conveyance or packing. The Department alleged that since the final products were cleared with full exemption, the plastic sheets were subject to duty liability at 24%. The appellants claimed exemption under Notification No. 16/97-CE for plastic sheets up to a specified value for home consumption.

2. The appellants argued that they were eligible for exemption on finished products up to a certain value without availing modvat credit on inputs or capital goods. They contended that the plastic sheets, as intermediate products, were exempted under Notification No. 16/97-CE up to a specific value for home consumption, including captive consumption. The appellants maintained that there was no bar in claiming both value-based exemption for finished products and exemption for plastic sheets under separate notifications.

3. The Tribunal referred to a previous judgment in a similar case where it was held that the appellants were eligible for small-scale exemption for plastic sheets under Notification No. 16/97-CE, as the value of clearances of plastic sheets was below the specified limit. The Tribunal noted that the introduction of a rider in the explanation of the notification did not affect the appellants' eligibility for exemption on plastic sheets. Based on this precedent and interpretation of relevant notifications, the Tribunal concluded that the demand for duty on plastic sheets was unsustainable, setting aside the impugned order and allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, holding that they were eligible for exemption on plastic sheets under Notification No. 16/97-CE despite availing value-based exemption for finished products, as the value of clearances of plastic sheets was within the specified limit. The judgment highlighted the importance of correctly interpreting relevant notifications to determine duty liability on intermediate goods in the manufacturing process.