2018 (5) TMI 1055 - HC - Central Excise

Valuation - SSI Exemption - Determination of turnover - whether the value of chassis which the respondent assessee uses for fitting bodies upon manufactured vehicles should be included for ascertaining the assessee s value of aggregate clearances for the purpose of exemption as a Small Scale Industrial unit? Held that - When one is ascertaining the aggregate value of clearances of all excisable goods for home consumption for the purpose of clause( vii) of para 2 of the said notification, in terms of clause( b) of para 3 thereof, the value of clearances of specified goods which are used as inputs for further manufacture of any specified goods within the factory of production would be excluded - the Tribunal is correct in coming to the conclusion that the value of chassis would not be included in the aggregate value of the clearances of the assessee of all excisable goods for home consumption - appeal dismissed - decided against Revenue.

Summary

Issues involved:
1. Whether the value of chassis used by the respondent assessee should be included in calculating the aggregate value of clearances for the purpose of exemption as a Small Scale Industrial unit.
2. Whether the respondent assessee is entitled to cumduty benefit.

Detailed analysis:
1. The first issue revolves around whether the value of chassis used by the respondent assessee for fitting bodies on manufactured vehicles should be considered in determining the assessee's value of aggregate clearances for exemption as a Small Scale Industrial unit. The respondent is engaged in manufacturing specified bodies fitted on procured chassis. The department argues that the chassis value should be included in the assessee's clearances to assess its SSI status. The outcome of this issue impacts the assessee's eligibility for exemption notifications. The Tribunal ruled in favor of the assessee, stating that the value of chassis should not be included in the aggregate clearances, citing relevant notification clauses.

2. The second issue arises as a consequence of the first issue. If the value of chassis is included, the assessee may lose its SSI status and the associated benefits. The question then shifts to the assessee's duty liability and whether it can avail cenvat credit for the goods used as inputs. The adjudicating authority and the Appellate Commissioner initially favored the department's stance based on specific notification clauses. However, the Tribunal reversed these decisions, emphasizing different notification parameters to support its ruling in favor of the assessee.

In-depth analysis:
The High Court analyzed the relevant notification (no.8 of 2003) which provides exemptions to eligible assesses from excise duties. The notification sets conditions for the exemption, including the aggregate value of clearances for home consumption not exceeding a specified limit. The Court highlighted the interplay between different clauses of the notification to determine the assessee's eligibility. While para 2(vii) establishes a threshold for aggregate clearances, para 3(b) excludes clearances of specified goods used as inputs for further manufacture within the factory. The Court concluded that the value of chassis, being a specified good used as an input for further manufacture, should be excluded from the assessee's aggregate clearances for home consumption.

The Court's decision rested on a comprehensive interpretation of the notification clauses, emphasizing the exclusion of specified goods used as inputs for further manufacture. As both the chassis and the final product were considered specified goods, the value of chassis was rightfully deemed ineligible for inclusion in the assessee's clearances. The Tribunal's ruling was upheld, and the Court found no legal error in the decision. Consequently, the second issue regarding cumduty benefit became moot. The Tax Appeal was dismissed in favor of the respondent assessee.