2023 (5) TMI 433 - AT - Central Excise

Legality of availment of SSI exemption under Notification No. 08/2003-CE(NT) dated 28.02.2003 - non-inclusion of value of supplies to Merchant Exporters - applicability of clarificatory Circular No. 468/39/2002- CX dated 25.07.2002 - penalty on Appellant Company or its Managing Partner - HELD THAT - here is reiteration of the finding of this Tribunal made on this issue in the case of VADAPALANI PRESS VERSUS COMMISSIONER OF C. EX. CHENNAI 2007 (3) TMI 151 - CESTAT CHENNAI where it was held that we are of the view that the interpretation given by Learned SDR to the Board s Circular No. 648/39/2002 would not be consistent with the provisions of law governing issuance of Form-H certificate. It is not the case of the Revenue that the cartons supplied by the appellants to A.V. Thomas Co. and other similar customers were not exported. It is however pointed out that the cartons were not exported as such but were only used as packing material for goods exported by the customers. It is also noticed that Hon ble High Court of Bombay in COMMISSIONER OF CENTRAL EXCISE MUMBAI-V VERSUS UNIVERSAL PACKAGING 2013 (10) TMI 140 - BOMBAY HIGH COURT had dismissed the Revenue s appeal that was filed against decision of this Tribunal given in UNIVERSAL PACKAGING VERSUS COMMISSIONER OF C. EX. MUMBAI-V 2010 (9) TMI 561 - CESTAT MUMBAI that was being passed basing on the ratio of Vadapalani Press. Further decision of Vadapalani Press has been consistently followed thereafter in several decisions of this Tribunal including the case of JAI JAWALA PROCESSORS VERSUS COMMISSIONER OF CENTRAL EXCISE ROHTAK 2014 (12) TMI 1318 - CESTAT NEW DELHI COMMISSIONER OF CENTRAL EXCISE VERSUS AMAR PACKAGING INDUSTRIES 2012 (8) TMI 1068 - GUJARAT HIGH COURT VIBA FLUID CONTROL VERSUS COMMISSIONER OF CENTRAL EXCISE BELAPUR 2017 (11) TMI 277 - CESTAT MUMBAI and HARE KRISHNA BOXES PVT. LTD. VERSUS COMMISSIONER OF C. EX. BELAPUR 2010 (12) TMI 715 - CESTAT MUMBAI - thus inclusion of such value of corrugated boxes supplies to Merchant Exporters to determine tax liability by computing the out-turn so as to exceed the SSI exemption limit and its confirmation by the Commissioner (Appeals) is not sustainable in both law and facts. No penalty is imposable also on the Appellant Company or its Managing Partner. Appeal allowed.

Summary

Issues:
Legality of availment of SSI exemption under Notification No. 08/2003-CE(NT) dated 28.02.2003 without including value of supplies to Merchant Exporters resulting in duty demand and penalties.

Analysis:
The judgment concerns the legality of availing the Small Scale Industry (SSI) exemption without including the value of supplies to Merchant Exporters, leading to duty demand and penalties. The Appellant, a manufacturer of Corrugated Carton Boxes, had availed the SSI exemption but faced duty demands based on a clarificatory Circular indicating that the exemption only applied to goods exported directly by exempted units themselves or through Merchant Exporters. The Commissioner (Appeals) confirmed duty demands, leading to the present appeals.

The Tribunal considered submissions and cited the case law of Decorpac vs. Commissioner of Central Excise, New Delhi, and Vadapalani Press vs. Commissioner to analyze the issue. The Tribunal noted that the interpretation of the clarificatory Circular was inconsistent with the law governing issuance of certificates. Previous decisions supported that clearances of corrugated boxes to be used as packing material for exports were not to be included in the exemption calculation. The Tribunal also referenced a High Court decision and multiple Tribunal decisions upholding this interpretation.

Based on the precedent set by previous cases, the Tribunal concluded that the inclusion of the value of corrugated box supplies to Merchant Exporters in determining tax liability beyond the SSI exemption limit was not sustainable in law or fact. Therefore, no penalties were imposed on the Appellant company or its Managing Partner. The Tribunal allowed the appeals and set aside the order of the Commissioner of Central Excise (Appeals), providing consequential relief to the Appellant.

In summary, the judgment clarified the interpretation of the SSI exemption regarding supplies to Merchant Exporters, relying on established case law and judicial precedents to rule in favor of the Appellant and overturn the duty demands and penalties imposed by the Commissioner (Appeals).