2003 (12) TMI 86 - AT - Central Excise

SSI Exemption - Opting out - Whether an assessee who paid the duty at the normal rate at the commencement of the financial year under the provisions of Notification 1/93 and thereafter was eligible to avail the benefit of Notification 1/93 during the same financial year if he satisfies other conditions? - HELD THAT - In the present case, the assessee M/s. Ankit Packaging Ltd. did not opt for not availing the benefit. Instead, it wrote on 10-4-1998 stating that it was availing the benefit of the exemption and was clearing the goods in terms of the notification. Therefore, the finding of the lower authority is contrary to the appellant's option. The notification calls for specific opting out by a manufacturer. There was no requirement to opt in. In the present case, the assessee has also written to the department informing that it was wanting to avail the exemption notification. In the face of such opting in, there was no justification for interpreting the payment of duty on some goods as opting out. Moreover, the assessee has also explained his reason for clearing some goods on payment of duty at the beginning of the financial year; it required some time to compute the aggregate value of the clearances made during the preceding financial year, so as to be sure that it had not exceeded the qualifying value limit during the preceding financial year. Thus, paying duty on the goods cleared during the opening days of the Financial Year was only erring in favour of the revenue and not foregoing an exemption. Such caution in an assessee cannot be turned against him. We find that a similar issue had come up before us in the case of C.C.E., Coimbatore v. Marutham Textiles (P) Ltd. and Others 2003 (2) TMI 86 - CEGAT, NEW DELHI and we took the view that clearance of some goods in the beginning of the financial year on payment of duty was no ground for holding that the assessee who was an entitled small scale unit, has opted out of the benefit of Notification No. 1/93.

Summary

Issues involved: Interpretation of Notification 1/93 regarding duty exemption for small scale units and the applicability of the proviso allowing units to opt out of the exemption.

Summary:
The Appellate Tribunal CESTAT, New Delhi addressed the issue of whether an assessee who initially paid duty at the normal rate under Notification 1/93 could later avail the benefit of the same notification in the same financial year. The case involved M/s. Ankit Packaging Ltd., a small scale unit engaged in manufacturing, eligible for exemption from Central Excise duty under the notification. The proviso in the notification allowed units to opt out of the exemption and pay duty at normal rates. M/s. Ankit Packaging Ltd. initially paid duty on some goods in the financial year 1995-96 due to computation reasons. The Central Excise authority contended that they were liable to pay duty on all subsequent clearances in that year. The Tribunal clarified that the proviso applied to manufacturers opting out of the exemption, which M/s. Ankit Packaging Ltd. did not do. The Tribunal emphasized that the payment of duty initially did not constitute opting out, as the assessee had expressed intent to avail the exemption. Referring to a similar case, the Tribunal ruled in favor of the assessee, stating that clearing goods on payment of duty at the beginning of the financial year did not imply opting out of the exemption. The Tribunal directed the appeal files to be forwarded for further action by the Bangalore Bench.

This judgment clarifies the distinction between opting out of an exemption and paying duty initially for computation purposes, providing guidance on the correct interpretation of Notification 1/93 for small scale units seeking duty exemptions.