1997 (5) TMI 175 - AT - Central Excise

Summary

Issues: Interpretation of Notification No. 175/86-C.E. regarding small scale industry exemption eligibility based on clearances value.

The judgment by the Appellate Tribunal CEGAT, New Delhi involved an appeal by M/s. Sansui Electronics Pvt. Ltd. concerning the interpretation of para-4 proviso (a) under Notification No. 175/86-C.E. The exemption under the notification was applicable only to an undertaking registered with the Director of Industries or the Development Commissioner as a small scale industry. The appellants were not registered as such, and their clearances value had exceeded Rs. 7.5 lakhs during the preceding financial year. The dispute centered on whether the exemption applied if the current financial year's clearances value was not likely to exceed Rs. 7.5 lakhs, even without registration. The appellants manufactured electronic products and had sought exemption under a different notification in the past. The Assistant Collector confirmed a demand of Rs. 59,329.50 for the period April 1986 to November 1986 due to the clearances value exceeding the threshold. The Collector of Central Excise (Appeals) upheld this decision.

The main argument presented by the appellants was that the expression "or" in the proviso should be read as "and," citing relevant case law to support their position. They contended that their eligibility for the exemption should be based on the current financial year's clearances value not exceeding Rs. 7.5 lakhs, even without registration. On the other hand, the Revenue representative argued that once the clearances value exceeded Rs. 7.5 lakhs in the preceding financial year, the small scale exemption could only apply to registered undertakings. The Revenue emphasized that the proviso's language was clear and did not support the appellants' interpretation. They highlighted that the Department had not interpreted "or" as "and" and that the case law cited by the appellants was not applicable to the facts at hand.

The Tribunal analyzed the relevant provisions of the notification, particularly para-4 and its proviso (a), which outlined the conditions for small scale industry exemption eligibility based on clearances value. It was undisputed that the appellants were not a small scale unit and had exceeded the clearances value threshold in the preceding financial year. The Tribunal rejected the appellants' argument that their eligibility for the exemption should be based solely on the current financial year's clearances value. The Collector of Central Excise (Appeals) had correctly interpreted the notification, stating that a Small Scale Industry (SSI) registration certificate was necessary if the clearances value exceeded Rs. 7.5 lakhs in the preceding year. The Tribunal agreed with the lower authorities' interpretation and concluded that there was no merit in the appeal, ultimately rejecting it.

In summary, the judgment focused on the correct interpretation of Notification No. 175/86-C.E. regarding the eligibility for small scale industry exemption based on the clearances value threshold. The Tribunal upheld the lower authorities' decision that once the clearances value exceeded Rs. 7.5 lakhs in the preceding financial year, the exemption could only apply to registered undertakings, and the current financial year's clearances value alone was not sufficient for eligibility.