2013 (10) TMI 334 - AT - Central Excise

SSI Exemption Benefit calculation of turnover of 1.5 crore and 4.0 crore - Clubbing of clearance - Waiver of Pre-deposit - manufacturers against loan licence agreement or on job work basis. - Held that - From the combined reading of para 2 and 3 of the notification it is noticed that the value of duty paid clearances cleared by a manufacturer are also to be included while computing the value of clearances of all excisable goods in the preceding financial year for computing the limit of ₹ 4 crores for the purpose of eligibility of the exemption notification for the current financial year. Therefore the value of the goods cleared by the appellant against loan license or job work basis from other units are to be clubbed for the purpose of ascertaining ₹ 4 crore limit in the preceding financial year. However, as regard the value of the clearances made in the current financial year under condition 3(b) the clearances bearing the brand name or trade name for other persons which are ineligible for exemption are to be excluded for computing the first clearances of ₹ 1.5 crore. I find the goods cleared under a brand name or a trade name which are ineligible for exemption are cleared on payment of duty. Therefore the duty paid clearances bearing a brand name or trade name of other persons are to be excluded for computation of ₹ 1.5 crores in the current financial year. Larger bench decision by majority - Prima facie case is against the assessee - stay granted partly

Summary

Issues Involved:
1. Eligibility for SSI exemption under Notification No. 8/2003-CE.
2. Clubbing of clearances from different manufacturers for determining SSI exemption eligibility.
3. Prima facie case for waiver of pre-deposit under Section 35F of the Central Excise Act, 1944.

Detailed Analysis:

1. Eligibility for SSI exemption under Notification No. 8/2003-CE:
The appellant is engaged in the manufacture of Ophthalmic and liquid orals (medicaments) and avails SSI exemption under Notification No. 8/2003-CE. The jurisdictional central excise officers found discrepancies between the clearances declared in the ER-I Returns and the balance sheets for the years 2007-2008 and 2008-2009. The department opined that the aggregate clearances for home consumption during 2007-2008 exceeded Rs. 4 Crores, making the appellant ineligible for SSI exemption for the year 2008-2009. A show cause notice was issued for the demand of differential duty amounting to Rs. 18,54,000/- along with interest and penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The original adjudicating authority confirmed the duty demand and imposed a penalty, which was later partially upheld by the Commissioner (Appeals) with a reduced duty demand of Rs. 12,36,000/-.

2. Clubbing of clearances from different manufacturers for determining SSI exemption eligibility:
The appellant argued that they have only one manufacturing unit at Allahabad and also get goods manufactured through other manufacturers under loan licence and job work agreements. The goods manufactured by other units were cleared on payment of duty and sold from the appellant's depot. The appellant contended that the value of clearances of goods manufactured under loan licence or job work agreements should not be clubbed with the clearances of their own goods for SSI exemption purposes. The Commissioner (Appeals) relied on para 4.2 of Chapter 2 of the CBEC Excise Manual of supplementary instructions for clubbing the clearances. However, the appellant argued that the clubbing done by the department is contrary to the provisions of the SSI exemption notification, which only requires clubbing of clearances from one or more factories of the same manufacturer or from a factory by one or more manufacturers.

3. Prima facie case for waiver of pre-deposit under Section 35F of the Central Excise Act, 1944:
The appellant pleaded for a waiver of the pre-deposit requirement, arguing that the difference between the balance sheet figures and the ER-I return figures was due to the inclusion of goods manufactured on job work or loan licence basis. The department opposed the stay application, citing a judgment of the Hon'ble Allahabad High Court in the appellant's own case. The Member (Technical) concluded that the appellant had a strong prima facie case, as the interpretation of para 4.2, Chapter 2 of the supplementary instructions adopted by the department was contrary to the provisions of the SSI exemption notification. The requirement of pre-deposit of duty demand, interest, and penalty was waived, and recovery was stayed till the disposal of the appeal. However, the Member (Judicial) directed the appellant to deposit Rs. 6,00,000/- within 4 weeks. The third Member agreed with the direction for pre-deposit, and the appellant was directed to comply.

Conclusion:
The judgment involved a detailed examination of the appellant's eligibility for SSI exemption, the clubbing of clearances from different manufacturers, and the requirement of pre-deposit under Section 35F. The Tribunal found that the appellant had a strong prima facie case and waived the requirement of pre-deposit, but ultimately directed a deposit of Rs. 6,00,000/- to safeguard the revenue's interest.