Small-scale exemption protects units from duty and penalty where undeclared goods still fall within the exemption limit.

A small-scale unit operating under an exemption notification was found not liable to duty demand or penalty where some manufactured goods were omitted from the earlier declaration and minor register discrepancies were noticed. The goods were still within the overall exemption limit when declared and undeclared products were considered together, and the record differences were treated as minor because the unit was not subject to the full statutory record-keeping regime applicable to controlled units. On that basis, the duty demand and penal action were held unsustainable and the adverse order was set aside.

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Issues: Whether duty demand and penal action were justified against a small-scale unit exempted from excise control, where some manufactured goods were not included in the earlier declaration and minor discrepancies were noticed in the unit's own registers.

Analysis: The unit had filed a declaration under the relevant exemption notification and was operating as a small-scale unit outside the normal excise control regime. The goods in question were held to be within the overall exemption limit when all declared and non-declared products were considered together. The register discrepancies were treated as minor and not a basis for adverse action, since the unit was not required to maintain the records on the statutory footing applicable to controlled units.

Conclusion: The demand of duty and the penalty were not sustainable, and the impugned order was set aside.

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