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Issues: Whether the value of goods supplied free of cost under the supply contracts could be added by a notional amount to the assessee's turnover for determining eligibility to small-scale exemption under Notification No. 1/93-C.E.
Analysis: The goods supplied free of cost were the very same products contracted to be supplied, and no separate amount was charged from the buyers for those free supplies. The turnover already reflected the consideration collected for the goods cleared under the contracts, and the free supplies formed part of the overall quantity covered by that consideration. In such circumstances, there was no basis to add any further notional value of the free-supplied goods to the clearances for computing the exemption limit.
Conclusion: The inclusion of the free-supply value in turnover was unjustified and the assessee remained within the exemption limit; the finding was in favour of the assessee.
Final Conclusion: The demand and penalty could not be sustained, and the assessee was entitled to the exemption benefit with consequential relief.
Ratio Decidendi: For computing an SSI exemption turnover limit, no notional value can be added for goods supplied free of cost where such supplies are part of the same contractual clearances and no separate consideration is charged for them.
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