2006 (8) TMI 74 - AT - Central Excise

Tribunal allows SSI exemption for excluding third-party branded goods from value calculations

NEBULAE HEALTH CARE LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI

NEBULAE HEALTH CARE LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI - 2007 (209) E.L.T. 125 (Tri. - Chennai), 2007 (78) RLT 74 (CESTAT - Che.) Issues Involved:1. Eligibility for SSI exemption under relevant notifications.2. Simultaneous availment of SSI exemption and Modvat/Cenvat credit.3. Interpretation of the relevant notifications in light of previous case laws and Supreme Court decisions.Detailed Analysis:Issue 1: Eligibility for SSI Exemption under Relevant NotificationsThe lower appellate authority confirmed the demand against the assessee primarily because the assessee violated a condition in the Notifications No. 8/1999, 8/2000, 8/2001, 8/2002, and 8/2003. The condition stipulated that the manufacturer shall not avail credit of duty on inputs under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002, for goods cleared for home consumption where the aggregate value of first clearances does not exceed rupees one hundred lakhs.Issue 2: Simultaneous Availment of SSI Exemption and Modvat/Cenvat CreditThe assessee manufactured goods on its own account and on a job work basis for third parties, using the third parties' brand names. For its own goods, the assessee availed SSI exemption under the relevant notifications. For goods bearing third-party brand names, the assessee availed Modvat/Cenvat credit and paid normal excise duty. The lower authorities denied the SSI benefit on the grounds that simultaneous availment of SSI exemption and Modvat/Cenvat credit was barred by the notifications.The assessee cited several case laws supporting simultaneous availment of SSI benefit and Modvat credit, but the Commissioner (Appeals) dismissed these precedents, relying on the Supreme Court's decision in CCE v. Ramesh Food Products. The Supreme Court had ruled that manufacturers could not simultaneously avail Modvat credit and full exemption under Notification 175/86.Issue 3: Interpretation of Relevant Notifications in Light of Previous Case Laws and Supreme Court DecisionsThe assessee argued that their case was different from Ramesh Food Products as they did not avail two options simultaneously. They claimed full exemption without Cenvat credit for their own goods and paid full duty on third-party branded goods. They pointed out that the notifications themselves excluded the value of clearances of goods bearing third-party brand names from the computation of aggregate value of clearances for exemption eligibility.During the hearing, the learned Counsel for the assessee argued that the notifications (e.g., 8/2003 and 9/2003) excluded branded goods from the exemption scheme, and therefore, the assessee could avail usual benefits for such goods. The learned SDR contended that as per the notifications, manufacturers enjoying full exemption could not avail Modvat credit until the aggregate value of clearances reached one hundred lakh rupees.The Tribunal found that the lower authorities had erred in denying the SSI benefit. The relevant notifications excluded the value of clearances of third-party branded goods from the computation of aggregate value for exemption purposes. Therefore, the assessee correctly availed the SSI benefit for its own goods, and the impugned order was not sustainable.The Tribunal also noted that the Supreme Court's decision in Ramesh Food Products was based on Notification 175/86, which had different provisions compared to the relevant notifications in this case. The relevant notifications specifically excluded third-party branded goods from the exemption scheme, unlike Notification 175/86.Conclusion:The Tribunal concluded that the assessee had correctly availed the SSI exemption under the relevant notifications and set aside the impugned order. The appeal was allowed, and the operative portion was pronounced in the open court on 22-8-06.