Small scale industry exemption not reduced by dutiable clearances of a separate product under Notification No. 175/86-CE.

Interpretation of Notification No. 175/86-CE required that clearances of one excisable item, even when partly made on payment of duty after the exemption limit was exhausted, were not to be aggregated to reduce the small scale industry exemption available for another distinct product. The Tribunal followed later decisions holding that the earlier Larger Bench view should not be applied in light of subsequent authority and the Supreme Court's dismissal of the Revenue's appeal. The result was that the dutiable clearances of the first item did not erode the exemption entitlement for the second item, leaving the assessee eligible for the separate exemption.

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Issues: Whether, for the purpose of availing the small scale industry exemption under Notification No. 175/86-CE dated 01.3.1986, the clearances of one excisable item cleared partly on payment of duty had to be aggregated so as to reduce the exemption available for another item.

Analysis: The dispute turned on the interpretation of Notification No. 175/86-CE. The appellant manufactured two different products and had already availed the exemption limit in respect of one item, after which the clearances of that item were made on a concessional duty slab. The Revenue sought to treat those dutiable clearances as affecting the separate exemption limit available for the other product. The Tribunal held that the issue was no longer res integra and followed the line of decisions which had taken the view that the earlier Larger Bench ruling was not to be applied, in light of subsequent decisions and the dismissal of the Revenue's appeal by the Supreme Court.

Conclusion: The clearances of the first item did not reduce the exemption available for the second item, and the dispute was decided in favour of the assessee.

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