SSI exemption and fortnightly duty payment: a circular cannot override the rule-based exclusion, so interest and penalty fail.

An SSI unit availing a value-based exemption under the Central Excise Rules was excluded from the general requirement of fortnightly duty payment under Rule 173G(1)(a), so that payment schedule did not apply. A departmental circular could not override the express exclusion in the rule, and any contrary direction in the circular was ineffective. On that basis, the interest demand and penalty were unsustainable.

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Issues: Whether an assessee availing Small Scale Industry exemption under a notification linked to value of clearances was bound to pay duty on a fortnightly basis under Rule 173G(1)(a) of the Central Excise Rules, 1944, and whether interest and penalty were consequently leviable.

Analysis: Rule 173G(1)(a) required fortnightly payment of duty by manufacturers generally, but the rule itself excluded manufacturers availing exemption under a notification based on the value of clearances in a financial year. The assessee was an SSI unit covered by such an exemption, and therefore the liability to make fortnightly payment did not apply to it. The circular relied upon by the Revenue, to the extent it suggested otherwise, was held to be contrary to the governing rules and could not override them.

Conclusion: The assessee was not required to pay duty on a fortnightly basis, and the interest demand and penalty were unsustainable.

Ratio Decidendi: A departmental circular cannot override the express exclusion contained in the statutory rule, and an SSI unit enjoying value-based exemption is not subject to the fortnightly duty-payment requirement under Rule 173G(1)(a).

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