SSI exemption for job-worker clearances cannot be denied where substantive notification conditions and challan-backed supplies are satisfied.

Clearances by a job worker to SSI units were treated as exempt where the supplies were supported by challans and the principal manufacturers stated that they were availing SSI exemption. The absence of a separate undertaking from the principal manufacturer did not defeat the benefit because the substantive conditions of the notification were satisfied. A Revenue precedent was held distinguishable on its facts, as that case involved materials received without challans and lacked bona fide compliance. Accordingly, exempt clearances to SSI units could not be added to turnover for crossing the SSI exemption limit, and the demand, interest and penalties were set aside.

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Issues: Whether the appellant, a job worker, was entitled to exemption for clearances made to SSI units and whether such clearances could be counted for denying SSI exemption on the ground that the turnover limit under the relevant notification was exceeded.

Analysis: The clearances to the SSI units were supported by challans and the principal manufacturers had indicated that they were availing SSI exemption. On the facts, the absence of a separate undertaking from the principal manufacturer was held not to defeat the exemption where the substantive conditions of the notification were satisfied. The Tribunal also found that the decision relied upon by the Revenue was distinguishable because, in that case, the materials were received without challans and the factual basis for bona fide compliance was absent. Since the supplies to SSI units were eligible for exemption, the turnover could not be inflated by including those clearances for the purpose of crossing the SSI exemption limit.

Conclusion: The appellant was held entitled to the notification benefit for supplies made to SSI units, and the demand, interest, and penalties were set aside.

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