2014 (7) TMI 21 - AT - Central Excise

Tribunal upholds manufacturer's entitlement to small scale exemption despite initial duty payment error

The Tribunal allowed the appeal in a case concerning the availment of small scale exemption under Notification No. 8/99 by a manufacturer of sugar ... Small scale (SSI) exemption - while raising the first invoice, the person liable for raising the same showed payment of duty of 16%, instead of nil rate of duty - on realizing their mistake, they raised another invoice in respect of the goods cleared, by showing the availment of exemption notification and consequent nil rate of duty - Notification No. 8/99, dated 1-3-1999 - Held that:- The duty paid in the first invoice and availed Cenvat credit by their buyers was reversed by their buyers. The Tribunal in the case of Mistry Brothers reported in [2006 (3) TMI 464 - CESTAT, MUMBAI] has held that the exemption is available automatically to an assessee, who has the option to opt out of the same. Inasmuch as the appellant have not, in clear terms and with a conscious mind, opted out of the small scale notification, the benefit of the same cannot be denied to them. We also note that the appellant reliance on the Tribunal’s decision in the case of Crescent Polymers Pvt. Ltd. reported in 2[2008 (2) TMI 187 - CESTAT, BANGALORE] is appropriate. It was held in the said decision that initial clearances at full rate of duty will not result in denial of SSI Exemption benefit for the entire period - Decided in favour of assessee. Issues involved:Interpretation of small scale exemption Notification No. 8/99 - Availment of exemption benefit on first invoice showing full rate of duty - Denial of exemption by Revenue based on initial invoice - Tribunal's decision in Mistry Brothers case and Crescent Polymers Pvt. Ltd. case.Analysis:The appeal involved a dispute regarding the availment of small scale exemption under Notification No. 8/99 by the appellant, engaged in the manufacture of sugar plant/machinery falling under Chapter 84 of the Central Excise Tariff Act. The core issue was whether the appellant had effectively opted for the exemption benefit despite the initial invoice showing full payment of duty. The Revenue contended that since the first invoice was raised with full duty payment, the appellant did not exercise the option for availing the benefit of the notification, leading to the denial of the exemption.Upon careful consideration, the Tribunal found that the appellant's entitlement to the small scale exemption under Notification No. 8/99 was not in dispute. The Tribunal rejected the Revenue's argument, emphasizing that the initial invoice, which erroneously reflected full duty payment, was subsequently rectified by issuing another invoice showing nil rate of duty. Additionally, the duty paid in the initial invoice was reversed by the buyers, further supporting the appellant's claim for exemption.The Tribunal referred to the decision in the case of Mistry Brothers, where it was established that the exemption is available automatically to an assessee unless they opt out of it explicitly. Since the appellant did not consciously opt out of the small scale notification, the benefit could not be denied to them. Furthermore, the Tribunal cited the Crescent Polymers Pvt. Ltd. case, clarifying that initial clearances at full duty rate would not lead to the denial of the Small Scale Industry (SSI) Exemption benefit for the entire period.In light of the above analysis and legal precedents, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment underscored the importance of a conscious and explicit opt-out mechanism for exemption benefits and clarified that rectifying initial errors in invoicing does not invalidate the claim for exemption under relevant notifications.