Exclusion of loan licensee clearances from SSI exemption upheld by tribunal, setting aside impugned order.

The tribunal held that clearances for loan licensees and goods manufactured through other manufacturers should not be included in the aggregate value for SSI exemption under Notification No. 9/03-CE. The appellant was deemed the manufacturer for goods produced for loan licensees and other manufacturers, and as duty was paid at normal rates for these goods, their value should not be considered in determining SSI exemption eligibility. The impugned order was set aside, and the appeal was allowed.

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Issues:
Determining eligibility for SSI exemption under Notification No. 9/03-CE for the period from 01.04.2003 to 31.10.2003 and whether the clearances of goods manufactured for loan licensees and through other manufacturers should be included in the aggregate value of clearances for home consumption.

Analysis:
During the period in question, the appellants were availing the SSI exemption under Notification No. 9/03-CE for manufacturing P&P medicines. The dispute arose as the Department sought to deny the SSI exemption by including the clearances of goods manufactured for loan licensees and through other manufacturers in the aggregate value of clearances for home consumption. The Joint Commissioner confirmed a duty demand against the appellants, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant's counsel argued that the clearances for loan licensees should not be included in the aggregate value for SSI exemption, citing terms of agreements and a judgment by the Hon'ble Gujarat High Court. The counsel emphasized that the loan licensees did not meet the criteria to be treated as independent manufacturers. The Department's representative defended the impugned order, referring to the CBEC manual and the Gujarat High Court judgment, contending that the loan licensees should be considered independent manufacturers.

After considering the submissions, the tribunal found that the loan licensees did not hire any part of the appellant's factory or shift, nor did the appellant hire any part of the manufacturers' factories. Therefore, the tribunal held that the appellant should be treated as the manufacturer for goods produced for loan licensees. As the duty was paid at normal rates for these goods, the value of clearances to loan licensees should not be included in determining the aggregate value for SSI exemption. Similarly, for goods manufactured by the appellant through other manufacturers, those manufacturers should be treated as the manufacturer, and their value of clearances should not be included in the appellant's aggregate value for SSI exemption. Consequently, the impugned order was set aside, and the appeal was allowed.

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