SSI exemption and clandestine removal burden on Revenue: confiscation, duty demand and penalty could not stand without proof of threshold breach

SSI exemption remained available because the assessee's production was found to be below the threshold, and the Revenue failed to prove clearance beyond the exemption limit or clandestine removal. On that basis, the legal foundation for confiscation, duty demand and penalty did not survive, and the adverse consequences were set aside in favour of the assessee. The operative principle is that where exemption-limit crossing is alleged, the burden lies on the Revenue to establish both threshold breach and clandestine removal before penal or confiscatory action can be sustained.

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Issues: Whether goods were liable to confiscation and duty demand, along with penalty, when the assessee claimed Small Scale Industry exemption and the Revenue did not establish clearance beyond the exemption limit or clandestine removal.

Analysis: The assessee's activity had commenced only recently and the production capacity was held to be below the SSI exemption threshold. In such circumstances, the burden lay on the Revenue to prove that the exemption limit had been crossed and that clearances were made clandestinely. As that burden was not discharged, the basis for seizure, confiscation, duty demand and penalty did not survive.

Conclusion: The confiscation, duty demand and penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee obtained consequential relief.

Ratio Decidendi: Where an assessee's production remains below the SSI exemption limit, confiscation and penal consequences cannot be sustained unless the Revenue proves crossing of the threshold and clandestine removal.

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