SSI exemption and Modvat credit: duty-paid branded job-work goods stay outside aggregate turnover, allowing input credit.

An SSI unit could claim SSI exemption on its own clearances while separately treating duty-paid goods manufactured for another person under that person's brand name. Because the notification scheme excludes third-party branded clearances from the aggregate value for SSI exemption, those branded goods fall under the normal excise regime when cleared on payment of duty. On that basis, inputs used in manufacturing such branded goods were eligible for Modvat credit, since duty had already suffered on the finished goods. The assessee's own products and the branded job-work goods were to be treated distinctly for the exemption scheme, and the Revenue's challenge failed.

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Issues: Whether an SSI unit could avail SSI exemption on its own clearances and simultaneously take Modvat credit on inputs used in the manufacture of goods bearing another person's brand name, where duty was paid on the branded goods manufactured on job work basis.

Analysis: The relevant notification scheme excludes clearances bearing the brand name or trade name of another person from the computation of aggregate value of clearances for SSI exemption. Such branded goods, when not eligible for SSI exemption and when cleared on payment of duty, are governed by the normal excise regime. On that basis, the inputs used for manufacture of those branded goods, on which duty has already suffered, qualify for Modvat credit. The own products of the assessee and the branded goods of a third party are to be treated distinctly for the purpose of the exemption notification. The issue stood covered by the Supreme Court's later dismissal of the Revenue's appeal in the identical Nebulae Health Care matter, which upheld the Tribunal's view on the same notification scheme.

Conclusion: The assessee was entitled to Modvat credit on the inputs used for the branded goods manufactured for another person, and the Revenue's challenge to the grant of such benefit failed.

Ratio Decidendi: Where an SSI notification excludes third-party branded clearances from the exemption scheme, duty-paid branded goods manufactured on job work basis do not affect the assessee's SSI benefit on own products, and Modvat credit is admissible on the inputs used for such branded goods.

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