Small scale exemption and Cenvat credit can coexist where the notification excludes third-party branded goods from the exemption scheme.

Under Notification No. 8/2003-C.E., an assessee claiming small scale exemption for eligible own-brand goods is not disentitled merely because it also avails Cenvat credit on inputs used for separately excluded goods cleared under another person's brand name on duty payment. The notification was treated as excluding such branded third-party clearances from the exemption scheme and from aggregate-value computation, without creating a blanket bar on concurrent exemption and credit in different streams of production. The earlier Ramesh Food Products ruling was distinguished, while Nebulae Health Care Ltd. was treated as the controlling authority supporting this concurrent treatment.

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Issues: Whether an assessee, while availing small scale exemption under Notification No. 8/2003-C.E. for its own branded goods, is disentitled to that exemption merely because it also avails Cenvat credit on inputs used in manufacturing other goods bearing another person's brand name and cleared on payment of duty.

Analysis: The notification treated clearances bearing another person's brand name as excluded from the exemption scheme and from the aggregate-value computation. The Court accepted the view that the notification did not impose a blanket prohibition against simultaneous enjoyment of exemption for eligible goods and Cenvat credit for excluded goods. The earlier Supreme Court decision in Ramesh Food Products was held distinguishable because it dealt with a different notification structure and with own-brand goods in relation to the credit and exemption interplay under that scheme. The later Supreme Court ruling in Nebulae Health Care Ltd. was treated as controlling, as it recognized that branded third-party goods cleared on duty do not affect the exemption available for the assessee's own eligible goods.

Conclusion: The assessee was entitled to claim exemption under Notification No. 8/2003-C.E. for eligible goods notwithstanding its availing of Cenvat credit in relation to separately excluded branded goods; the revenue's challenge failed.

Ratio Decidendi: Under Notification No. 8/2003-C.E., an SSI unit may claim exemption for eligible clearances while separately availing Cenvat credit in relation to goods excluded from the exemption, so long as the notification itself does not prohibit such concurrent treatment.

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