SSI exemption remains available for own goods despite duty-paid branded clearances, subject to input credit verification.

An SSI unit manufacturing both own goods and duty-paid branded goods could still claim Notification No. 8/2003-C.E. exemption for its own clearances, because third-party branded clearances were treated as outside the exemption scheme and subject to normal excise treatment. Credit on inputs used for the dutiable branded goods was therefore not inconsistent with SSI eligibility for the unit's own products. The only qualification was factual verification that no input credit had been retained in relation to exempt clearances, with any attributable reversal left to the jurisdictional officer. On that basis, the demand and penalty were not sustainable.

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Issues: Whether an SSI unit manufacturing both own goods and branded goods for which duty is paid can be denied the benefit of Notification No. 8/2003-C.E. dated 01.03.2003 for its own clearances, and whether credit taken on inputs used for dutiable branded goods bars such exemption.

Analysis: The scheme of the notification was read as excluding third-party branded clearances from the exemption scheme, while permitting Cenvat/Modvat credit on inputs used for such dutiable branded goods because those clearances fall under the normal excise regime. That credit availment was held not to defeat eligibility for SSI exemption in respect of the assessee's own goods. The only caveat noted was factual verification that no credit had been retained on inputs used for own exempt clearances, and any attributable credit reversal could be examined by the jurisdictional officer.

Conclusion: The assessee was entitled to SSI exemption on its own products, subject to verification of credit reversal as indicated, and the demand and penalty could not survive.

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