2007 (10) TMI 158 - AT - Central Excise

Tribunal Upholds Separate Identity Rule for SSI Exemption Eligibility

The Tribunal upheld the Commissioner's decision in a case concerning the calculation of the aggregate value of clearances for Small Scale Industries (SSI) ... Impugned proprietary concern & Pvt Ltd. are common only for accounting purposes – it doesn’t mean that their clearance be clubbed to deny SSI exemption u/n 1/93 – correct way to calculate SSI limit is to sum total the clearances of both the concerns to the third party in open market. Issues:Calculation of aggregate value of clearances for SSI exemption eligibility.Analysis:The case involved the issue of calculating the aggregate value of clearances for eligibility under the Small Scale Industries (SSI) exemption notification. The proprietary concern, engaged in manufacturing rolled products, availed benefits under Notification 1/93. The Department issued a show cause notice proposing recovery of differential duty due to exceeding the Rs. 50 lakhs limit. The Commissioner (Appeals) set aside the duty demand and penalty, stating that the proprietary concern and the Private Ltd. Co. were not the same entity, and their clearances should not be clubbed unless proven otherwise. The Commissioner found that the clearances of both units were not correctly taken into account, as internal transfers should not lead to double value addition. The Commissioner also noted that the Department's calculation method was erroneous, even if both entities were considered the same.The show cause notice did not allege clearances by the proprietary concern to any third party. The Department's contention that the proprietary concern and the Private Ltd. Co. were the same entity was challenged. The Department's calculation method, starting with raw-materials cleared by the proprietary concern to the Private Ltd. Co., was deemed incorrect. The Commissioner (Appeals) held that even if both entities were considered the same, no duty demand could be sustained against the proprietary concern. The Tribunal upheld the impugned order and rejected the appeal, affirming the Commissioner's decision.In conclusion, the judgment clarified the calculation method for determining the aggregate value of clearances for SSI exemption eligibility. It emphasized the separate identity of the proprietary concern and the Private Ltd. Co., highlighting that internal transfers should not lead to double value addition. The Tribunal's decision upheld the Commissioner's findings, emphasizing that even if both entities were considered the same, no duty demand could be sustained against the proprietary concern.