SSI exemption valuation excludes captively used inputs for exempt goods when aggregate clearances are computed.

In computing aggregate value for SSI exemption, exempt finished goods are excluded, and the same principle was applied to captively used intermediate goods consumed in manufacturing exempt specified products. The CESTAT noted that the exemption scheme and its explanatory provisions were intended to prevent double counting of goods already enjoying exemption, so the value of lay flat tubings used within the factory for exempt plastic bags was not includible in aggregate clearances. On that basis, the demand was not sustainable and the assessee retained SSI exemption on the disputed clearances.

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Issues: Whether the value of lay flat tubings captively used in the manufacture of exempt plastic bags was to be included in the aggregate value of clearances for the purpose of SSI exemption.

Analysis: The dispute related to the SSI exemption scheme during the relevant period. The goods manufactured and the final products were covered by exemption notifications, and the question was whether the captively consumed intermediate product could be added to the aggregate clearance value. Applying the settled interpretation that exempted finished goods are excluded while computing aggregate value, the same principle was held applicable to inputs used within the factory for manufacture of exempt specified goods. The reasoning was that SSI relief is intended for small units and the value of goods already enjoying exemption should not be counted again for aggregate turnover purposes.

Conclusion: The value of the captively used intermediate goods was not includible in the aggregate value of clearances, and the demand could not be sustained.

Final Conclusion: The appeal succeeded and the assessee retained the benefit of SSI exemption on the disputed clearances.

Ratio Decidendi: For computing aggregate value under an SSI exemption notification, exempted finished goods and captively used inputs for manufacture of such exempt goods are to be excluded when the notification so provides by its scheme and explanatory provisions.

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