2018 (7) TMI 307 - AT - Central Excise

Manufacturer wins appeal in excise duty case, tribunal upholds SSI exemption eligibility

The tribunal ruled in favor of the appellant, a manufacturer of corrugated paper boxes, in a case concerning excise duty non-payment and SSI exemption ... SSI exemption - crossing of threshold limit - The department has proceeded to deny the SSI exemption alleging that in the very same factory goods were cleared by two manufacturers and therefore as per clause (vi) of para 2 of the Notification No. 8/2003-CE, the exemption benefit is not available to the appellant - Held that:- It is not disputed that the appellant M/s. Sun Pack, Proprietor Shri S. Chandrasekar has started the manufacturing operations in the factory only with effect from 10.11.2006. It is also seen that they have cleared goods worth ₹ 66,60,401.92 during the period from 10.11.2006 to 31.3.2007. Thus the aggregate value of clearances for the appellant has not exceeded the SSI exemption limit. The factory having been taken on lease by the appellant, he has to be considered as an independent manufacturer. Further, the earlier manufacturer Shri D. Kalaiarasan has cleared the goods on payment of excise duty and has not availed any exemption benefit. Only because the earlier manufacturer was not availing exemption benefit, the appellant cannot be compelled to pay excise duty even though the clearances are below the SSI limit. There is no case that both the manufacturers were clearing goods from the same factory during the relevant period. Thus, clause (vi) of para 2 of the Notification is not attracted in the present case. Demand of duty do not sustain - appeal allowed - decided in favor of appellant. Issues:1. Appellant not discharging excise duty on goods cleared by them.2. Allegation of wrongly availing SSI exemption.3. Clubbing clearances of two manufacturers to deny SSI exemption.4. Appellant's status as an independent manufacturer.Analysis:1. The case involved the appellant, engaged in manufacturing corrugated paper boxes, who was alleged to not discharge excise duty on goods cleared by them, leading to an investigation by the Preventive Unit. The department claimed the appellant wrongly availed SSI exemption, resulting in a duty demand, interest, and penalties.2. The appellant argued that they started manufacturing activities after taking the factory on lease from the previous manufacturer, who had surrendered registration before the appellant began operations. The appellant contended that since the earlier manufacturer had cleared goods without availing exemption, the appellant should not be denied SSI exemption based on the combined clearances of both manufacturers.3. The department invoked clause (vi) of para 2 of Notification No. 8/2003-CE, which states that when goods are cleared by multiple manufacturers from the same factory, the exemption limit applies to the aggregate value of clearances by all manufacturers. However, the tribunal found that the earlier manufacturer cleared goods after the lease to the appellant, and since the appellant's clearances were within the SSI limit, they should be considered an independent manufacturer eligible for the exemption.4. The tribunal concluded that the appellant, having taken the factory on lease and operating independently within the SSI limit, should not be penalized for the earlier manufacturer's clearances. The demand for duty was deemed baseless, and the appeal was allowed, providing consequential relief to the appellant. The judgment highlighted the importance of considering the individual status of manufacturers when applying SSI exemption rules.