Small scale industry exemption cannot be forfeited by a few duty-paid clearances without prior opt-out intimation.

Mere payment of duty on some initial clearances does not by itself amount to a binding election to forgo small scale industry exemption for the rest of the financial year. Under paragraph 2(i) of Notification No. 08/2003-CE, withdrawal from the exemption is relevant only where the manufacturer has chosen not to avail it and to pay duty at the normal rate for the full year. In the absence of prior intimation opting out of the notification, the earlier duty-paid clearances did not forfeit the benefit for subsequent clearances. The duty demand, interest and penalties were therefore set aside, with consequential relief.

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Issues: Whether the appellant could avail the small scale industry exemption for the remaining part of the financial year despite having paid duty on some initial clearances and without giving prior intimation of an intention not to avail the exemption.

Analysis: Paragraph 2(i) of Notification No. 08/2003-CE dated 01.03.2003 restricts withdrawal only where the manufacturer has chosen not to avail the exemption and instead to pay duty at the normal rate for the financial year. Mere payment of duty on some clearances, without any intimation that the assessee had opted out of the exemption, does not amount to a binding election against the exemption. The Larger Bench decision relied upon in the order was followed, along with other supporting tribunal decisions, to hold that a few duty-paid clearances cannot be treated as a de facto opting out of the notification benefit.

Conclusion: The appellant remained entitled to claim the exemption for the subsequent clearances, and the demand was not sustainable.

Final Conclusion: The duty demand, interest and penalties were set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Absence of an intimation to opt out of a small scale industry exemption notification, coupled with payment of duty on only some initial clearances, does not by itself amount to withdrawal from or forfeiture of the exemption for the rest of the financial year.

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