2020 (11) TMI 432 - AT - Central Excise

Tribunal overturns denial of SSI exemption due to unjustified inclusion of clearances. Procedural vs. substantive benefits.

The Tribunal allowed the appeal, setting aside the Commissioner's order and finding the denial of SSI exemption erroneous. The inclusion of clearances ... SSI Exemption - supplies made to merchant exporters against Form 'H' and Form ‘ST-49’ - denial of exemption under Notifications dated March 1, 2002 and March 1, 2003 by treating the supplies made to merchant exporters against Form 'H' and Form ‘ST-49’ as clearances for home consumption - HELD THAT:- The value of branded goods (printed material) cannot also be included in the aggregate value of clearances for the purpose of SSI exemption. The appellant manufactures and clears the printed material for home consumption which do not bear any branded name. The appellant also manufactures printed material which bears the brand name of the buyers. In terms of paragraph 2(vii) of Notifications dated March 1, 2002 and March 1, 2003, one of the conditions for availing SSI exemption is that the aggregate value of clearances of all excisable goods for home consumption does not exceed ₹ 3 Crore (4 Crore w.e.f 01.04.2005) in the preceding financial year. In paragraph 3A, certain categories of clearances have been excluded for determining the aggregate value of clearances under paragraph 2(vii). One such category under clause (b) of paragraph 3A is clearances bearing the brand name or trade name of another person that are ineligible for exemption in terms of paragraph 4. Thus, in terms of paragraph 3A(b) of the Notification, clearances bearing the brand name or trade name of another person are not includible in the aggregate value of clearances for paragraph 2(vii). There was no violation of the procedure by the appellant and in any case, procedural infraction, if any, cannot to be a ground to deny of substantive benefit of SSI exemption to the appellant. Extended period of limitation - HELD THAT:- As the benefit of SSI exemption could not have been denied to the appellant, it is not necessary to examine the contention advanced on behalf of the appellant that the extended period of limitation could not have been invoked. Appeal allowed - decided in favor of appellant. Issues Involved:1. Denial of SSI exemption under Notifications dated March 1, 2002, and March 1, 2003.2. Inclusion of clearances made to merchant exporters against Form 'H' and Form 'ST-49' in the aggregate value of clearances.3. Procedural compliance for availing export clearances.4. Inclusion of the value of traded goods in the aggregate value of clearances.5. Inclusion of the value of branded goods in the aggregate value of clearances.6. Invocation of the extended period of limitation and imposition of penalty and interest.Detailed Analysis:Issue 1: Denial of SSI ExemptionThe core issue is whether the appellant was entitled to SSI exemption under the Notifications dated March 1, 2002, and March 1, 2003. The Department argued that the appellant was not eligible for this exemption as the clearances made to merchant exporters against Form 'H' and Form 'ST-49' should be included in the aggregate value of clearances, which would exceed the limit provided in the Notifications.Issue 2: Inclusion of Clearances Against Form 'H' and Form 'ST-49'The appellant contended that supplies to merchant exporters against Form 'H' and Form 'ST-49' qualify as exports and not as clearances for home consumption. Therefore, these should not be included in the aggregate value of clearances for SSI exemption. The Commissioner disagreed, stating that the appellant did not follow the prescribed procedure for export clearances, thus these supplies should be treated as clearances for home consumption.Issue 3: Procedural Compliance for Export ClearancesThe Commissioner held that the appellant did not follow the procedure prescribed in the Circular dated July 25, 2002, which required that the goods be exported directly from the unit itself. However, the Tribunal found that Form 'H' and Form 'ST-49' certificates are accepted as proof of export, even if the goods are not directly supplied from the unit, as supported by various judicial precedents like Vadapalani Press and Amar Packaging Industries.Issue 4: Inclusion of Traded GoodsThe appellant argued that the value of traded goods should not be included in the aggregate value of clearances for SSI exemption. The Commissioner denied this benefit, citing procedural non-compliance. The Tribunal, however, accepted the appellant's contention, referencing decisions like Pioneer Magnesia Works Ltd. and Sigma Pneumatics Pvt. Ltd., which support that procedural infractions should not deny substantive benefits.Issue 5: Inclusion of Branded GoodsThe appellant also contended that the value of branded goods (printed material) should not be included in the aggregate value of clearances. The Tribunal agreed, noting that clearances bearing the brand name or trade name of another person are not includible in the aggregate value of clearances for SSI exemption, as per paragraph 3A(b) of the Notifications and supported by judicial precedents like Nebulae Health Care Ltd. and British Health Products India Ltd.Issue 6: Extended Period of Limitation, Penalty, and InterestGiven that the benefit of SSI exemption could not have been denied, the Tribunal found it unnecessary to examine the invocation of the extended period of limitation, penalty, and interest.ConclusionThe Tribunal set aside the Commissioner’s order dated December 28, 2007, and allowed the appeal. The denial of SSI exemption was found to be erroneous, and the inclusion of clearances against Form 'H' and Form 'ST-49', traded goods, and branded goods in the aggregate value of clearances was not justified. Procedural infractions, if any, should not deny substantive benefits.