Small-scale exemption option cannot be inferred from non-claim at inception; denial set aside and eligibility remanded for merits review.

Non-claim of small-scale exemption from the start of a financial year does not, by itself, amount to an exercise of the option to forego exemption under Notification No. 1/93-C.E. The option clause applies only where a manufacturer is already availing the exemption and thereafter chooses not to avail it. Where exemption was never earlier taken and the omission was attributed to ignorance, the denial on the basis of an alleged option was unsustainable. The matter was remanded to the original authority to consider eligibility for small-scale exemption on merits.

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Issues: Whether the denial of small-scale exemption under Notification No. 1/93-C.E. was justified by treating the assessee as having exercised an option not to avail the exemption merely because the exemption was not claimed from the inception.

Analysis: The exemption had not been availed from the beginning of the relevant financial years, but the assessee had not earlier enjoyed the exemption and then opted out of it. The option clause in the notification applies only where a manufacturer is already availing the exemption and thereafter chooses not to avail it. Non-claim of exemption on account of ignorance was not treated as an exercise of the contractual or statutory option contemplated by the notification.

Conclusion: The denial of exemption on the basis of the option clause was not sustainable. The matter was remanded to the original authority to examine eligibility for small-scale exemption on merits.

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