2025 (4) TMI 4 - AT - Central Excise

SSI exemption under Notification 08/2003-C.E. upheld, Nepal exports excluded from total clearance value computation

CESTAT Kolkata allowed the appeal regarding SSI exemption under Notification 08/2003-C.E. The tribunal held that exports to Nepal should not be included ... SSI exemption under N/N. 08/2003-C.E. dated 01.03.2003 - exports made to Nepal should be included in the computation of the total value of clearances for the purpose of determining eligibility for the Small Scale Industries (SSI) exemption or not - HELD THAT:- As per this Notification, the goods cleared by the appellant are totally exempted up to the value of clearances of Rs.1.5 crores. As per the Notification No. 08/2003-C.E. dated 01.03.2003, the value of exports made to Nepal and Bhutan were included for the purpose of computation of value of clearances as provided under Explanation Clause (G) of Notification No. 08/2003 ibid. Circular No. 958/1/2012-CX dated 13.01.2012 was issued wherein it was clarified that exports to Nepal have been placed at par with exports to other countries, excepting Bhutan. However, during the impugned period, Notification No. 08/2003 had not been amended so as to exclude ‘Nepal’ from Explanation Clause (G) of the aforesaid Notification. This issue has been examined by the Hon’ble Gujarat High Court in the case of M/s. Ketan Pottery Works v. Union of India [2016 (2) TMI 484 - GUJARAT HIGH COURT] wherein the Hon’ble High Court has declared the portion “and Nepal” in Explanation Clause (G) of Notification No. 08/2003 as unconstitutional in view of non-deletion of the same by the Government from the said Notification. Conclusion - The value of clearances to Nepal are to be considered at par with exports made to other countries and hence, such values are not includable for the purpose of computation of the value of exemption limit under Notification No.08/2003-C.E. dated 01.03.2003. The demand confirmed in the impugned order, by including the value of exports made to Nepal, is not sustainable and consequently, the same is set aside - Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the value of exports made to Nepal should be included in the total value of clearances for the purpose of determining the exemption limit under Notification No. 08/2003-C.E. dated 01.03.2003.Whether the inclusion of exports to Nepal in the computation of the exemption limit is legally sustainable in light of Circular No. 958/1/2012-CX and the decision of the Hon'ble Gujarat High Court in M/s. Ketan Pottery Works v. Union of India.Whether the demand for central excise duty, interest, penalties, and confiscation of goods based on the inclusion of exports to Nepal is valid.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The appellant was availing the benefit of Notification No. 08/2003-C.E., which provides an exemption for goods cleared up to a value of Rs. 1.5 crores. Explanation Clause (G) of this Notification originally included exports to Nepal and Bhutan in the computation of the exemption limit. However, Circular No. 958/1/2012-CX clarified that exports to Nepal are to be treated on par with exports to other countries, except Bhutan, effective from 01.03.2012. The Gujarat High Court in M/s. Ketan Pottery Works v. Union of India declared the inclusion of 'and Nepal' in Explanation Clause (G) as unconstitutional.Court's interpretation and reasoning:The Tribunal examined whether the value of exports to Nepal should be included in the exemption limit computation under Notification No. 08/2003-C.E. The Tribunal noted that despite the Circular clarifying the parity of exports to Nepal with other countries, the Notification had not been amended to reflect this change. The Gujarat High Court's decision was pivotal, declaring the inclusion of Nepal as unconstitutional due to its discriminatory nature post-01.03.2012.Key evidence and findings:The Tribunal relied on the Gujarat High Court's judgment, which found that the continued inclusion of exports to Nepal in the exemption limit computation was discriminatory and violated Article 14 of the Constitution. This was because exports to Nepal were treated differently from exports to other countries despite the policy change.Application of law to facts:Applying the legal framework and precedents, the Tribunal concluded that the value of exports to Nepal should not be included in the computation of the exemption limit under Notification No. 08/2003-C.E. The Tribunal found that the demand for excise duty, interest, penalties, and confiscation based on such inclusion was unsustainable.Treatment of competing arguments:The appellant argued that the inclusion of exports to Nepal was incorrect based on the Circular and the Gujarat High Court's decision. The Revenue contended that the Notification's language explicitly included Nepal. The Tribunal favored the appellant's argument, emphasizing the unconstitutionality of the inclusion post-01.03.2012 and the legislative intent demonstrated by the subsequent amendment in 2016.Conclusions:The Tribunal concluded that the inclusion of exports to Nepal in the exemption limit computation was not legally sustainable. Consequently, the demand for duty, interest, penalties, and confiscation was set aside.SIGNIFICANT HOLDINGSThe Tribunal held that the value of exports to Nepal should be treated on par with exports to other countries and thus not included in the computation of the exemption limit under Notification No. 08/2003-C.E. The demand for central excise duty, interest, penalties, and confiscation of goods based on such inclusion was deemed unsustainable.Preserve verbatim quotes of crucial legal reasoning:The Tribunal referenced the Gujarat High Court's decision: 'Under the circumstances, the portion 'and Nepal' appearing in Explanation Clause (G) to SSI Notification No. 8 of 2003 is declared unconstitutional with effect from 1-3-2012.'Core principles established:The principle established is that exports to Nepal, post-01.03.2012, should not be included in the computation of the exemption limit under SSI Notification No. 08/2003-C.E., aligning with the parity established by the Circular and judicial precedent.Final determinations on each issue:The Tribunal set aside the impugned order, allowing the appeal and confirming that the demand for duty, interest, penalties, and confiscation based on the inclusion of exports to Nepal was not valid.