2025 (7) TMI 1640 - AT - Central Excise

SSI exemption allowed if total turnover stays within limits despite excise duty on some products under relevant rules

The CESTAT Kolkata allowed the appeal, holding that the appellant's turnover for the disputed years remained below the prescribed SSI inner limits (Rs. 1 ... Eligibility for SSI exemption - denial of benefit on the ground that since the appellant has paid the Excise Duty in respect of one product, he cannot claim SSI exemption in respect of the other product in respect of the same assessee - HELD THAT:- It is noted that the SSI limit was Rs.1 crore from 1.3.2003 to 31.3.2007, which was increased to Rs.1.50 crores from 1.4.2007. This is referred as ‘inner limit’ for ease of reference. Similarly, the outer limit was initially at Rs.3 crores, which was increased to Rs.4 crores subsequently. The assessee opting for SSI, has to start to pay Excise Duty the moment he exceeds the inner limit. However, within the same financial year, if the outer limit is not exceeded, he can once again claim the SSI limit for the next financial year. But once the outer limit of Rs.3 or Rs.4 crores is exceeded, he would not get the SSI benefit in the subsequent financial year. Para 3 (a) of the Notification specifically removes the exemption benefit when the clearance is that of any branded goods. This means that in respect of the branded goods of others, cleared by the SSI, would require payment of Excise Duty, even if the unit per se is exempted from payment of Excise Duty. Coming to the point about the turnover of the branded goods also being considered as part the total turnover of the appellant, we have seen that as per Para 3 (a) of the Notn No.8/2003 CE dated 1.3.2007, the turnover in respect of other branded goods cleared is excluded from the SSI exemption and hence Excise Duty is required to be paid. When Para 2 (vii) and Para 3(a) are read together it get clarified that the turnover of Excise Duty paid goods in respect of the branded goods cannot be clubbed with the turnover of the unit to deny the SSI benefit. In the present case, it is not disputed that for Brand ‘Monginis’, the appellants have paid the Excise Duty - the Revenue cannot add the turnover in respect of the Mongini Turnover of the appellant, so as to deny the SSI benefit. In respect of turnover of 2007-2008, the turnover being Rs.1.41 crores, the same is less than the increased SSI inner limit of Rs.1.50 crores. On this ground, the confirmed demand is not sustainable - For the year 2008-09 the total turnover is Rs.1,51,04,201 as per the Table B, which is more than Rs.1.50 cr inner turnover limit. However, from Annexure A we find that cum-duty benefit has been given while quantifying the demand. If cum-duty benefit is considered the turnover would be Rs.1,48,95,042 [13758995 + 1136047]. Therefore, the demand is not sustainable as the turnover is less than Rs.1.50 cr. For the year 2009-10, the turnover is less than Rs.1.46 cr. Hence, the demand is not sustainable for this year. The appellant is in error in partly paying the Excise Duty on one product and opting for SSI exemption in case of another product, which is not allowed. However, it is found that their turnover during the entire period under dispute is less than the respective inner limit (Rs. 1 Cr/Rs. 1.50 Cr) specified for SSI exemption for the concerned year - the impugned order is set aside - appeal allowed. ISSUES: Whether the SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 is not available if the aggregate clearance value of all excisable goods (own brand plus third-party brand) exceeds the prescribed limit.Whether a manufacturer can simultaneously pay Central Excise duty and avail CENVAT credit on one own-branded product while claiming SSI exemption on another own-branded product within the same unit.Whether the turnover of excisable goods bearing the brand name or trade name of another person should be included in computing the aggregate clearance value for SSI exemption eligibility.Whether the demand for duty and penalty is barred by limitation considering the period of issuance of the Show Cause Notice vis-à-vis filing of statutory returns. RULINGS / HOLDINGS: SSI exemption under Notification No. 8/2003-CE is not denied by including the turnover of goods bearing the brand name of another person, as per para 3(a) of the Notification, such clearances 'shall not be taken into account' for computing the aggregate clearance value.A manufacturer cannot selectively pay Excise Duty on certain own-branded products and claim SSI exemption on others within the same manufacturing unit; the exemption applies to the entire unit's turnover and not to specific products.The turnover of third-party branded goods on which Excise Duty has been paid cannot be clubbed with the turnover of own-brand goods to deny SSI exemption; this position is supported by the Supreme Court ruling in Commissioner of Central Excise, Chennai v. Nebulae Health Care Ltd.The demand for duty and penalty relating to periods where the Show Cause Notice was issued beyond the prescribed limitation period is not sustainable and is time-barred. RATIONALE: The Court applied the provisions of Notification No. 8/2003-CE dated 01.03.2003 and its subsequent amendments, especially paras 2(vii) and 3(a), which exclude clearances bearing the brand name of another person from the aggregate clearance value for SSI exemption.The Court relied on the precedent set by the Supreme Court in Commissioner of Central Excise, Chennai v. Nebulae Health Care Ltd., affirming that third-party branded goods are excluded from the SSI exemption computation.The Court interpreted the exemption as applicable to the manufacturing unit as a whole, rejecting the notion of partial or selective SSI exemption for different products within the same unit.The limitation period for issuing a Show Cause Notice was considered in light of statutory filing of ER-1 returns, leading to the conclusion that demands for periods beyond one year from filing are barred.