Small scale exemption computation: duty-paid clearances of one product do not exhaust exemption for other goods until the overall ceiling is reached.

For small scale exemption under Notification No. 175/86-C.E., duty-paid clearances of one class of goods were excluded from the computation of the aggregate value of first clearances for other classes of goods. The Tribunal noted that crossing the lower free-clearance slab for one product did not exhaust the exemption available to other specified goods, so long as the overall ceiling for first clearances had not been reached. Prior Tribunal rulings taking the same view were followed, and the assessee continued to qualify for exemption on the remaining goods until the aggregate limit was exhausted.

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Issues: Whether, for purposes of small scale exemption under Notification No. 175/86-C.E., clearances of one class of goods on payment of duty exhausted the exemption limit for another class of goods, or whether duty-paid clearances were excluded while computing the aggregate value of first clearances up to the exemption ceiling.

Analysis: The dispute turned on the manner of computing the exemption limit where the assessee manufactured excisable goods falling under different tariff headings. Once the clearances under one heading exceeded the lower free-clearance limit and duty was paid on the excess, those duty-paid clearances were not to be counted against the exemption available for other specified goods. The aggregate ceiling governed the total value of first clearances across the relevant headings, but the fact that one product had crossed the lower slab did not disentitle the other products from exemption until the overall ceiling was reached. Prior Tribunal decisions had taken the same view and had held that duty-paid clearances were not to be included for computing the value of first clearances.

Conclusion: The assessee remained entitled to small scale exemption for the other goods until the aggregate ceiling of first clearances was exhausted; the Revenue's contrary contention failed.

Ratio Decidendi: For a small scale exemption notification, clearances on which duty has already been paid are excluded while computing the aggregate value of first clearances, and exemption for other specified goods continues until the overall ceiling is reached.

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