Small scale exemption under Notification No. 1/93: Nepal exports count only for slab limits, not as home-consumption clearances.

Clearances to Nepal were treated as clearances for home consumption only for computing the slab limit under Notification No. 1/93, not for converting export clearances into home-consumption clearances. The option in clause (4) to opt out of the small-scale exemption applied only to goods covered by paragraph (1), namely goods cleared for home consumption, and once exercised required duty on later such clearances in the same financial year. Because exports to Nepal were outside paragraph (1), that option did not arise in relation to them, and the exemption could not be denied on the footing that such exports triggered the opt-out clause.

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Issues: Whether clearances made to Nepal could be treated as clearances for home consumption for the purpose of the small scale exemption under Notification No. 1/93 and whether exercise of the option to pay duty on such clearances disentitled the assessee from the exemption for subsequent clearances.

Analysis: The exemption under paragraph (1) of Notification No. 1/93 applied to specified goods cleared for home consumption. The explanation to clause (4) allowed a manufacturer to opt out of the exemption for such goods, and once that option was exercised, duty at the applicable rate had to be paid on subsequent clearances in the same financial year. However, the explanation treating clearances for export to Nepal or Bhutan as clearances for home consumption was confined to computation of slab limits. It did not confer the status of home consumption on export clearances. Since the export clearances were not covered by paragraph (1), the question of an option under clause (4) in relation to those exports did not arise.

Conclusion: The benefit of the exemption could not be denied on the footing that exports to Nepal amounted to home-consumption clearances for the purpose of the option clause, and the applicants had made out a prima facie case for stay.

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