Aggregate clearance computation for captively consumed specified goods remained protected under the small scale exemption scheme.

Captively consumed lay flat tubes continued to be excluded from aggregate clearance value under the small scale exemption scheme because paragraph 3(c) governed computation of clearances, not the substantive grant of exemption. Explanation (f) inserted by amendment excluded only specified goods chargeable to nil rate or already exempt under another notification from the deeming exclusion, but lay flat tubes remained specified goods under Notification No. 16/97-C.E. and no breach of the turnover limit was shown. The duty demand and penalty were therefore not sustainable.

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Issues: Whether captively consumed lay flat tubes, being specified goods under the small scale exemption notification, continued to be excluded from aggregate value of clearances despite the insertion of explanation (f) by the amending notification.

Analysis: The notification scheme treated the relevant clause as one governing computation of aggregate clearances and not the substantive availability of exemption. The original deeming provision in paragraph 3(c) excluded specified goods used as inputs in the manufacture of other specified goods within the factory from the aggregate value of clearances. The later explanation (f) carved out only cases where such specified goods were chargeable to nil rate or were already exempt under another notification, so that their clearances as inputs would not be deemed exempt for the purpose of paragraph 3(c). Even after the amendment, lay flat tubes remained specified goods under Notification No. 16/97-C.E., and there was no finding that inclusion of their value caused the turnover limit to be exceeded.

Conclusion: The captively consumed lay flat tubes remained eligible for the benefit of the notification for the purpose of aggregate clearance computation, and the duty demand and penalty were not sustainable.

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