Exempted and dutiable goods

[varun arora]

Dear experts

If one of client manufactures exempted goods and value is rs 8 crores and now he want to manufactures dutiable goods then benefit of 150 lakhs is available on dutiable goods or not means for the purpose of calculation of turnover of 150 lakhs whether clearances of exempted goods shall be clubbed or not

Thanks in advance.

[CSSANJAY MALHOTRA]

No, he can;'t be classified as SSI unit if the Turnover in previous F.Y. has crossed ₹ 4 cr. Benefit of SSI Notification No 08/13 is available if the Turnover does not exceed > ₹ 4 cr in previous F.Y. and further the exemption of duty holds good for first taxable clearances of ₹ 1.50 cr, beyond which normal rate of duty applies.

For arriving at value of ₹ 1.50 cr, Export Turnover, Goods exempt from duty, Sales under Brands name, Sales to SEZ, EOU...

[CSSANJAY MALHOTRA]

Please read the Notification as 08/2003....

[KASTURI SETHI]

I endorse the views of Sh.CS Sanjay Malhotra, Sir. If a manufacturer makes clearances of more than 4 crores in its first year of the commencement of production, he is eligible for SSI exemption of ₹ 1.50 crore.

[Mahir S]

Sir,

It may be noted that while computing the limit of ₹ 400 Lakh, the turnover of goods exempted under any other notification (except clearances to FTZ, SEZ, 100% EOU, EHTP/STP, UN, etc. and specific job work notifications) has to be included.

If the goods are exempted by virtue of any notification, then the same are required to be included for computing the limit of ₹ 400 lakhs.

However, if the goods are Non excisable, then it is not required to be included for computing the limit of ₹ 400 lakhs.

Hence, you have to take decision based on whether the goods of ₹ 8 crores discussed in your query are exempted goods or non excisable goods, and thereafter confirm yourself if the SSI benefit in this case shall be available to you or not.

[KASTURI SETHI]

Re-examined. Agreed fully with the replies of Sh.Mahir S, Sir and Sh.CS Sanjay Malhotra, Sir regarding computation of Rs.four hundred lakhs for eligibility as SSI unit in central Excise.Thanks to both experts.

[Mahir S]

[KASTURI SETHI]

Sh.C.S.Sanjay Malhotra Ji,

Sir, There is some snag in the software of TMI so I could not reach you. Moreover, you have not mentioned your email Id. in your profile. So I am posting my views on this forum.

A manufacturer commence his business of production of specified goods(under Notification No.8/2003-CE) in his factory for the first time in 2015-16 and his turnover of four crores crosses on 12.3.16. From this situation two points emerge:-

1. Will he not be entitled to threshold exemption limit of ₹ 1.50 crore?

I am of the view that he is eligible for first clearance of ₹ 1.50 crore on the ground that his turnover of excisable goods was NIL during the preceding year (2014-15). (Emphasis supplied on Para 2(vii) of Notification No.8/2003-CE).

2. When will he lose the status of SSI for Central Excise purpose?

Since the manufacturer crosses turnover of ₹ 4 crores on 12.3.16, he will be no more SSI unit from 12.3.16 onwards. Since his turnover during the preceding year was NIL, so his status of SSI unit will remain intact up to 11.3.2016 and thus he will be eligible for first clearance of the value of ₹ 1.50 crore.

3. Will he lose the status of SSI unit for the whole year 2015-16 or from 12.3.16 onwards?

I want your considered views for enrichment of my knowledge. I hope you will oblige me on this forum.

Thanks a lot.

With regards.

K.L.SETHI

[CSSANJAY MALHOTRA]

Respected Sir Sh. Kasturi ji,

Always feel obliged to interact act with you as it always refreshes my memory. Sir you are absolutely correct and there is statutory background to your view points.

Assessee should be meet the criteria of SSI Eligibility initially in terms of Investment in P&M to be eligible for SSI Exemption under Notf 08/2003 of Central Excise.

Unit is eligible for SSI Exemption upto First Turnover of ₹ 150 Lacs in the current year even if he has started Manufacturing operations from April 1 of the current F.Y. (Exemption is based on turnover of Previous Year). - This is similar to the concept in Service Tax, wherein Tax liability commences after ₹ 10 Lacs even if the service provider commences business in current F.Y. In short, no duty to be paid on the tax concessions claimed earlier on first turnover of ₹ 150 Lacs. From Next F.Y., duty is to be discarged from Zero point.

SSI Status for the purpose of Central Excise Duty will not hold good from 01.04.2016 (from next F.Y,) as the assessee has availed Concessional of Excise Duty upto Ist Turnover of ₹ 150 Lacs during F.Y. 15-16 and afterwards have paid duty at the Normal Rate beyond turnover of ₹ 150 Lacs. (Hence turnover < or > than ₹ 400 Lacs does not matter in F.Y. 15-16 as duty have been paid off at normal rate beyond ₹ 150 Lacs turnover).

Unit will not loose the status for whole year. Tax concessions which SSI has enjoyed can;t be paid back. (Covered in Point No 1 above).

My e-mail id is [email protected] (Sir, you can connect anytime, would be honoured).

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Thanks a lot for validation of my views, Sir. I was a bit shaken when you informed me that I missed to write the word, 'NOT'. So I thoroughly perused all the relevant notifications word for word on the SSI issue before expressing my views again on this forum. However, efforts have not ended in smoke rather yielded better results as the concept is clearer to me now. Agreed with other parameter highlighted by you.

Your email Id will be helpful to me in future.Thanks.

With regards

SETHI

[CSSANJAY MALHOTRA]

Respected Sh Kasturi ji,

Regret, I missed the phrase "first clearances" of your opinion. Your views are correct as per the provisions of law.

[KASTURI SETHI]

SH. CS SANJAY MALHOTRA JI,

Sir, Anyhow, upholding my views by you, has a great value for me. Really from the core of my heart. No exaggeration here. You always go into depth of the issue. It is a fact.

Thanks a lot.

AI Summary

SSI exemption eligibility: exempted clearances count toward turnover, affecting threshold benefits and status loss timing. Goods exempted by statutory notification must be included in computing previous year turnover for SSI eligibility, whereas non excisable goods are excluded. A new manufacturer with nil prior year excisable turnover may claim the first clearance threshold exemption on initial clearances even if current year turnover later exceeds the SSI ceiling; loss of SSI status occurs from the date turnover crosses the ceiling, but previously availed first clearance concession need not be repaid.