SSI Exemption - Determination of Turnover of the previous year of 4 crores

[Rama Krishana]

As per the Paragraph no. 3A of the Notification no. 8/2003 CE dated 1.3.2003 for the purpose of Calculation of Rs. four hundred lakhs (4 crores) of the previous year, certain amount shall be excluded. Other than excluded items, all turnover of excisable goods shall be included.

My query is related to the term "excisable goods" used in the SSI exemption notification above.

As per Section 2(d) of the Central Excise Act, 1944, (d) "excisable goods" means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt;

Now my query is whether the value / turnover of the goods where Goods are specified in the Tariff itself with empty tariff rate (e.g. Goods falling under Chapter 12 of CETA) and with Nil tariff rate (e.g. heading 53.01 of CETA) are "excisable goods" as being Subject to duty of excise.

Because if these are "excisable goods", the value shall be included in the turnover of the previous year and if these are not "excisable goods", the value shall not be included in computing the limit of 4 crores.

I have no doubt that goods exempted under a notification are "excisable goods" and are liable to be included as above.

But the doubt arises in respect of goods where tariff rate itself is empty or tariff rate itself is Nil.

[CSSANJAY MALHOTRA]

Dear Sh. Kasturi ji,

Am also like one of you to contribute at this platform to ensure Governance, as we have both have practically gone through the issues faced by Industry at the ground level. (rather you have your entire life in CENTRAL EXCISE DEPT possessing far knowledge as compared to us).

Not wanted to bring this CESTAT judgement earlier as you rightly mentioned that "NIL rate of Duty goods" are Excisable goods and besides this Apex Court citation has been brought in. But to make the querist issue addressed, all experts put in their best.

Thanks and regards

Sanjay Malhotra

[Rama Krishana]

Dear all Experts

Please accept my gratitude and thanks from the deep of my heart. Though I have different opinions but cannot reject your opinion also.

Your healthy discussions and participation deserve a hats off salute.

Thanks to all.

[KASTURI SETHI]

Sh.Rama Krishna Ji,

Sir, Let us not get rid of the issue until or unless we arrive at any concrete conclusion. I feel all the experts have "We Feeling" in this forum. I also consider you in the list of experts. If we leave the issue inconclusive, it is the defeat of all experts. I reply to your cross queries as under:-

By mere finding entry in First Schedule and Second Schedule of Central Excise Tariff Act, 1985, goods do not become excisable.Definition of 'manufacture' under Section 2 (f) has also undergone changes in the year 2003. So to some extent the judgements pertaining to the period prior to the amendments lose its sheen. Goods must be 'manufactured' and must be 'marketable'. Any product must, inter alia, conform to both parameters.

Further there is a gulf of difference between 'Blank' and 'NIL' entries against column meant for rate of duty. Still I am of the view that where the column of rate of duty has been left blank the goods are not excisable and where NIL rate of duty has been prescribed the goods are treated as excisable goods being subject to duty of excise. Why rate of duty has been mentioned NIL and why has been left blank need to be researched. Why do you not consider NIL rate of duty as rate of duty in terms of the judgement of Apex Court ? If we consider NIL rate of duty as rate of duty, then your condition of "subject to a duty of excise' stands fulfilled. You may pl. guide what is the difference between 'Leaving the column blank' and 'mentioning NIL rate of duty'.

Looking forward to your response.

With regards.

K.L.SETHI

 

[CSSANJAY MALHOTRA]

Dear Sh. Kasturi Sethi ji,

Excellently placed the topic for sharing thoughts as to "Why the Blank Rate has been placed"??????? This is the core strength of Experts who go to the deep root cause to understand the issue....

Also appreciate the way of bringing the debate by Mr. Rama Krishnan for knowldge enhancement.

Sir, one of my submission for Blank Rate of Duty is that I find majority of the goods are "PRODUCED" and not "MANUFACTURED" hence subject to Blank Rate at present as you correctly use the terminology Manufacture in your recent revert to query raised.

Will share other reasons too afterwards, but let others too do some brain storming.

[KASTURI SETHI]

SH.CS SANJAY MALHOTRA JI,

Agreed Sir. By your reply dated 12.4.16 we are back to square one. Thus we cannot budge even an inch from the stand taken already on the issue.

Your reply i.e. difference between 'manufacture' and 'production' has taken me back to the year 1984 when I was asked this very question in my interview for promotion to the post of Inspector. And I was able to explain on the basis of cramming power at that time. Actually came to know the difference when I was posted in Range i.e. practical situation.

Awaiting eagerly the result of brain storming from Sh.Rama Krishana, Sir.

[Rama Krishana]

Dear All Experts

Now on one point Mr. Kasturi Sethi Ji is agreed with me that, Where rate of duty is left Blank would not be excisbale goods at all. The relevant portion of his reply is as under:

"Still I am of the view that where the column of rate of duty has been left blank the goods are not excisable and where NIL rate of duty has been prescribed the goods are treated as excisable goods being subject to duty of excise..."

I hope, all may agree on the first part of the issue that where rate of duty column has been left blank would not be treated as excisable at all as per the definition given u/s 2(d) since there is no duty of excise has been prescribed.

On the second part of the issue, I do agree with the argument that an Exemption notification cannot make an Excisbale goods as Non Excisable Goods but I have doubt that, whether "NIL" rate of duty as per the tariff entry itself, would make the goods as excisable goods.

Since last few days, I tried to get the answer to this query, and I got a lot from the replies of all the experts for further brainstorming. Please give me some more time to analysis the issue.

Though we have some difference of opinion but it shows the sportsmen spirit and we will continue with the same. I will, certainly, come with my final view on the basis of your suggestions and views.

I am happy that all the experts have made this forum live and useful.

Once again thanks to all with core of my hearth.

[CSSANJAY MALHOTRA]

Dear Friends,

HSN has been substituted over BTN to align Central Excise & Customs Tariff and hence all ITC codes specified in Customs has been brought in Central Excise Tariff.

Important aspect which can't be ignored to reiterate is the Additional Note 1(c) of General Notes on Interpretation to Central Excise Tariff Act, which included Goods with 8 digit code having Blank rate as a "TARIFF ITEM" & hence the higher Appellate authorities decision are based upon considering even Blank Rate as "Excisable Goods". Important aspect is that if the activity does not amount to manufacture, then the goods are not Excisable even if they are defined in Tariff as NIL/Blank /Specified Rate.

Section 2(d) of Central Excise Act should be read with Additional Note 1(c) to General Notes of Tariff Interpretation to arrive at conclusions. This is what higher Courts has followed in their citations.

[KASTURI SETHI]

CS SANJAY MALHOTRA JI,

Thanks a lot for enrichment of my knowledge, Sir. Your views are full of substance that goods must be manufactured and should also be marketable to qualify the definition of "excisable goods" under Section 2(d) & (f) of the Central Excise Act. Suppose if the finished goods are not marketable, the assessee would not remove the same from the factory and CE duty has to be paid at the time of removal or we may say on clearance from the factory.

AI Summary

Excisable goods: nil rate tariff entries count toward SSI turnover while blank rate entries may not under current interpretation.
Whether goods specified in the tariff with a Nil rate or a blank rate of duty are "excisable goods" for computing SSI exemption turnover turns on the meaning of "as being subject to a duty of excise" in Section 2(d), read with tariff interpretative notes and precedent. Administrative practice and appellate decisions generally treat nil rated (and, in many cases, blank rate when read with tariff notes) goods as excisable and thus includible in turnover, while some argue blank entries may indicate non excisability absent manufacture or marketability.