SMALL SCALE EXEMPTION TO BEARING COMPONENTS

SMALL SCALE EXEMPTION TO BEARING COMPONENTS

The small scale exemption benefit has been withdrawn from Ball and Roller Bearings with effect from March 1, 2001. Since then a controversy arose whether this benefit has also been denied to parts and components of the Bearings. There is divergent practice in different Commissionerates on impugned issue. This article ponder over this controversy only,

The annexure to exemption Notification No. 8/2001-C.E. dt. 28-02-2000 specifies the list of products eligible to small scale exemption. It includes all the products falling under Central Excise Tariff and gives an exhaustive list of products to which this benefit is not extended. The amendment is made by the Notification No. 6/2001 dt. 01.03.2001 in this list only for depriving the benefit to the Bearings. It has incorporated the following words: -

“Ball or Roller Bearings falling under Chapter 84 of First Schedule.”

But the Central Excise Tariff does not contain the separate entry for parts of Ball and Roller Bearings. It reads as follows: -

“8482.00 – Ball or Roller Bearings”

The parts also fall under the same tariff heading in view of the Note 2(a) to Section XVI of Central Excise Tariff which reads as follows: -

2(a) “Parts which are goods include in any of the headings of Chapter 84 or 85 (other than heading Nos. 84.09, 84.31, 84.66, 84.73, 84.85, 85.3, 85.22, 85.29, 85.38 and 85.48) are in all cases to be classified in their respective headings.”

Thus, the parts of Bearing also falls under the same tariff as that of complete Bearings. This is the reason for the conflict between the Department and the assessee over the eligibility of small scale exemption on the parts and components of Bearings.

But it is argued that the tariff heading has not been mentioned in the small scale exemption. Secondly, it has been consistently ruled by the Department authorities that exemption to the complete machine does not mean that its parts are also eligible for such exemption. In case of Dry Battery Cells, the Ahemdabad Commissionerate has clarified the aforesaid position vide its Circular No. 12/91 dt. 26.02.1991. Thus, it can not take another stand when the same interpretation extends a benefit to a product.

Furthermore, the legal position is that the construction of exemption Notification to be on the basis of plain language used therein and there is no room for the indentment. The Apex Court of India has held in case of Rajasthan Spinning and Weaving Mills Ltd. Vs Union of India [1995 (77) ELT 474] that “Exemption Notification to be construed strictly – Liberal Construction which enlarges the term and scope of the Notification not permissible and nor extended meaning assignable to exempted item.”

From the forgoing discussion, it is clear that SSI exemption denying benefit to Ball and Roller Bearings do not imply that it has been withdrawn from its parts and components also when both of them falls under same tariff heading. It is duty of the Board to clarify the aforesaid position so that business can run in free and fair atmosphere.

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SMALL SCALE EXEMPTION TO BEARING COMPONENTS

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