SSI Exemption - availability of when goods also manufactured on behalf of another

PJ/Case Laws/2011-12/1548

Case: U.V. Laboratories v. Commissioner of C. Ex. Thane-II

Citation: 2012 (276) E.L.T. 266 (Tri.- Mumbai)

Issue:- Whether value of goods manufactured by assessee on account of another manufacturer are to be clubbed for computing aggregate value of clearances for availing SSI exemption under Notification No. 1/93-CE and No. 7/97-CE ?

Whether the manufacturer has option to avail duty free exemption limit in respect his respect of his own account and avail the Modvat facility in respect of goods manufactured for another manufacturer?

Brief Facts:- Appellants were engaged in manufacture of Organic and Inorganic Chemical falling under Chapter 28 and Chapter 29 of Central Excise Tariff Act. They were availing Small Scale Exemption. In addition, they were also manufacturing excisable goods on account of another concern M/s. Pharma Links, Mumbai on loan-license basis by availing benefit of Notification No. 27/92 dated 09.10.1992.

Show cause notices were issued to the appellants for clubbing of clearances made on their own and on account of M/s. Pharma Link for the purpose of availing SSI exemption under Notification No. 1/93-CE and No. 7/97-CE.

The Adjudicating Authority dropped the proceedings in the show cause notices. In review, it was observed that in view of provisions of Section 2(f) of the Central Excise Act, 1944 the manufacturer is a person who actually manufacture excisable goods irrespective of the fact that goods manufactured on his own or from the raw material supplied by the customers. Clubbing of clearances was to be done as benefit of full exemption on one hand and slab exemption after availing Modvat facility on the other hand cannot be availed simultaneously.

In appeal by Revenue, the Commissioner (Appeal) set aside the Adjudication order and allowed the appeal. Against the same, Appellants are in appeal before the Tribunal.

Appellant’s Contention:- Appellant submitted that M/s. Pharma Link had filed declaration under Notification No. 27/92-CE(NT) dated 09.10.92 where the goods were manufactured by the appellant on their account and duty was also paid be the appellant on behalf of M/s. Pharma Links. It was also submitted that M/s. Pharma Links were also getting the goods manufactured from other manufacturer M/s. Maharashtra Organics on job work basis and they were adding the value of the goods manufactured by the appellant as well as M/s Maharashtra Organics who were availing the benefit of Notification No. 1/93-C.E. and the clearance were being monitored by the Range Superintendent of M/s Pharma Links who also issued a certificate dated 09.10.96 in this regard. It was submitted that since the value of clearances of M/s Pharma Links were already clubbed with other manufacturer to deny exemption under said Notification to appellants by treating them as manufacturer is not proper and legal.

Reliance was placed on CCE v/s Premier Industries [2008 (221) ELT 561 (Tri)] wherein it was held that value of clearances made by job worker should not be added for computing the value. Reliance was placed on CCE v/s Bharat Foundry [2009 (246) ELT 561 (Tri-Ahd)] and on R. B. Polypack v/s CCE [2004 (178) ELT 563 (Tri)].

It was further submitted that in terms of Notification No. 83/94-CE, 84/94-CE and 214/86-CE, the goods manufactured by a job worker are exempted from excise duty if the raw material supplier pays the duty on the same, while clearing them from his factory. It was submitted that while demanding the duty where one of the show cause notices duty of Rs. 72, 210/- was demanded by including the value of Rs. 5, 94, 000/- export goods which is not correct in law.

Respondent’s Contention:- Revenue submitted that under Notification No. 1/93-C.E. in para 2 of the Notification it is clearly stated that aggregate value of clearance of the specified goods (a) by a manufacturer from one or more factories; or (b) from a factory by one or more manufacturers are to be taken together for the purpose of calculating the slab of Rs. 30 Lakhs/20 Lakhs/25 Lakhs respectively. The Notification clearly states that all the clearance made from the factory of the appellant on their behalf or on behalf of other manufacturer i.e. M/s Pharma Links are to be clubbed for the purpose of claiming the benefit. He also submitted that the appellant have availed the full exemption in respect of clearance made on their own behalf and availed the benefit of Modvat facilities in respect of clearance made on behalf of M/s. Pharma Links which is not permissible under para 1(a) of the Notification. The appellant can avail either the benefit under para 2(a)(i) or (a)(ii). Therefore clubbing of clearance on behalf of the appellant as well as M/s. Pharma Links is necessary in term of para 2 (a) of the Notification.
Revenue relied on the decision of the Gujarat High Court in case of Indica Laboratories Pvt. Ltd. v. Union of India [1990 (50) ELT 210 (Guj)] wherein it was held that clearance of the Loan License and the assessee manufacturer has to be clubbed.

Reasoning of Judgment:- The Tribunal noted that the condition of Notification 1/93-C.E. was that the aggregate value of clearance cleared from a factory by one or more manufacturers are to be taken into account and these clearances shall not exceed Rs. 30 Lakhs/20 Lakhs/25 Lakhs. Similar condition is available in Notification No. 7/97 in Para 2(v). Therefore there is no doubt that for availing the exemption under these notifications, the value of clearance made from the appellant’s factory on their own and on behalf of M/s. Pharma Links are to be clubbed under these notifications. Similarly, in para 1(a)(i) of Notification No. 1/93, it is clearly stated that in case a manufacturer avails the credit of duty paid under Rule 57A, value of the clearances of first Rs. 30 lakhs will be governed by concessional rate and in para 1(a)(ii) in case the manufacturer does not want to avail this facility of para 1(a)(i), then goods upto Rs. 30 lakhs will be exempted from the whole of the duty of excise. Para 1(a)(i) and (ii) cannot be availed simultaneously. Para 1(a)(i) clearly states that in a case where a manufacturer avails credit of duty paid on inputs then clearance of Rs. 30 lakhs will be cleared at concessional rate and if the manufacturer does not want to avail this facility then only the clearance of Rs. 30 lakhs will be totally exempted. Similar provisions are made in the Notification No. 7/97. Under para 2(i) a manufacturer wants to avail the option not to avail the SSI exemption and wants to pay duty then he has to pay the duty in whole financial year and the option once exercised cannot be withdrawn in the same financial year. In the present case, the appellant has availed the both facilities i.e. full exemption on Rs. 30 lakhs on the goods cleared by them on their own behalf and availing Modvat Facility or payment of full duty in respect of the clearance made on behalf of M/s. Pharma Links is contrary to the provisions of these Notifications.

The Tribunal held that ratio of CCE v/s Premier Industries will not apply in appellant’s case as in that decision interpretation of Notification No. 8/98 and 83/94 was involved but in appellant’s case they were not availing benefit under either of these Notifications. It was held that decision in CCE v/s Bharat Foundry was also not applicable as appellant herein was not availing benefit of Notification No. 83/94 and 84/94 and the said decision did not interpret Notification No. 1/93 and No. 7/97. The decision in R. B. Polypack v/s CCE was also held to be not applicable for same reasons.

It was held that in Indica Laboratories Pvt. Ltd. v. Union of India it was held by the High Court that clearances of loan licensee at manufacturing factory are to be clubbed.

It was held that the question of exclusion from total value of clearances does not arise as the appellant were not availing exemptions under Notification No. 83/94, 84/94 and 214/86.

With regard to inclusion of export clearances, it was found that under Notification the value of clearances made for home consumption are to be taken into account for the purpose of availing benefit under Notification. Contention of the appellant accepted in this regard.

In the end, it was held that Value of clearance made by the appellant on behalf of M/s. Pharma Links is to be clubbed for the purpose of paying the duty under these Notifications. It was held that the appellant cannot avail both SSI exemption and Cenvat credit facility simultaneously.

Decision:- Appeal disposed of accordingly.

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PJ/Case Laws/2011-12/1548

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