SSI Exemption Benefit Available To Factory Is Located In Rural Area: CESTAT

The Delhi Bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) has held that the assessee is entitled to avail the SSI exemption benefit as their factory is located in a rural area and the benefit cannot be denied for the reason that they have been manufacturing the goods bearing the brand name which belong to Nootan Polymers.

The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that Exemption Notifications have to be strictly construed. Neither in clause 4 of the Notification nor in Explanation IX is it provided that the specified goods must be the same or similar to the goods for which the brand name or trade name is registered. The Tribunal has in adopting the above reasoning effectively added to the Notification words to the effect “brand name or trade name in respect of the same goods”. It is clearly impermissible.

Background

The appellant/assessee is engaged in the manufacture of “HDPE Pipes” and had declared the “Principal Place of Business” as By-pass Choraya, Bhuwana, Udaipur and Additional Place of Business as Village-Lal-Madari, Tehsil–Nathdwara, Distt-Rajsamand.

The appellant manufactured the goods by using the brand name of “NOBLE” “FITWELL” and “ZINDAL” and cleared the same without payment of central excise duty by wrongly claiming the benefit of SSI exemption in terms of the notification (as amended) during the period December, 2016 to June, 2017 contravening the provisions of Central Excise Rules, 2002.

On the basis of an intelligence, it was gathered that the appellant was engaged in clearing/selling of the goods without issuance of taxable invoices and thereby evaded the payment of GST. Search was conducted at the factory premises, the godown and the residential premises of one of the partners on 2.8.2018 by the GST Commissionerate.

The stock of finished goods and the raw materials was found unaccounted/not recorded in their records, or in the books of accounts during the physical stock verification.

Statement of all the partners of the firm was also recorded under the provisions of the GST Act, 2017.

Show cause notice was issued under the provisions of the GST Act, which was adjudicated and the goods were confiscated.

During the examination of the documents recovered from the search operations and statements recorded, it revealed that the appellant had wrongly claimed the benefit of SSI exemption in contravention of the conditions mentioned in para-4 of the Notification, as they manufactured the pipes of the brand name of other company viz. M/s.Nootan Polymers, Rajkot during the period Jan., 2017 to June, 2017.

A show cause notice was issued demanding the central excise duty under Section 11A(4) along with interest and penalty under Section 11A and 11AC of the GST Act. The Adjudicating Authority confirmed the demand. The appellant preferred an appeal, which has been dismissed.

Arguments

The appellant had not disputed the fact of removal of the goods from their factory premises bearing the brand name of another person. Referring to the findings of the Commissioner (Appeals), it was submitted that the exemption of rural area claimed by the appellant is applicable only to the branded name or trade name mentioned in Para-4(b) of the notification. The clearance of the goods bearing the brand name or trade name of another person is ineligible for the grant of SSI exemption.

The main ground for denying the benefit of the SSI exemption notification was that the appellant was using the brand names i.e. “NOBLE”, FITWELL” and “ZINDAL” of M/s. Nootan Polymers, Rajkot. The assessee contended that their factory is situated in a rural area and, therefore, they are entitled to the exemption in terms of Para 4(c) of the notification.

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Issues Raised

The basic question involved is whether the benefit of SSI exemption notification no.8/2003-CE dated 1.3.2003 is available to the appellant?

Relevant Provision

Para-4 of the notification denies the exemption in respect of specified goods bearing a brand name or trade name, whether they are registered or not of another person and further sets out the exceptions. The sub-clauses (a) to (e) of Para-4 enumerates various exceptions in which case even if the goods bearing the brand name or trade name would be entitled to the exemption under the notification.

Conclusion

The court while allowing the appeal held that the findings of Authorities below that the requirement of manufacturing in a rural area has be to read with clause (b) is legally not sustainable as the expression used in clause (c) is clear and simple. There is no ambiguity, which has, therefore, to be read only with the substantive Para-4 i.e. the goods bearing the name or trade name shall not be eligible for the exemption but clarifies that the bar created therein shall not apply in the case of the exceptions.

Therefore, the tribunal held that clause (c) has to be read within the scope of the expression used therein. Accepting the findings of the Adjudicating Authority would amount to re-writing of the provisions of Para-4(c) so as to incorporate the words “brand name or trade name” after the words “specified goods”, which is not permissible.

The tribunal held that the appellant is entitled to avail the exemption under Para-4(c) of the notification, the order deserves to be set aside.

FAQs

Case Details

Case Title: M/s.Shreenathji Polyplast Versus Commissioner of Central Excise and Central Goods & Service Tax

Case No.: Excise Appeal No.54681 of 2023

Date: 07.10.2024

Counsel For Appellant: Pradeep Jain

Counsel For Respondent: Bhagwat Dayal

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