ORDER
P. Karthikeyan, Member (T)
1. M/s Nebulae Health Care Ltd. Kanchipuram manufactures P or P medicines of CSH 3003.10 and medicines falling under CSH 3003.20. The assessee manufactured and cleared their products during the years 1999-2000 to 2003-2004 on their own account and on job work basis for several other parties. The goods manufactured for third parties bore the brand name of such third parties. During the said period, the assessee availed benefit of SSI exemption under the Notifications No. 8/1999, 8/2000, 8/2001, 8/2002 and 8/2003 (Hereafter referred to as “relevant Notifications”.) in respect of the goods manufactured by them on their own account. In respect of the goods bearing brand name of third parties, the assessee availed the benefit of Modvat/Cenvat credit and also paid normal duty of excise. Five show cause notices were issued to the assessee to recover the benefit of SSI Notification availed by the assessee during this period on the ground that the assessee was barred from availing the benefit of SSI notification and Modvat/Cenvat credit simultaneously. The Joint Commissioner demanded an amount of Rs. 74,99,779/- on adjudication of the five show cause notices issued to them. A penalty of Rs. 10 lakhs was imposed on them under Rule 25 of the Central Excise Rules. Interest under Section 11AB was also demanded. On appeal, against the above order, the Commissioner (Appeals) passed the impugned order upholding the order of the original authority except the penalty, which he vacated. Hence this appeal by the assessee.
2. The lower appellate authority confirmed the demand against the assessee mainly on the ground that the assessee was not eligible for the benefit of SSI exemption owing to the following condition which existed in the Notifications No. 8/1999, 8/2000, 8/2001 8/2002 and 8/2003 which the assessee had violated.
2. (iii) the manufacturer shall not avail credit of duty on inputs under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002 (hereinafter referred to as the said Rules.), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs.
[In Notfn 8/99, para 2(iv)]
2.1. The lower appellate authority observed that according to Notification No. 175/86 if the manufacturer availed Modvat scheme in respect of specified goods covered under the Notification, then the concessional rate of normal duty less 10% would apply. In the instant case, the appellants had not exercised any such option for the goods cleared availing modvat/cenvat scheme. In respect of goods manufactured on job work basis they availed Cenvat benefit and cleared them on payment of full duty. Such availment of Cenvat and SSI exemption simultaneously was clearly barred as per the above provisions of each of the relevant Notifications.
2.2. The appellants had cited the following case laws in support of the procedure they followed:
(i) Jaina Detergents Pvt. Ltd. v. CCE
(ii) Kinjal Electricals Pvt. Ltd. v. CCE
(iii) Roots Multi clean Ltd. v. CCE
(iv) Chaitanya Power Capacitors Pvt Ltd. v. CCE and,
(v) Faridabad Tools v. CCE reported in 1994 (63) ELT 759 (Tri-Del.)
All these cases involved simultaneous availment of SSI benefit and Modvat Credit and the Tribunal had decided them in favour of the assessees. The Commissioner (Appeals) found these case law to be laying down no good law in view of the ratio of the Hon’ble Supreme Court’s decision in CCE v. Ramesh Food Products . In the said case, the Apex Court affirmed the decision of the Tribunal in the case of Kamani Foods v. CCE 1995 (75) ELT 202 (Tri). In Kamani Foods v. CCE the Tribunal had held…” in terms of Notification 175/86 full exemption would not be available under Notification 175/86 to a manufacturer for certain specified goods manufactured by him if he chooses to avail of Modvat Credit for certain other specified goods”. In CCE v. Ramesh Food Products the Apex Court had observed as follows:
Exemption envisaged for the specified goods accrues to them through instrumentality of the manufacturer. The notification clearly demarcated the two categories of manufacturers. A clear cut distinction is explicit between a manufacturer availing Modvat credit under Rule 57A and another not opting for the Modvat Scheme. As is statutorily provided, input duty relief is given under the scheme to the manufacturers who opt to operate under the scheme by applying for it in the prescribed manner. Ultimately the manufacturers have the choice of choosing one of the two concessions, i.e. either the Modvat Scheme or Notification 175/86. Further, there is no one to one correlation between the inputs and final products under Modvat Scheme. It would therefore not be possible to allow the manufacturer to simultaneously avail Modvat for some products and avail full exemption for others under small-scale exemption scheme.
2.3. Following the ratio of the above decision, the lower appellate authority upheld the decision of the original authority to deny SSI benefit to the assessee.
3. In the appeal against the impugned order, the assessee relied on the case law it had cited in its support before the lower appellate authority. The appellants further stated that the facts of the instant case were different from the facts of the case dealt with in Ramesh Food Products case. They submitted that in the said case, the issue was as to whether the two options provided under SSI exemption Notification 175/86 could be simultaneously availed or not. In their case they had not availed the benefit of two options simultaneously. They had availed the benefit of full exemption without Cenvat Credit in respect of their own goods. In respect of goods bearing the brand name of other persons they had not at all availed any concessional rate of duty but paid full duty. The Apex Court had not held that payment of full rate of duty on goods bearing the brand name of other persons and claiming exemption for own goods was not permissible. It was further argued that in all the SSI notifications, while defining the term “aggregate value of clearances” for the purpose of determination of exemption, as well as eligibility limit (i.e. value of clearances during the preceding financial year), the value of clearances of the specified goods, bearing the brand names of other persons had been excluded, for the reason that manufacturers were required to pay full duty on such goods. Therefore, the Notification itself recognized that a manufacturer while availing the benefit of exemption under the said Notification could also manufacture goods bearing the brand name of other persons on which full rate of duty was payable. Moreover, the relevant part of the Notifications (on computation of eligible value of clearances) read as follows:
the manufacturer shall not avail the credit of duty paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified does not exceed rupees one hundred lakhs.
3.1 In this computation, value of clearances of goods bearing brand name of other persons had been excluded. Therefore, restriction as to availment of Cenvat Credit contained in the Notification should refer only to those goods, for which the benefit of this exemption was sought and not to other goods. The wordings were different under Notfn. No. 175/86 where availment of credit for clearing the specified goods was barred. It was further argued that the Commissioner (Appeals) erroneously relied on the ratio of Ramesh Food Products case and the case law of Kamani Food Products v. CCE (supra) as these had dealt with options available under Notification No. 175/86 which was not the case of the appellant.
4. During hearing, the learned Counsel submitted that the appellant had not availed benefit of two options simultaneously. Citing Notifications No. 8/2003 and 9/2003 for illustration (Notfns 8/03 and 9/03 are used as representative of similar twin Notfns of 99 to 02 also), the learned Counsel submitted that the appellant had availed benefit of SSI exemption without the Modvat benefit in terms of Notfn No. 8/2003. The branded goods bearing brand name of others were excluded from the scheme of exemption under Notfn No. 8/2003 and they were like any other goods cleared paying the normal effective duty. Those goods were eligible for the usual benefits as available to any other assessee. He stated that Notifn No. 9/2003 which contained the exemption scheme for assessees availing Modvat credit also excluded the branded goods bearing brand name of others. Therefore, both the Notfns did not cover goods bearing other’s brandname cleared by an SSI unit and were not subject to the conditions or restrictions contained in the Notifications. The same was the scheme in respect of such goods contained in similar sets of Notfns issued during the years 1999 to 2002.
5. The learned SDR referred us to the findings of the Commissioner (Appeals) and submitted that as per the SSI Notfns such as Notfn No. 8/2003, the manufacturer who enjoys full exemption as per the Notfn shall not avail credit of duty paid on inputs under Rule 3 or Rule 11 the Cenvat Credit Rules, 2002 till the aggregate value of clearances of specified goods cleared for home consumption, calculated in the manner specified in the notification, does not exceed One hundred lakh rupees or till the full exemption has been enjoyed by the SSI unit. As per the Notfn No. 8/2003, modvat credit could not be availed by such assessees who had opted for full exemption for the first clearances of value of Rs. One hundred lakhs. In the instant case, the appellant had also cleared specified goods bearing brand name of others availing modvat credit. This was incorrect and made the assessee ineligible for the full exemption opted for as per the said Notfn. in respect of clearances of his own goods of value Rs. One hundred lakhs. She submitted that the ratio of the apex court’s decision in Ramesh Food Products was that the assessee could not avail benefit under Not.No. 175/86 and avail Modvat benefit simultaneously. As per the judgment, assessees were given substantive concessions of modvat and Not.175/86. The assessee had no liberty to avail both the benefits simultaneously. In availing modvat credit for goods cleared with brand name of others, the SSI unit forfeited its option to avail benefit of exemption under Not.No. 175/86. She also stated that the Bangalore Bench of the Tribunal had decided that both the options could be availed simultaneously, but disallowed the benefit for the reason that the assessee had not maintained records of credit availed by it to enable grant of the benefit under the modvat option. She submitted that, because of this difficulty only the assessees were barred from availing both the options simultaneously.
6. We have gone through the records and carefully considered the rival submissions. The main issue to be decided in this case is whether the assessee’s own goods cleared by the assessee in the respective years were eligible for full exemption/slab exemption in terms of the relevant Notifications. The sole objection raised by the lower authorities to deny the benefit to the assessee’s own goods is that the benefit is not admissible if the manufacturer availed credit of duty paid on inputs used in the manufacture of specified goods cleared for exemption counted to determine Rs. One hundred lakhs as per the Table to the Notification. The concerned clause common in all the relevant Notfns reads as follows:
The manufacturer shall not avail the credit of duty on inputs under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2002 hereinafter referred to as the said Rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of the first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs
The following is the table referred to above.
______________________________________________________
S. No. Value of clearances Rate of duty
______________________________________________________
(1) (2) (3)
______________________________________________________
1. First clearances up to an aggregate Nil
value not exceeding one hundred lakh
rupees made on or after the 1st day of
April in any financial year.
_____________________________________________________
2. All clearances of the specified goods Nil
which are used as inputs for further
manufacture of any specified goods
within the factory of production of the
specified goods.
____________________________________________________
6.1 Both the lower authorities have given a finding that the assessee had not availed credit of duty paid on inputs used in the manufacture of goods, the aggregate value of first clearances of which did not exceed Rs. One hundred lakhs in each year in which the full exemption was availed. Therefore, in terms of the relevant Notifications, the assessee had correctly availed the SSI benefit denied and demanded in the impugned order. The impugned order is therefore not sustainable.
7. The provisions in the relevant Notifications to compute aggregate value of clearances mandate that the clearances of goods bearing brand name or trade name of another person which are ineligible for the grant of exemption shall not be taken into account in determining the aggregate value of clearances. Therefore, value of clearance of goods bearing brand name of third parties without availing the benefit of Notification No. 8/2003 is not reckoned for computing clearance value of Rs. One hundred lakhs in a any year for exemption benefit. From these clauses contained in the relevant Notifications, it is clear that goods bearing brand name of third parties were not eligible for exemption contained in Notification No. 8/2003. Identical provision existed in Notfn No. 9/2003 where the option of availment of Modvat benefit and payment of a concessional rate of duty was prescribed. Goods bearing brand name of third parties are therefore excluded from the exemption in Notification No. 9/2003 as well. The assessee has not availed the benefit contained in either of the Notifications 8/99 and 9/99, 8/2000 and 9/2000 etc. in respect of goods bearing brand name of third parties.
8. We find that the impugned order also seeks support of the ratio of Ramesh Food Products case decided by the Hon’ble Supreme Court. In that case, the Honourable Supreme Court considered the options available to the SSI units clearing specified goods and decided that both the options provided substantive concessions viz; modvat and exemption under Notfn 175/86 to the manufacturer and the manufacturer had to decide on one option. Once an option was made, there was no liberty to the assessee to avail benefits of both the options simultaneously. Therefore an SSI unit availing full exemption as per the Notfn No. 175/86 in respect of certain specified goods could not also avail the modvat benefit in respect of certain other specified goods.
8.1. Notfn No. 175/86 dated 1.3.86 extended concessional rate of duty on first clearances of specified goods of value of rupees seven and a half lakhs while availing modvat credit on inputs or full exemption benefit for such goods without the benefit of modvat credit. The Notfn also provided lesser benefit for further clearances in excess of the above aggregate value under both the options for higher slabs / aggregate value of clearances. In computing the aggregate value of clearances for the purpose of exemption under both the options, the notification did not require that the goods bearing brand name of third parties should be excluded. The following explanation, inter alia, governed computation of the above aggregate value for the Notfn:
Explanation IV. – For the purposes of this notification, where the specified goods manufactured by a manufacturer, are affixed with a brand name or trade name (registered or not) of another manufacturer or trader, such specified goods shall not, merely by reason of that fact, be deemed to have been manufactured by such other manufacturer or trader.
8.2 The above condition though present in the Notifications that replaced the scheme of duty benefit for SSI units contained in Notfn 175/86, value of such goods are specifically excluded from the computation of aggregate value in these Notifns. Clearances of goods bearing brandname of third parties is thus not governed by the Notfns issued for the benefit of SSI units.
9. Notification No. 175/86 and the subsequent pairs of Notifications issued annually to extend the benefit contained in Notification. No. 175/86 are different in certain other important respects also. Notification No. 175/86 treated goods bearing other’s brand name on the same footing as the goods manufactured by the SSI Unit for the purpose of allowing the benefit of the Notfn. The Notifications that governed clearances covered by the impugned order specifically excluded goods cleared by the 531 Units which bore brand names of third parties from the exemption scheme. The relevant Notfns did not prohibit the SSI Units from availing modvat benefit for such goods and full exemption for other specified goods.
9.1. All the twin Notifications contain the following identical conditions excluding the goods bearing brand name of third parties from the purview of both the Notifications.
3. For the purpose of determining the aggregate value of clearances for home consumption, the following clearances shall not be taken into account, namely:
(a) xxxxx
(b) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4 below.
4. The exemption contained in this Notification shall not apply to the specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:….
The exclusions mentioned are components manufactured for OE manufacturers, goods manufactured in rural area, goods bearing brand names of KVIC etc. The condition contained in para 2(iii) of the relevant Notifications seminal to the dispute was not present in the Notification No. 175/86. The relevant notifications are different from Notification No. 175/86 in view of the other new conditions since added.
10. Therefore, the ratio laid down by the Apex Court interpreting Notification No. 175/86 in Ramesh Food Products cannot apply in reading the scope of pairs of Notifications issued in various years after its (Notification No. 175/86) rescission for the benefit of SSI Units. It is well settled that each Notification has to be construed strictly on its own terms. The issue involved in the subject case is interpretation of the scope of relevant Notfns extending exemption without the benefit of modvat credit. In the view we have taken of the relevant Notification, the assessee had correctly availed the exemption under the relevant Notfns and the impugned order is passed on incorrect reasoning. We therefore set aside the impugned order and allow the appeal.
(Operative portion pronounced in the open Court on 22.8.06)