CESTAT Allows SSI Exemption Benefit to Factories Located In Rural Area [Read Order]

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.

Shreenathji Polyplast, 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.

As per the Intelligence, it was found 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.

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A 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.

Further issued notice 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’s appeal was dismissed.

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 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.

The two members bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that Exemption notification neither provided that the specified goods must be the same or similar to the goods for which the brand name or trade name is registered.

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Further held that the appellant is entitled to avail the SSI exemption benefit under the provisions of Para-4(c) as their factory is located in a rural area and the benefit cannot be denied.

To Read the full text of the Order CLICK HERE

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