Manufacturer Cannot Pay Duty on One Brand and Claim SSI Exemption on Another in Same FY: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a manufacturer cannot pay excise duty on one brand and simultaneously claim Small Scale Industry (SSI) exemption on another brand from the same manufacturing unit within the same financial year.

Switz Foods Pvt. Ltd., the appellant, is engaged in manufacturing cakes and cookies under different brand names, including ‘Fresh Bake’ and ‘Bake Shop’. The company paid excise duty on goods under the ‘Fresh Bake’ brand and it claimed SSI exemption under Notification No. 8/2003-CE for products cleared under the ‘Bake Shop’ brand, all from the same factory premises.

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The Department issued a show cause notice covering the period 2006-07 to 2010-11, alleging that the appellant could not selectively pay duty on one product and simultaneously avail SSI exemption for another. The adjudicating authority confirmed the demand and imposed penalties, which was upheld by the Commissioner (Appeals). The appellant challenged this decision before the CESTAT.

Before the CESTAT, the appellant’s counsel argued that the company paid excise duty on certain goods voluntarily, while availing exemption for others, and that its total clearances remained within the prescribed threshold.

The counsel also submitted that excise duty was always paid on branded goods manufactured for third parties (such as the ‘Monginis’ brand), which are ineligible for SSI exemption. For its own branded products, the appellant claimed that its turnover did not cross the inner exemption limit.

The revenue countered that the SSI Notification does not allow partial application of exemption and duty within the same financial year from a single unit. According to them, the exemption scheme requires consistency, and once opted for, it must be applied to all eligible goods for that year.

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The two-member bench, comprising R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) held that the SSI exemption must be applied uniformly across all eligible products from the same unit in a financial year, and a manufacturer cannot split excise duty and exemption between different brands produced in the same facility.

Despite affirming the legal principle, the tribunal allowed the appeal and set aside the duty demand, observing that Switz Foods’ total turnover for each financial year under dispute did not exceed the applicable SSI exemption threshold (Rs. 1 crore or Rs. 1.5 crore, depending on the year). The tribunal also considered that excise returns had been filed regularly and that no suppression of facts was found.

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