Excise Duty Exemption Limit

This query is : Resolved 

22 March 2009

What is the Exemption limit for Excise Duty ? What about Limit for SSI ?

What are the procedure for Registration for Excise ?

Dayal (Expert)
22 March 2009


Provisions of General SSI exemption

Various concessions are given to small-scale industries to encourage their growth and also on account of administrative convenience. Since Excise is a duty on manufacture, it is payable even by a small unit manufacturing the goods.

However, it is Government’s policy to encourage growth of small units. The Govt. has therefore, given various concessions to small scale industries (SSI).

The most important notification giving these concessions is notification No. 8/2003 dated 1-3-2003. SSI units whose turnover is less than Rs. 4 crores in the previous financial year are eligible for the concessions. All industries irrespective of their investment or number of employees are eligible for concession. In fact, even a large industry will be eligible for the concession if its annual turnover is less than Rs. 4 crores. The SSI unit need not be registered with any authority.

If SSI unit does not avail Cenvat on inputs, turnover upto Rs 150 lakhs is fully exempt (The limit was Rs 100 lakhs upto 31-3-2007).

If SSI unit avails Cenvat on inputs, it has to pay full normal duty on all its clearances.

Goods not Eligible for SSI concession

Goods with other’s brand name not eligible - Goods manufactured by an SSI unit with brand name of others are not eligible for SSI concession, unless goods are manufactured in a rural area

“Some large units get their goods manufactured from small unit under their brand name or trade name. For example, Bata gets many of their Chappals made from small units. Similarly, Bajaj Electricals/Philips India etc. get many electrical goods made from small units with Bajaj/Philips brand name. In such cases, the small unit will not be eligible for excise exemption. However, if the small unit manufactures goods under his own brand name, SSI exemption is available. If he manufactures goods bearing brand name of any other person, SSI exemption is not available.”

Provisions in respect of brand name - Brand name or trade name means any name or mark such as symbol, monogram, label, signature, or invented word or writing which is used in relation to the goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such goods and some person using such name or mark. The name or mark may or may not indicate identity of that person. The brand name or mark or trade name may or may not be registered.
Thus, the definition is very wide. Even name of person who markets the goods, if used on the product, may attract the provision; as such name or mark indicates the connection between the goods and person using that name or mark.

Clubbing of turnover

If the manufacturer has more than one factories (even at different places), the turnover of all factories (belonging to same manufacturer) have to be clubbed together for calculating the SSI exemption limits of Rs 150 or 400 lakhs.

Slabs in SSI excise exemption - Following are slabs in SSI excise exemption.

First slab of 150 lakhs - There is full exemption from excise upto the first clearances of Rs. 150 lakhs, starting from 1st April every year,
Second slab after initial 150 lakhs - After the turnover crosses Rs. 150 lakhs, full normal duty is payable. The SSI unit can avail Cenvat credit on inputs in respect of inputs used after turnover crosses Rs 150 lakhs
Even if an assessee crosses turnover of Rs. 4 crores, he has to only pay duty at normal rate. The SSI manufacturer does not have to pay duty on earlier turnover for which he had availed concession.
However, in next year, he will not be able to avail any concession and he has to pay normal rate of duty from 1st April itself.
Excluded turnover for calculating exemption limit of Rs 150 lakhs - While calculating exemption limit of Rs. 150 lakhs, some of turnover of SSI is not to be considered, as explained below. [Note the differences in provisions in calculating limits of Rs 150 lakhs and Rs 400 lakhs].
CLEARANCES OF GOODS EXEMPTED UNDER ANY OTHER NOTIFICATION TO BE EXCLUDED – Some goods may be exempt under some other notification, i.e. other than SSI exemption notification. In some cases, duty may not be payable on such goods for some other reason. Turnover of such goods is not to be considered for calculating exemption limit of Rs 150 lakhs
EXPORT TURNOVER TO BE EXCLUDED - The limit of Rs 150 lakhs is of clearance for home consumption, i.e. within India. Export turnover should not be considered for the purpose of calculating the turnover of 150 lakhs
TURNOVER OF NON-EXCISABLE GOODS SHOULD BE EXCLUDED – Some goods are non-excisable, i.e. these are not included in Tariff at all. In such case, its turnover cannot be considered for purpose of exemption limit. [Same provision for calculating limit of Rs 400 lakhs].

Cenvat on capital goods permissible
The SSI unit can avail Cenvat credit on capital goods even if it is availing SSI exemption and not availing Cenvat on inputs. However, the Cenvat credit on capital goods can be utilised only after the turnover reaches 150 lakhs. Even if the capital goods are received during the period when his turnover was less than Rs 150 lakhs, he can take credit only after his turnover crosses Rs 150 lakhs (He should make suitable entries in Cenvat credit on capital goods account, but actually start debiting the account only after turnover crosses Rs 150 lakhs).

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