12 November 2009
Please frame proper query as to what type of goods are manufactured by the assessee, country where goods is exported etc etc.however I am giving here a summary of the provisions it may be useful for you
Provisions of General SSI exemption
The most important notification giving concessions to SSI is notification No. 8/2003 dated 1-3-2003. SSI units whose turnover is less than Rs. 4 crores are eligible for the concessions. 1. If SSI unit does not avail Cenvat on inputs, turnover upto Rs 150 lakhs is fully exempt (The limit was Rs 150 lakhs upto 31-3-2007). 2. If SSI unit avails Cenvat on inputs, it has to pay full normal duty on all its clearances.
3. Goods not Eligible for SSI concession - some items are not eligible (some of the items not eligible for SSI exemption are eligible for exemption under different notifications. Some are not exempt at all). Thus, SSI exemption is available only if the item is covered in this notification.
4. Broadly, items generally manufactured by SSI (except in tobacco, matches and textile sector) are eligible for SSI exemption. Some items like pan masala, matches, watches, some textile products, tobacco products, etc. are specifically excluded, even when these can be manufactured by SSI. Some items like automobiles, primary iron and steel etc. are not eligible, but anyway, these are beyond capacity of SSI unit to manufacture.
5. Goods with others 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.
6. Duty payable on goods manufactured for captive consumption, if not eligible for SSI concession - If goods which are not eligible for SSI concession are manufactured by SSI unit for captive consumption, duty will be payable, even if final product is eligible for SSI concession, as correctly held in Super Polyfabriks Ltd. v. CCE 1999(114) ELT 1019 (CEGAT).
7. SSI units eligible for SSI concession - 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.
8. Exemption available only if turnover in previous year was less than Rs 4 crores
9. Clubbing of turnover - (a) 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. (b) It is also possible that more than one manufacturers may clear the goods from the same factory e.g. part of factory may be used by one manufacturer and another part of same factory may be used by another manufacturer. In such cases, all clearances from the factory has to be considered even if the clearance is of different manufacturers for calculating the SSI exemption limits of 150 or 400 lakhs. (c) Some times, a manufacturer may use the factory for part of the year and then another manufacturer may use the same factory for remaining part of the year. In such cases, the turnover of different manufacturers has to be clubbed for calculating the SSI exemption limits of 150 or 400 lakhs, if it is from the same factory. (d) Clubbing is also possible if two units are sham or bogus or if there is unity of interest and practically they are one.
10. If a manufacturer has more than one factories, he has to avail the option in respect of all factories. He cannot opt to avail Cenvat in respect of one factory and avail SSI exemption in respect of other factory, as the slab-wise exemption is for all factories of manufacturer together. - CBE&C Circular No. 172/6/96-CX dated 6-2-1996.
11. Choice of various types of exemption - SSI units have been given two types of exemptions -
(a) Unit can avail full exemption upto Rs 150 lakhs and pay normal duty thereafter. Such units can avail Cenvat credit on inputs only after reaching turnover of Rs 150 lakhs in the financial year. [The full exemption limit of Rs 150 lakhs was increased to Rs 150 lakhs w.e.f. 1-3-2007].
(b) Unit intending to avail Cenvat credit on inputs on all its turnover have to pay normal duty without any concession.
When second option suitable - Option of payment of duty may be suitable in following cases - (a) When buyer intends to claim Cenvat credit. In such cases, the effective cost will be lower as SSI unit can claim Cenvat on inputs (b) When SSI unit intends to export the products and has huge balance in Cenvat credit account. In such cases, he can pay duty and claim rebate after export of goods. Otherwise, the balance may remain unutilised. There is provision to get refund of balance lying in credit in Cenvat Credit account. However, such refund can be only of Cenvat on inputs and not of capital goods.
Option must be indicated, if SSI unit intends to avail Cenvat credit - The first option, i.e. Nil duty upto Rs 150 lakhs and normal duty for subsequent clearances is automatic. However, if assessee wants to avail second option, he must inform option to department. He should inform in writing to Assistant Commissioner with a copy to Superintendent of Central Excise. The second option (of paying 150% duty) is available any time during the year, but the option once availed cannot be withdrawn during the financial year.
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, if the SSI unit does not avail Cenvat credit on inputs. If an SSI unit manufactures goods of different varieties, falling under different Chapter heads and/or in different factories, total exemption considering clearances of all Chapters together and all factories of same manufacturer together, will be Rs. 150 lakhs. An SSI unit can opt for paying full normal duty also.
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. [confirmed in Searsole Chemicals v. CCE 1999(113) ELT 435 (CEGAT)]. 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 -
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. However, if some intermediate product gets produced, its turnover may be held as includible. [However, this turnover (except clearances to EOU, SEZ, STP, EHTP, UN etc.) will have to be considered for calculating exemption limit of Rs 400 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.
Exports to Nepal and Bhutan cannot be excluded, i.e. export turnover to Nepal and Bhutan will have to be considered while calculating limit of Rs 150 lakhs. It will be treated as 'clearance for home consumption', even if actually it is 'export'. Exports to Nepal and Bhutan will have to be included whether payment is received in Indian Rupees or in free foreign currency. [Same provision for calculating limit of Rs 400 lakhs].
Export under bond through merchant exporter to be excluded - If the exports are under bond without payment of duty through an export house, these will not be considered for SSI exemption limit i.e. it will be excluded for calculating exempted turnover. This is because, in such case, the clearance is not for 'home consumption'. [Same provision for calculating limit of Rs 400 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].
Goods manufactured with others brand name not to be included - A SSI unit can manufacture goods with brand name belonging to others. Such goods are not exempt from duty and full duty is payable on such goods. This turnover has to be ignored for calculating SSI exemption limits of Rs 150 lakhs. [However, if these goods are manufactured in rural area with other’s brand name, these are exempt upto Rs 150 lakhs. In such case, that turnover will have to be considered for calculating exemption limit of Rs 150 lakhs]. [Same provision for calculating limit of Rs 400 lakhs].
Intermediate products - Value of intermediate products manufactured while producing final products which are eligible for SSI exemption cannot be considered for calculating limits of Rs 150 lakhs, if both intermediate product and final product are eligible for SSI concession. Such intermediate product is fully exempt from duty. - - However, if final product is exempt under any other notification, the value of intermediate product will have to be considered, i.e. included for considering SSI exemption [Same provision for calculating limit of Rs 400 lakhs].
Strips of plastics used within factory - Clearance of strips of plastics used within factory of production for weaving of fabrics or manufacture of sacks or bags made of polymers of ethylene or propylene are exempt. [Same provision for calculating limit of Rs 400 lakhs].
Job work which does not amount to manufacture to be excluded - Job work of test, repairs, reconditioning etc. as this does not amount to ‘manufacture’ i.e. where new and identifiable product does not emerge. [Same provision for calculating limit of Rs 400 lakhs].
Partial exemption if Cenvat on input availed - The full exemption upto Rs 150 lakhs is available only if the unit does not avail Cenvat credit on inputs. However, once the SSI unit starts to avail Cenvat credit and pay duty, he cannot then avail SSI concessional rate of duty for the whole year. However, option to avail Cenvat and pay duty can be availed any time during the year. - CBE&C circular No B-41/2/97-TRU dated 14.7.1997.
How to calculate the SSI exemption limit of Rs 400 lakhs - While calculating turnover of Rs. 400 lakhs, some of turnover of SSI is not to be considered, while some has to be considered, as discussed below. [Note the differences in provisions in calculating limits of Rs 150 lakhs and Rs 400 lakhs].
Turnover to be excluded While calculating limit of Rs 400 lakhs, following is to be excluded –
Export turnover to be excluded - The limit of Rs 400 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 Rs 400 lakhs.
Export under bond through merchant exporter to be excluded - If the exports are under bond without payment of duty through an export house, these will not be considered for SSI exemption limit i.e. it will be excluded for calculating exempted turnover. This is because, in such case, the clearance is not for 'home consumption'.
Deemed exports to be excluded – Goods can be cleared to EOU, SEZ, EHTP or STP unit or to UN or an international organisation without payment of duty. Such clearances are not to be considered for calculating the exemption limit of Rs 400 lakhs. [Same provision for calculating limit of Rs 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.
Goods manufactured with other’s brand name not to be included - A SSI unit can manufacture goods with brand name belonging to others. Such goods are not exempt from duty and full duty is payable on such goods. This turnover has to be ignored for calculating SSI exemption limits.
However, goods manufactured in rural area under other’s brand name will have to be included.
Intermediate products - Value of intermediate products manufactured while producing final products which are eligible for SSI exemption cannot be considered for calculating limits of Rs 400 lakhs, if both intermediate product and final product are eligible for SSI concession. However, if final product is exempt under any other notification, the value of intermediate products will have to be considered. [Same provision for calculating limit of Rs150 lakhs].
Job work or any proces which does not amount to manufacture to be excluded - Job work of test, repairs, reconditioning etc. is not to be included, as this does not amount to ‘manufacture’ i.e. where new and identifiable product does not emerge. Similarly, if any processing or operation is done which does not amount to manufacture, its value will not be included. - - Goods returned and cleared after processing are not includible as value of goods for clearances can be considered only once and not twice over. – Kusum Chemicals v. CCE 2002(144) ELT 346 (CEGAT).
Strips of plastics used within factory - Clearance of strips of plastics used within factory of production for weaving of fabrics or manufacture of sacks or bags made of polymers of ethylene or propylene are exempt. [Same provision for calculating limit of Rs150 lakhs].
Inputs brought by assessee and cleared as such not to be considered - A unit can clear inputs as such on payment of duty under rule 3(4) of Cenvat Credit Rules [That time rule 57AB(1)(b) - earlier 57F(1)(ii)]. This turnover is not to be considered for calculating clearances of Rs. 150/400 lakhs - Board circular No. 263/30/88-CX.8 dated 27-10-88.
Turnover to be included – While calculating limit of Rs 400 lakhs, following is to be included -
Turnover of goods exempted under other notification to be included – If SSI unit clears goods under some other exemption notification, its turnover will have to be considered i.e. included for calculating exemption limit of Rs 400 lakhs. - - Thus, job work done by SSI unit is exempt under notification No. 214/86-CE or 83/94-CE. This turnover will have to be considered i.e. included for considering exemption limit of Rs 400 lakhs. The valuation will have to be done on basis of material cost plus job charges. - - Similarly, goods exempted under any other notification i.e. other than SSI exemption notification will have to be included. - - However, clearances to EOU, SEZ, EHTP, STP, UN or other international agency without payment of excise duty will not be considered for calculating exemption limit of Rs 400 lakhs. [If goods are excluded under any notification other than SSI exemption notification, that turnover has to be excluded for calculating limit of Rs 150 lakhs].
Goods manufactured in rural area with other’s brand name to be included - If goods are manufactured in rural area with other’s brand name, these are exempt upto Rs 150 lakhs. In such case, that turnover will have to be included for calculating exemption limit of Rs 400 lakhs [Same provision for calculating limit of Rs150 lakhs].
Option to pay full duty to SSI without availing concession - An SSI unit is allowed to pay full duty even if it is entitled to pay concessional duty. He can avail and utilise Cenvat on inputs as well as capital goods. Option once exercised cannot be changed during the year. It is not permissible to pay full duty on part clearance and concessional duty on part of the clearance. The option must be informed in writing to Assistant Commissioner with copy to Superintendent.
This option is useful to SSI units which supply goods to other units which can avail Cenvat of duty paid by SSI. If such option is not available to SSI, the duty paid on inputs used by SSI units is not available for Cenvat credit.
No concession if previous year’s turnover was over four crores - SSI exemption is available only to those units whose turnover was less than Rs. 4 crores in previous financial year (i.e. April to March). If turnover had exceeded Rs. 4 crores in previous year, there is no excise exemption at all and full excise is payable right from the beginning. If turnover exceeds four crores in current year, concession availed during current year need not be refunded, but next year, there will be no SSI concession - confirmed in Searsole Chemicals v. CCE 1999(113) ELT 435 (CEGAT). [Note : the ceiling was Rs. 2 crores in 94-95, which has been increased to Rs. 4 crores in 95-96. Thus, SSI units whose turnover was less than Rs. 4 crores in 2000-01 can avail SSI exemption in 2001-02.]
Only previous year's turnover relevant - In Karnataka Gears v. CCE 1999(110) ELT 529 = 29 RLT 543 (CEGAT), it was held that only previous year's turnover is relevant for purposes of SSI exemption. Turnover in respect of any other past year is not to be considered.
SSI exemption available in respect of goods exported to Nepal & Bhutan - The SSI exemption is available for home consumption, i.e. for consumption within India. However, explanation to SSI exemption notifications make it clear that clearances for home consumption shall also include clearances for export to Bhutan & Nepal. Thus, exports to Nepal & Bhutan will qualify for SSI exemption. In Unitherm Inductoweld v. CCE 2000(123) ELT 1162 (CEGAT), it was held that exports to Nepal will be includible even if the export is under bond without payment of excise duty.
Other Exemptions to small sector - Besides the aforesaid general exemption, there are specific exemptions.
Goods manufactured without aid of power - Some goods are exempt if no process in or in relation to manufacture of these goods is ordinarily carried on with aid of power. Some of these are mentioned in CETA itself and some in a Notification No. 167/86 dated 1-3-86. Apex Court in CCE v. Rajasthan State Chemical Works - 1991 (55) ELT 444 (SC) = (1991) 4 SCC 473 = 1991(2) SCALE 602 have held that process in manufacture or in relation to manufacture implies various stages through which the raw material is subjected to change by different operations. Thus, handling of raw materials or filling of pans are so interrelated that without these manufacturing process is impossible to be completed. Hence, if power is used in any of these operations, it is a case where, in or in relation to the manufacture, the process is carried on ‘with aid of power’.
Goods in rural area by cooperatives - Some goods manufactured by registered cooperatives or institutions recognized by Khadi and Village Commission or Board are exempt. These are : preparations of vegetable or fruits, sauces, laundry soap, foot-wears, calculators, cassettes, radios, black and white TV sets, electric iron and toaster, electronic clocks and watches, synthetic detergents, jute yarn and fabrics. This exemption is available to un-branded goods. If the goods are branded, the exemption is available only if the brand or trade name belongs to (a) the manufacturer producing the goods himself or (b) if it belongs to Khadi & Village Industries Commission or Board, (c) National Small Industries Corporation or State Industries Development Corporation or (d) a State Small Industries Development Corporation. In other words, the exemption is not available if the brand name belongs to a private trader who is not manufacturing those goods (Notification No. 88/88 dated 1-3-88 as amended).
Genuine specified products of village industry - Certain items produced by village industry and marketed by or with assistance of Khadi & Village Industries Commission are exempt from duty. The products include - lac, gum, vegetable products, fireworks, resin acids, articles of vulcanised rubber, articles of leather, articles of wood, ceramic products, furniture etc. [Notification No 198/87-CE dated 28.8.1987].
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