Excise and SSI

Government of India has provided a major relief by granting full exemption from the Payment of central excise duty on a specified output and thereafter slab-wise concessions of certain specified items in 1978. A general Small Scale Exemption Scheme in respect of specified commodities was introduced in 1985. The same was replaced in 1986 and subsequently amended from time to time by a number of notifications in 1993. With effect from 1-4-1994, Gate-Pass System was replaced by manufacturer invoice to cover clearances of goods as the duty-paying document.

In the Budget 1995-96, the limit of Rs.2 crore turnover for a small scale unit to be eligible to exemption was revised to Rs.3 crore. SSI units whose clearances dis not exceed Rs.30 lakhs in a financial year were exempted from payment of excise duty. SSIs are also not required to maintain any statutory records such as daily stock account of production and clearances, raw material account, personal ledger account, RG-23A account, RG-23C account, stock register of goods sent for processing of job-work, invoice records etc. Their own records are adequate for excise purposes. The exemption limit has been raised to Rs.50 lakhs in the budget 1998-99. SSIs have been allowed to pay duty on a monthly basis w.e.f 1-4-1999.

Eligibility as an SSI Unit

The pre-requisite for the eligibility for excise concessions was that SSI unit should be registered with the State Directorate of Industries or DC(SSI). At-the time of obtaining the exemptions and concessions, the SSI unit was required to produce such a certificate of registration from the respective Directorate of Industries or DC(SSI),

In the year 1986, SSI units not registered with the State Directorate of Industries were also given exemptions, but on different eligibility conditions. With effect from 1-4-1994, the requirement of obtaining registration certificate from the Directorate of Industries or DC(SSI) has been dispensed with as a condition for available or excise duty concessions. This implies that there would be no distinction between registered and unregistered units for SSI concessions. Further, the eligibility for excise concessions for SSIs has been based on annual turnover rather than SSI registration which is based on the criterion of investment in plant and machinery. Only the units previously registered with DGTD and now with SIA are not considered eligible for SSI concessions.

There are two exemption schemes available for the SSI sector which have been amended by the Finance Act, 2000. The schemes are: 

SSI Scheme (Without CENVAT)

This scheme as contained in Notification No.8/2000-CE dated 1.3.2000 is effective from 1.4.2000. The following rate of duty is applicable to such manufactures whose turnover does not exceed Rs. 3 crores in the previous financial year in respect of clearances of excisable goods for home consumption (including exports to Nepal or Bhutan) from one or more factories of the same manufacturer or from factory by one or more manufacturers:

Rate of duty in respect of Clearances of Excisable Goods

It may be noted that beyond clearances of Rs.100 lakhs, the manufacturer is liable to pay normal rate of duty and accordingly he can avail CENVAT credit at this stage. Similarly, CENVAT credit on capital goods can be availed and utilised after crossing the limit of Rs.100 lakhs.

The scheme has been extended to articles of plastic, cosmetic and toilet preparations, tread rubber, airconditioning and refrigeration and parts, which were earlier covered under a separate exemption. All such clearances of the specified goods which are used for captive consumption in production of the specified goods are subjected to ‘nill’ rate of duty and the Table itself. The notification grants exemption in respect of basic excise duty and special excise duty. The manufacturer may opt for not availing exemption contained in the notification and instead pay the normal rate of duty on the clearances. But once the option is exercised, it shall continue till the remaining part of the financial year.

SSI exemption notifications clearly use the words ‘first clearances on or after 1^st April in any financial year’. In Remakrishna Engineering Works v. CCE, (1996) 83 ELT 346 (CEGAT), it has been held that all clearance from 1^st April in chronological order have to be considered for purpose of calculation of exemption limit of Rs.50 laks. Thus, if some goods are cleared on payment of duty, those will also have to be considered for calulating the limit of 50 lakhs.

Value for purpose of calculating the limit of 50,100 and 300 lakhs is the ‘Assessable value’ as per section 4 i.e., wholesale price at factory gate, exclusive of taxes, where price is the sole criteria. When goods are assessed on basis of MRP (Maimum Retail Price) the ‘Value’ will be as determined under section 4A.

SSI Scheme (with CENVAT)

This scheme as contained in Notification No.9/2000-CE dated 1.3.2000 is effective from 1.4.2000. The Notification provides the concessional rate of duty in respect of clearances of specified goods for home consumption (including exports to Nepal or Bhutan), and also states that all clearances of the specified goods which are used for captive consumption in production of the specified goods shall be subjectedd to ‘nil’ rate of duty. Such clearances shall not be counted for determining the aggregate value of clearance of the specified goods. The following Table shows the Rate of Duty.

 Rate of duty in respect of Clearances of Specified goods

The exemption shall apply only subject to the following conditions:

                     i.A manufacturer who intends to avail the exemption under this notification shall exercise his option in writing for availing the exemption under this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year.

                   ii.While exercising the option under condition (i), the manufacturer shall inform in writing to the jurisdiction Deputy Commissioner or Assistant Commissioner of Central Excise with a copy of the Superintendent of Central Excise giving the following particulars, namely:-

                                                                   a.                        name and address of the manufacturer;

                                                                  b.                        location/locations of factory/factories;

                                                                   c.                        description of specified goods produced;

                                                                  d.                        date from which option under this notification has been exercised;

                                                                   e.                        aggregate value of clearances of specified goods (excluding the value of clearances referred to in para 3 of this notification) till the date of exercising the option.

                  iii.Where a manufacturer opts for availing the exemption under this notification in terms of condition (i) above, the clearances of specified goods already made during the financial year, prior to the exercise of such option, shall be taken into account for computing the aggregate value of clearances, as specified in the said table.

                 iv.Where a manufacturer clears the specified goods from one or more factories, the exemption in this case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table, and not separately for each factory.

                   v.Where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table and not separately for each manufacturer.

                 vi.The aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturer, does not exceed preceding financial year Rs.300 lakhs.

The exemption contained shall not apply to the specified goods bearing a brand name of trade name, whether registered or not, of another person, except in the following cases, namely:-

a.                   Where specified goods, being in the nature of components or parts of any machinery or equipment orappliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1944, However, manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in the financial year 1999-2000, may submit a declaration regarding such use instead of following the procedure laid down in chapter X of the said rules;

b.                  Where the goods bear a brand name of trade name of -

                                             i.                        the Khadi and Village Industries Commission; or

                                            ii.                        a State Khadi and Village Industry Board; or

                                          iii.                        the National Small Industries Corporation; or

                                          iv.                        a State Small Industries Development Corporation; or

                                           v.                        a State Small Industries Corporation;