13

Exemption Based on Value of

Clearances (SSI)
Question 1
Answer the following questions with reference to Notification No. 8/2003-CE dated 01.03.2003
relating to small scale units:
(i) What is the eligible turnover for claiming exemption under the said notification?
(ii) How will the turnover be computed when the manufacturer has more than one factory?
(iii) What does ‘value’ mean for the purposes of the said notification?
(iv) Comment on the availability of CENVAT credit on capital goods under the said
notification.
(v) What is the treatment in respect of ‘clearances of excisable goods without payment of
duty’ as specified in the said notification?

Answer
(i) The eligible turnover for claiming exemption under the said notification is `400 lakh. The
units whose value of clearances computed in accordance with Notification No.8/2003 is
less than or equal to `400 lakh (`4 crore) in the previous financial year are eligible for
the benefit of exemption in the current financial year.
(ii) When a manufacturer clears the goods from one or more factories, the turnover of all the
factories have to be aggregated for the purpose of claiming exemption under the said
notification.
(iii) The value for the purposes of the said notification would mean the value fixed under
section 4 or section 4A or the tariff value fixed under section 3(2).
(iv) The units availing the benefit of said notification cannot avail CENVAT credit on inputs.
However, they can avail CENVAT credit on capital goods but the same can be utilized for
payment of duty on final products only after the turnover reaches ` 150 lakh.
(v) Paragraph 3A of the said notification lays down that for computing the value of
clearances of all excisable goods for home consumption (` 400 lakh), the following

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Exemption Based on Value of Clearances (SSI) 13.2

‘clearances of excisable goods without payment of duty’ shall not be taken into account,
namely-
(a) to a unit in the Free Trade Zone
(b) to a unit in the Special Economic Zone
(c) to a 100% Export Oriented Undertaking
(d) to a unit in the Electronic Hardware or Software Park
(e) supplies to United Nations or an international organization for their official use or
supplied to projects funded by them on which exemption of duty is available in terms
of Notification No.108/95-CE dated August, 28, 1995.

Question 2
Explain any five instances when small scale exemption will be available to the excisable goods
bearing the brand name of another person.

Answer
SSI Notification No. 8/2003 dated 1.3.2003 denies the benefit of the exemption on clearances
bearing a brand name of another person. This means that such clearances would attract
normal rate of duty. However, in the following exceptional situations small scale exemption will
be available on the excisable goods bearing the brand name of another person:
(A) Manufacturers of components/parts of any machinery/equipment/appliances for
use as original equipment in the factory
Where the manufacturer manufactures components/parts of any machinery, equipment or
appliance for use as original equipment in the factory even if such components have a trade name
or brand name, the exemption would be available subject to provisions of Central Excise (Removal
of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.
(B) Goods bearing the brand name of KVIC/NSIC/SSIDC etc.
When the goods bear the brand name of Khadi and Village Industries Commission (KVIC) or a
State Khadi and Village Industry Board or National Small Industries Corporation (NSIC) or a
State Small Industries Development Corporation (SSIDC) or a State Small Industrial
Corporation, such goods are entitled to SSI exemption.
(C) Account books, registers, writing pads and file folders: Account books, registers,
writing pads and file folders falling under heading 4820 or 4821 of the First Schedule of the
Central Excise Tariff are entitled to small scale exemption even if they bear a brand name or
trade name whether registered or not, of another person.
(D) Packing materials: SSI exemption is available in case the specified goods are in the
nature of packing materials and are meant for use as packing material by or on behalf of the
person whose brand name they bear even if they bear the brand name of others.

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13.3 Central Excise

(E) Goods manufactured in rural area

Goods bearing the brand name of another person, when manufactured in a rural area, are
eligible for SSI exemption.

Question 3
An SSI manufacturer may like to pay full duty even when he is eligible for SSI exemption.
(a) Can he do so?
(b) Why he would like to pay full duty?
(c) What is the duty payable?

Answer
(a) Yes, the concerned manufacturer can do so. In such a situation he can avail CENVAT
credit on inputs.
(b) He would like to pay full duty if his customer wants to avail CENVAT credit and if duty
paid on his inputs is quite substantial. As a result, the effective cost of the buyer will be
reduced.
(c) Duty payable will be normal duty less concession, if any available under any other
exemption notification.

Question 4
A small scale manufacturer had achieved sales of ` 89 lakh during the year 2013-14. Turnover
achieved during 2014-15 was ` 1.52 crores. Normal duty payable on the product is 12% plus
applicable education cesses. Find the total excise duty paid by the manufacturer during
2014-15 in each of the following cases:-
(A) If the unit has availed CENVAT credit.
(B) If the unit has not availed CENVAT credit

Answer
(A) If the unit has availed CENVAT credit: In this case the unit is required to pay duty at
normal rates on the entire turnover i.e. 12.36% [consisting of Excise Duty @ 12%,
Primary Education Cess @ 2% on Excise Duty and Secondary and Higher Education
Cess @ 1% on Excise Duty] on `1.52 crores which works out to be ` 18,78,720/-
(B) If the unit has not availed CENVAT credit: In this case duty payable will be computed
as under:
(i) On ` 150 lakhs = NIL
(ii) On subsequent sales= Normal duty @ 12.36% i.e. 12.36% of ` 2,00,000 which
works out to be ` 24,720/-

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Exemption Based on Value of Clearances (SSI) 13.4

Question 5
(i) Is simultaneous availment of CENVAT credit under CENVAT Credit Rules, 2004 and SSI
exemption under Notification No. No. 8/2003-CE dated 01.03.2003 permissible? Explain.
(ii) In order to be exempt from obtaining registration, a SSI unit has to give a declaration in
the prescribed form when its turnover exceeds ` 140 lakh per annum. Is it true?

Answer
(i) No, simultaneous availment of CENVAT credit and SSI exemption is not allowed. In
other words, a manufacturer cannot avail CENVAT credit in respect of some products
manufactured by it and exemption for others at the same time. He can take only one
benefit at a time in respect of all products manufactured, i.e. either CENVAT credit or SSI
exemption.
This view has been upheld in CCE v. Ramesh Foods Products (2004) 174 ELT 310 (SC),
where it has been held that simultaneous availment of CENVAT credit on some products
and exemption on some other products is not permissible.
However, this restriction does not apply to inputs used in manufacture of specified goods
bearing brand name or trade name of another person, which are eligible for grant of SSI
exemption in terms of proviso to para 2(iii) of Notification No. 8/2003-CE dated
01.03.2003.
Thus, if an SSI unit is manufacturing branded (with other’s brand) as well as
unbranded/self branded goods, it can avail exemption in respect of unbranded/self
branded goods. In respect of branded goods, he can avail CENVAT credit and pay duty
on the final products.
(ii) No. As per Notification No. 36/2001-CE (NT) dated 26.06.2001, an SSI unit whose
turnover exceeds ` 90 lakhs per annum has to give a declaration in the prescribed form,
for availing exemption from obtaining registration.

Question 6
M/s. RKR manufactures footwear bearing the unregistered brand name "Lotus" which is
registered by M/s. Lotus Industries Ltd. for manufacture of detergent powder. When the
Department disallowed the benefit of small scale exemption to M/s. RKR, under Notification
No. 8/2003-C.E. on the ground that their goods are bearing brand name of another person, it
contended that M/s. Lotus Industries Ltd. owns brand name Lotus only for detergent power
and not for footwear. Examine, with the help of a decided case law, if any, whether, in the
instant case, SSI exemption is available to M/s. RKR.

Answer
No, SSI exemption is not available to M/s. RKR. The facts of the given case are similar to the
case of CCE v. Rukmani Pakkwell Traders 2004 (165) E.L.T. 481 (S.C.). In the instant case,

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13.5 Central Excise

Supreme Court, on the basis of the following observations, reversed the Tribunal’s decision
that SSI exemption is available to the assessee and held that the assessee is not so entitled
to SSI exemption:-
(i) Firstly, the Tribunal’s reliance upon Circular No. 88/88-CX.6 dated 30-12-1988 was
erroneous. The circular clarified that if there were more than one registered owner in
respect of the same trade mark, then merely because the other person had the same
registered mark in some other goods, would not preclude the owner of the trade mark
from getting the benefits of the SSI exemption.
Thus, said circular had no application to the facts of this case as the assessee was not
the owner of the trade mark.
(ii) Secondly, the exemption notifications have to be strictly construed. The SSI exemption
notification clearly provides that the exemption will not apply if the specified goods bear a
brand or trade name of another person, but the notification nowhere stipulates that the
specified goods must be same or similar to the goods for which the brand name or trade
name is registered. Consequently, the benefit of exemption would be lost even if the
brand name or trade name is used in respect of different goods.
In other words, even if brand name of another person is used in respect of goods of other
class or kind (different from the nature of the goods of the owner of brand name), benefit of
SSI exemption shall not be available.
In view of the aforementioned provisions, M/s RKR will not be entitled to the SSI exemption as
their goods bear the brand name “LOTUS” owned by M/s. Lotus Industries Ltd. The fact that
M/s. RKR uses the brand name on footwear while the same is being used by M/s. Lotus
Industries Ltd. on detergent powder, is of no relevance.
Note: Circular No. 88/88-CX.6 dated 30-12-1988 clarifies that in case a manufacturer uses the
brand name of another person in respect of a different product, the benefit of SSI exemption
would be available to him provided both the brand name owners had registered the brand
name for their respective products. In Rukmani Pakkwell Traders case referred above, the
assessee was denied the benefit of the SSI exemption because the said circular was not
applicable in this case as the assessee was not the owner of the trade mark. However, in
case the assessee had got the trade mark registered, the benefit of SSI exemption would have
been available to him.

Question 7
Small & Company, a small scale industry, provides the following details.
Particulars `. (Lakhs)
(i) Total value of clearances during the financial year 2013-14 (including 870
VAT ` 50 lakhs)
(ii) Total exports (including for Nepal and Bhutan `200 lakhs) 500
(iii) Clearances of excisable goods without payment of duty to a unit in 20

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Exemption Based on Value of Clearances (SSI) 13.6

Software Technology Park

(iv) Job work under Notification No. 84/94-CE dated 11.4.94 50
Job work under Notification No. 214/86-CE dated 25.3.86 50
(v) Clearances of excisable goods bearing brand name of Khadi and 200
Village Industries Commission
Clearances at point (ii), (iii), (iv) and (v) are included in clearances at point (i).
Determine the eligibility for exemption based on value of clearances for the financial year
2014-15 in terms of Notification No. 8/2003-CE dated 1.3.2003 as amended. Make suitable
assumptions and provide brief reasons for your answers where necessary.

Answer
Calculation of value of clearances during financial year 2013-14
Particulars ` (in lakhs)
Total value of clearances during the financial year 2013-14 870
Less : VAT included in above 50
820
Less: Exports excluding exports to Nepal and Bhutan ` (500-200) lakh 300
2. Clearances of excisable goods without payment of duty to a unit in 20
Software Technology Park
3. Job work done under Notification No. 84/94-CE dated 11.04.94 and
under Notification No. 214/86-CE dated 25.3.86 i.e..` (50 + 50) lakh 100
Value of clearances during the financial year 2013-14 400
Notes:-While computing value of clearances during financial year 2013-14 (as shown above),
1. export turnover has been excluded. However, export to Nepal and Bhutan cannot be
excluded as these are treated as “clearances for home consumption”.
2. job work under Notification No. 214/86 - CE and Notification No. 84/94-CE is not taken
into consideration.
3. clearances of excisable goods without payment of duty to a unit in Software Technology
Park are deducted.
4. clearances of excisable goods bearing brand name of Khadi and Village Industries
Commission are included.
In order to claim the benefit of exemption under Notification No. 8/2003 – C.E. in a financial
year, the total turnover of a unit should not exceed ` 400 lakh in the preceding year. Since the
value of clearances in the previous financial year 2013-14 does not exceed ` 400 lakh, Small
& Company is eligible to claim the benefit of Notification No. 8/2003 dated 1st March, 2003 in
the financial year 2014-15.

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13.7 Central Excise

Question 8
CTL Ltd. has a manufacturing unit situated in Lucknow. In the financial year 2013-14, the total
value of clearances from the unit was ` 450 lakh. The break up of clearances is as under:
(i) Clearances worth ` 50 lakh of certain non-excisable goods manufactured by it.
(ii) Clearances worth ` 50 lakh exempted under specified job work notification.
(iii) Exports worth ` 100 lakh (`75 lakh to USA and ` 25 lakh to Nepal).
(iv) Clearances worth ` 50 lakh which were used captively to manufacture finished products
that are exempt under notifications other than Notification No. 8/2003-CE dated 1.3.2003
as amended. [The value of clearances of final products manufactured from such
intermediate products is not included in the total turnover of ` 150 lakh]
(v) Clearances worth ` 200 lakh of excisable goods in the normal course.
Explain briefly, the treatment for various items and state, whether the unit will be eligible for
the benefit of exemption under Notification No. 8/2003-CE dated 1.3.03 as amended for the
year 2014-15.

Answer
In order to claim the benefit of exemption under Notification No. 8/2003 – C.E. in a financial
year, the total turnover of a unit should not exceed ` 400 lakh in the preceding year. As per
Notification No. 8/2003 CE dated 01.03.2003, for the purpose of computing the turnover of
` 400 lakh:-
(i) Turnover of non-excisable goods has to be excluded. Therefore, clearances of non-
excisable goods of worth ` 50 lakh shall be excluded.
(ii) Clearances exempt under job work notifications are not considered. Therefore, exempt
clearances of ` 50 lakh under job work notification will be excluded.
(iii) Export turnover has to be excluded. However, export to Nepal and Bhutan cannot be
excluded as these are treated as “clearance for home consumption”. Therefore,
clearances worth ` 75 lakh exported to USA will be excluded while clearances worth
` 25 lakh exported to Nepal will be included.
(iv) Value of intermediate products manufactured has to be included if the final product is
exempt under any notification other than Notification No. 8/2003-CE dated 1-3-2003.
Therefore, clearances worth ` 50 lakh which were used captively to manufacture finished
products exempt under notifications other than Notification No. 8/2003 will be included.
(v) Clearances of excisable goods of ` 200 lakh in the normal course will be considered.
Therefore, the turnover of CTL Ltd. for claiming the SSI exemption will be:-
= ` 450 lakh – (` 50 lakh + ` 50 lakh + 75 lakh) = ` 275 lakh
Since the turnover is less than ` 400 lakh, CTL Ltd. will be eligible for exemption under
Notification No. 8/2003 – CE in the financial year 2014-15.

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Exemption Based on Value of Clearances (SSI) 13.8

Question 9
A SSI unit has effected clearances of goods of the value of ` 475 lacs during the financial year
2013-14. The said clearances include the following:
(i) Clearance of excisable goods without payment of excise duty to a 100% EOU ` 120lacs
(ii) Job work in terms of Notification No. 214/86 CE, which is exempt from duty ` 75 lacs
(iii) Export to Nepal and Bhutan ` 50 lacs
(iv) Goods manufactured in rural area with the brand name of the others ` 90 lacs
Examine with reference to the notification governing SSI exemption under the Central Excise Act
whether the benefit of exemption would be available to the unit for the financial year 2014-15.

Answer
A SSI unit shall be eligible for benefit of exemption notification only if value of clearances
during preceding financial year does not exceed `400 lakhs.
The item wise treatment shall be as under -
1. Clearance to 100% EOU shall be excluded for calculating the limit of 400 lakhs.
2. Clearance under Notification No. 214/86 shall be excluded for calculating the limit of 400
lakhs.
3. Export to Nepal & Bhutan is considered as home consumption and thus, it shall be
included for computing limit of 400 lakhs.
4. The turnover of goods manufactured in rural area with the brand name of the others shall
be included for computing limit of `400 lakhs.
Calculation of clearances during financial year 2013-14:

Total value of clearances 475 lakhs

Less: Clearance to 100% EOU 120 lakhs
Clearance under Notification No. 214/86 75 lakhs 195 lakhs
280 lakhs
As the value of clearances for home consumption in financial year 2013-14 does not exceed
` 400 lakhs, the benefit of exemption shall be available to the SSI unit during financial year
2014-15.

Question 10
Choti Ltd., which is engaged in the manufacture of excisable goods started its business in
May, 2014. It availed small scale exemption in terms of Notification No. 8/2003-C.E. dated
1-3-2003 as amended for the financial year 2014-15. The following details are provided:

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13.9 Central Excise

`
15,000 kg of inputs purchased @ ` 992.70 per kg 1,48,90,500
(inclusive of central excise duty @ 12.36%)
Capital goods purchased on 28.6.2013 44,12,000
(inclusive of excise duty at 12.36%)
Finished goods sold [at uniform transaction value (exclusive of excise 2,50,00,000
duty) throughout the year]
Calculate the amount of excise duty payable by M/s. Choti Ltd. in cash, if any, during the year
2014-15. Rate of duty on finished goods sold may be taken at 12.36%. There is neither any
processing loss nor any inventory of input and output. Show your workings and notes with
suitable assumptions as required.

Answer
Computation of the excise duty payable
Particulars ` `
Finished goods sold during the year 2,50,00,000
Less: Exemption of `150 lakh under Notification No. 8/2003 1,50,00,000
CE dated 01-03-2003
Dutiable clearances [Note 1] 1,00,00,000
Excise duty payable @ 12.36% (`1,00,00,000 × 12.36%) 12,36,000
Less: I. CENVAT credit available on inputs [Note 2]  
Proportion of inputs consumed in dutiable clearances
1,00,00,000
=` =0.4
2,50,00,000 6,55,203
Excise duty paid on such inputs
12.36
= [1,48,90,500x ] x 0.4
112.36
II. CENVAT credit available on capital goods [Note 3] 4,85,336 11,40,539
12.36
=` [44,12,000x ]
112.36
Excise duty payable in cash 95,461

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Exemption Based on Value of Clearances (SSI) 13.10

Notes:
1. Since there is neither any processing loss nor inventory of input and output, it implies
that all goods manufactured have been sold and entire quantity of inputs has been used
in manufacturing these goods.
2. In respect of units availing SSI exemption, no CENVAT credit is available on inputs
consumed in exempt clearances of ` 150 lakh.
3. In respect of units availing SSI exemption, CENVAT credit on capital goods can be
availed but utilized only after clearances of ` 150 lakh. Further, entire credit on capital
goods can be taken in the same financial year by such units.

Question 11
MNO Ltd. is in the manufacture of both excisable and non-excisable goods in a factory
building rented by them from October 1, 2013. From the following particulars for the period
October 1, 2013 to March 31, 2014, state briefly with suitable explanations, whether MNO Ltd.
could claim the benefit of exemption in terms of Notification No. 8/2003-CE dated 1-3-2003 for
the financial year 2014-15.
` (in lakhs)
(i) Clearances of goods bearing the brand name of another person 60
(ii) Export Sales to Nepal 80
(iii) Export Sales to USA and Canada 120
(iv) Clearances of goods (duty paid based on Annual capacity of 70
production under section 3A of the Central Excise Act, 1944)
(v) Clearances of goods subject to valuation based on retail sale price 200
under section 4A of the Central Excise Act, 1944 ( the said goods
are cleared at MRP and are eligible for 30% abatement)
(vi) Job work under Notification No. 214/86-CE dated 25-3-86 60
During the period April 1, 2013 to September 30, 2013, the previous tenant of the factory
building presently occupied by MNO Ltd. had cleared excisable goods of the aggregate value
of ` 120 lakhs.
Answer

Computation of value of clearances for home consumption in the financial year 2013-14
[Link]. Particulars `
(in lakh)
(i) Clearances of branded goods (Note-1) Nil
(ii) Export sales to Nepal (Note-1) 80

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13.11 Central Excise

(iii) Export sales to USA and Canada (Note-1) Nil

(iv) Clearances of goods on which duty has been paid under section 3A of 70
the Central Excise Act
(v) Clearances of goods subject to valuation under section 4A of the 140
Central Excise Act (Note-2)
(vi) Job work under Notification No. 214/86-CE (Note-1) Nil
(vii) Clearances of previous tenant of the building occupied by MNO Ltd.
(Note- 3) 120
Total 410
Notes:
1. In order to claim the benefit of exemption under Notification No. 8/2003 C.E. dated
01.03.2003 in a financial year, the total turnover of a unit should not exceed ` 400 lakh in
the preceding financial year. Notification No. 8/2003 C.E. dated 01.03.2003 provides that
for the purpose of computing the turnover of ` 400 lakh:-
(a) clearances bearing the brand name or trade name of another person are excluded.
It has been assumed that the branded goods are excisable goods and they bear the
brand name of another person and not the brand name of MNO Ltd.
(b) export turnover is excluded. However, exports to Nepal and Bhutan are not
excluded as these are treated as “clearance for home consumption”. It has been
assumed that goods exported by MNO Ltd. to Nepal are excisable goods.
(c) clearances under specified job work notifications are excluded and Notification No.
214/86 CE dated 25.03.86 is one of the specified notification.
2. In case of the goods subject to valuation under section 4A of the Central Excise Act,
1944, value for the purpose of the SSI exemption would mean value fixed under section
4A i.e., retail sale price less abatement. Hence, value of such clearances would be `
200 lakh × 70%= ` 140 lakh.
3. For the purpose of computing the turnover of ` 400 lakh, all the clearances made by
different manufacturers from the same factory are to be clubbed together. Hence,
clearances, worth ` 120 lakh of previous tenant of the building occupied by MNO Ltd.
have been added.
Conclusion: Since the value of clearances for home consumption exceeds ` 400 lakh in the
financial year 2013-14, MNO Ltd. is not eligible to claim the benefit of exemption under
Notification No. 8/2003 – C.E. dated 01.03.2003 in the financial year 2014-15.

Question 12
SSI & Co. is eligible for exemption in terms of Notification No. 8/2003-CE dated 1-3-2003 for
the year 2014-15. It provides the following particulars with regard to the clearances of goods
effected during the said year. Determine the duty payable in respect of the year 2014-15:

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Exemption Based on Value of Clearances (SSI) 13.12

Particulars ` (in lakhs)

Value of domestic clearance of goods with own brand name 120
Value of clearance of goods with the brand name of others (including 100
` 30 lakhs in respect of goods manufactured in a rural area)
Value of clearances for exports 50
Value of clearances for captive consumption (Final products are eligible for 40
SSI exemption)
Value of clearances of goods exempted under notification other than 20
Notification No. 8/2003
(Assume rate of excise duty at 12%)
Answer
Computation of turnover of M/s. SSI & Co. eligible for exemption during the year 2014-15
Particulars ` in lakh
Turnover to be excluded:
Value of clearances for export [Note – 1] 50
Value of clearances for captive consumption [Note – 1] 40
Value of clearances of exempted goods [Note – 1] 20
Value of domestic clearance of goods with brand name of others 70
(excluding goods manufactured in rural area) [Note – 2]
Turnover to be included:
Value of domestic clearances with own brand name 120
Value of clearances of goods with brand name of others manufactured in
rural area 30
Total 150

Computation of excise duty payable

On 1st clearance of ` 150 lakh duty is Nil
On clearances with brand name of others worth ` 70 lakh (excluding rural 8,40,000
area clearances) @ 12% [Note 3]
Add: Education cess and secondary and higher education cess @ 3% 25,200
Total excise duty liability 8,65,200

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13.13 Central Excise

Notes:
1. As per Notification No. 8/2003 CE dated 01.03.2003, export clearance, captive
consumption and exempted clearances are not included in determining the limit of first
` 150 lakh for SSI exemption.
2. As per Notification No. 8/2003 CE dated 01.03.2003, the clearances with the brand name
of others which are ineligible for SSI exemption has to be excluded while determining the
limit of ` 150 lakh. However, clearances with the brand name of others manufactured in
rural area are eligible for SSI exemption and hence, such clearances are included while
determining the limit of ` 150 lakh.
3. Duty is not payable on export clearance and exempted clearances. Further, intermediate
goods used captively in the manufacture of final products which are eligible for SSI
exemption are also exempt from excise duty. Thus, duty will be payable only in respect of
the goods manufactured with brand name of others.

Question 13
Arigo Ltd. is a small scale industrial unit which is producing ‘Fast’, a tonic for growing children.
Under the Annual Report for the year 2014-15, the SSI unit shows gross sales turnover* of
` 1,95,10,000, inclusive of excise duty and VAT. The product ‘Fast’ attracts excise duty @
12% and VAT @ 1%. Calculate the duty liability under Notification No. 8/2003 dated
01.03.2003.
*Gross Sales Turnover of ` 1,95,10,000 is eligible for exemption under Notification No.
8/2003. Further, for the year 2013-14, the taxable clearances of SSI unit was
` 1,60,00,000.

Answer
Since, the turnover of previous year was less than ` 400 lakh, Arigo Ltd. will be eligible for SSI
exemption under Notification No. 8/2003 CE dated 1.3.2003 during the year 2014-15.
Calculation of duty liability under Notification No. 8/2003.
Gross sales turnover is ` 1,95,10,000 which includes excise duty and VAT
For first 150 lakh clearances, excise duty is Nil and VAT is 1%.
Therefore, VAT on first ` 150 lakh clearances = ` 1,50,000.
For balance sales (including excise duty and VAT)
= ` 1,95,10,000 – (1,50,00,000 + 1,50,000) = ` 43,60,000
VAT = 43,60,000 x 1/101 = ` 43,168 (rounded off)
Therefore, balance sales excluding VAT but including excise duty
= ` 43,60,000 – 43,168 = ` 43,16,832

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Exemption Based on Value of Clearances (SSI) 13.14

Hence, excise duty (including 2% education cess and 1% secondary and higher education
cess)= ` 43,16,832 x12.36/112.36 = ` 4,74,866.89
Total duty payable = ` 4,74,866.89 or ` 4,74,867 (rounded off)

Question 14
Aggarwal & Company is a manufacturing company. In the financial year 2013-14, the details
of its clearances of excisable goods are as follows:-

Particulars ` (Lakhs)
(i) Total exports (including for export to Bhutan ` 50 lakhs) 600
(ii) Clearances of excisable goods without payment of duty to a 100% EOU 10
(iii) Job work under Notification No. 84/94-CE dated 11.4.94 50
(iv) Job work under Notification No. 214/86-CE dated 25.3.86 50
(v) Clearances of goods bearing brand name of National Small Industries 100
Corporation
(vi) Clearances of corrugated boxes bearing the brand name of Sugar & 200
Spice Confectioners. Sugar & Spice Confectioners use these
corrugated boxes for packing the bakery products produced by them.
On the basis of above information, you are required to ascertain the eligibility of Aggarwal and
Company for exemption based on value of clearances in terms of Notification No. 8/2003-CE
dated 1.3.2003 as amended for the financial year 2014-15.

Answer
Calculation of value of clearances of Aggarwal and Company during financial year 2013-14
Particulars ` (in lakhs)
Export to Bhutan (Note-1) 50
Clearances of excisable goods bearing brand name of National Small 100
Industries Corporation (Note-4)
Clearances of corrugated boxes bearing the brand name of Sugar and Spice
Confectioners used for packing the bakery products by them (Note-4) 200
Value of clearances during the financial year 2013-14 350
Notes:- In order to claim the benefit of exemption under Notification No. 8/2003 – C.E. in a
financial year, the total turnover of a unit should not exceed ` 400 lakh in the preceding year.
As per Notification No. 8/2003 CE dated 01.03.2003, for the purpose of computing the
turnover of ` 400 lakh:-

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13.15 Central Excise

1. export turnover has to be excluded. However, export to Bhutan cannot be excluded as

the same are treated as “clearances for home consumption”.
2. clearances under specified job work notifications are excluded and Notification No.
214/86 CE and 84/94-CE are the specified notifications.
3. clearances of excisable goods without payment of duty to a 100% EOU are excluded.
4. clearances bearing the brand name or trade name of another person are excluded.
However, following clearances of excisable goods bearing brand name are included:-
(a) Goods bearing brand name/trade name of National Small Industries Corporation.
(b) Goods in the nature of packing materials and meant for use as packing material by
or on behalf of the person whose brand name they bear.
Since, the value of clearances in the previous financial year 2013-14 does not exceed
` 400 lakh, Aggarwal & Company is eligible to claim the benefit of Notification No. 8/2003
dated 1st March, 2003 in the financial year 2014-15.

Question 15
MNO & Co. is the small scale unit located in a rural area which is eligible for exemption under
Notification No. 8/2003-CE during the year 2013-14. You are required to determine the value
of the first clearance of the unit and duty liability of MNO & Co. for the year 2013-14 on the
basis of particulars given below:
`
(i) Total value of clearances of goods with own brand name 50,00,000
(ii) Total value of clearances of goods with brand name of other parties 100,00,000
(iii) Clearances of goods which are totally exempt under another 45,00,000
notification (other than an exemption based on quantity or value of
clearances)
(iv) Rate of excise duty – 12% plus education cesses as applicable
(Make suitable assumptions where required and show the calculations with appropriate notes)
Answer
Computation of the value of first clearances and duty liability of MNO & Co.
Sl. No. Particulars Amount (`)
(i) Clearances of goods with own brand name 50,00,000
(ii) Clearances of goods with brand name of other parties [Note 1] 1,00,00,000
(iii) Clearances of goods which are exempt under a notification other _

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Exemption Based on Value of Clearances (SSI) 13.16

than exemption based on quantity or value of clearances [Note 2]

Total value of clearances eligible for SSI exemption available 1,50,00,000
under Notification No. 8/2003 CE dated 01.03.2003
Less: SSI exemption [Note 3] 1,50,00,000
Dutiable clearances Nil
Excise duty payable Nil
Notes:
As per Notification No. 8/2003 CE dated 01.03.2003 -
1. Since, MNO & Co. is situated in rural area, clearances of goods with brand name of other
parties would also be eligible for SSI exemption.
2. Clearances of goods which are exempt (other than an exemption based on quantity or
value of clearances) under a notification are not included in the first clearances of `150
lakh.
3. First clearances of `150 lakh are exempt from payment of excise duty under SSI
exemption.

Question 16
Veena Ltd. has two factories and supplies you the following information:
Particulars Factory ‘A’ Factory ‘B’
(i) Assessable value of clearances upto 31-12-2014 ` 90 lac ` 60 lac
(ii) Assessable value of clearances from 01-01-2015
` 60 lac ` 40 lac
to 31-03-2015
(iii) Inputs purchased during the year 2014-15 ` 112.36 lac ` 55.15 lac
(including excise duty)
(iv) Capital goods purchased on 14-09-2014 (including - ` 11.03 lac
excise duty)
(v) Effective rate of excise duty on inputs and 12.36% 10.3%
capital goods purchased and output sold.
Veena Ltd. is availing SSI exemption under Notification No. 8/2003-C.E. and inputs are used
evenly throughout the year. There is neither any processing loss nor any inventory of input
and output. You are required to calculate the amount of excise duty payable by Veena Ltd. in
cash, if any, for the Financial Year 2014-15.

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13.17 Central Excise

Answer
Computation of central excise duty payable in cash by Veena Ltd. for FY 2014-15
Particulars Factory ‘A’ Factory ‘B’ Total
(Factory A +
Factory B)
` (in lakh) ` (in lakh) ` (in lakh)
Assessable value of clearances up to 90 60 150
31.12.2014
Less: SSI exemption under
Notification No. 8/2003 [Note 1 & 2] 150
Dutiable clearances up to 31.12.2014 Nil
Assessable value of clearances from 60 40 100
01.01.2015 to 31.03.2015
Excise duty payable 7.416 4.12 11.536
[60 x 12.36%] [40 x 10.3%]
Less: CENVAT credit on inputs used 4.944 2.06 7.004
in dutiable clearances (computed on ⎡ 12.36 60 ⎤ ⎡ 10.3 40 ⎤
pro rata basis as the same have ⎢112.36× 112.36 × 150 ⎥ ⎢55.15× 110.3 × 100 ⎥
⎣ ⎦ ⎣ ⎦
been used evenly throughout the
year) [Note 3]
Less: CENVAT credit on capital ⎡ 10.3 ⎤
goods [Note 4] ⎢`11.03× 110.3 ⎥ 1.03
⎣ ⎦
1.03
Excise duty payable in cash 2.472 1.03 3.502
Notes:
As per SSI exemption Notification No. 8/2003 CE dated 01.03.2003-
1. First clearances upto an aggregate value not exceeding ` 150 lakh made during a
financial year are exempt from payment of excise duty.
2. Turnover of all factories belonging to same manufacturer have to be clubbed together for
calculating SSI exemption limit of ` 150 lakh.
3. Units availing SSI exemption cannot avail CENVAT credit on inputs used in the
manufacture of exempt clearances of `150 lakh.
4. Units availing SSI exemption can avail CENVAT credit on capital goods but can utilize
the same only after crossing the exemption limit of ` 150 lakh.

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Exemption Based on Value of Clearances (SSI) 13.18

Further, entire credit on capital goods can be taken in the same financial year in which
such capital goods are received by such units [Third proviso of rule 4(2)(a) of CENVAT
Credit Rules, 2004].

Question 17
A Ltd. was a manufacturer of two products 'X' & 'Y' falling under Chapter Heading 32 and 84 of
the First Schedule to the Central Excise Tariff Act, 1985, [Link] goods 'X' were
dutiable but the goods 'Y' falling under Chapter Heading 84 were fully exempt from duty vide
an exemption notification. However, the manufacturer, A Ltd., paid the excise duty on 'Y' by
mistake and did not even claim refund of the same.
Since goods 'X' falling under Chapter heading 32 were eligible for SSI exemption, the
manufacturer wished to claim the same.
For the purpose of computing the value of clearances for SSI exemption, the manufacturer
excluded the turnover of goods 'Y' which was exempt although duty was paid mistakenly on
them. However, the Department contended that the clearance of such goods should be
included while computing the value of clearance for SSI exemption purposes.
With reference to a decided case law, you are required to find out whether the contention of
the Department is correct or not.

Answer
The facts of the given case are similar to the case of Bonanzo Engg. & Chemical P. Ltd. v.
CCEx. 2012 (277) E.L.T. 145 (S.C.). In the instant case, the Supreme Court opined that value
of exempted goods needs to be excluded while computing the value of clearances for the
purposes of claiming SSI exemption.
The Apex Court observed that if an assessee had mistakenly paid duty on the goods which
were exempted from duty under some other notification; it would not mean that such goods
had become liable to duty.
Further, the benefit of SSI exemption could not be denied to the assessee merely because he
had not claimed a refund of the duty paid by him on such goods.
Therefore, in view of the above-mentioned ruling of the Supreme Court, the contention of the
Department of including the clearances of goods ‘Y’ is not correct.

Question 18
The assessee was engaged in the manufacture and sale of cookies from branded outlets of
"Cookies Man". The assessee had acquired this brand name from a foreign company. The
assessee was selling some of these cookies in plastic pouches/containers on which the brand
name described above was printed. No brand name was affixed or inscribed on the cookies.
Excise duty was duly paid on the cookies sold in the said pouches/containers. However, on

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13.19 Central Excise

the cookies sold loosely from the counter of the same retail outlet with plain plates and tissue
paper, duty was not paid. The retail outlet did not receive any loose cookies nor did they
manufacture them. They received all cookies in sealed pouches/containers. Those sold
loosely were taken out of the containers and displayed for sale separately. The assessee
contended that SSI exemption would be available on cookies sold loosely as they did not bear
the brand name.
Department denied exemption on cookies sold loosely as claimed by the assessee.
Examine, with the help of a decided case law whether the manufacture and sale of specified
goods, not physically bearing a brand name, from branded sales outlets would disentitle an
assessee to avail the benefit of small scale exemption.

Answer
Yes, the manufacture and sale of specified goods not physically bearing a brand name, from
branded sales outlets would disentitle an assessee to avail benefit of small scale exemption.
The facts of the given case are similar to the case of CCEx vs. Australian Foods India (P) Ltd.
2013 (287) ELT 385 (SC) wherein the Supreme Court held, that it is not necessary for goods
to be stamped with a trade or brand name to be considered as branded goods for the purpose
of SSI exemption, after making following observations:
(i) Physical manifestation of the brand name on goods is not a compulsory requirement as
such an interpretation would lead to absurd results in case of goods, which are incapable
of physically bearing brand names viz., liquids, soft drinks, milk, dairy products, powders
etc. Such goods would continue to be branded good, as long as its environment conveys
so viz. packaging/wrapping, invoices, accessories etc.
(ii) The test of whether the goods is branded or unbranded, must not be the physical
presence of the brand name on the goods, but whether it is used in relation to such
specified goods for the purpose of indicating a connection in the course of trade between
such specified goods and some person using such name with or without any indication of
the identity of the person.
(iii) Once it is established that a specified good is a branded good, whether it is sold without
any trade name on it, or by another manufacturer, it does not cease to be a branded
good of the first manufacturer. Therefore, soft drinks of a certain company do not cease
to be manufactured branded goods of that company simply because they are served in
plain glasses, without any indication of the company, in a private restaurant.

Question 19
XYZ & Co., a SSI unit, manufactures different products and the value of clearances for the
financial year 2013-14 is given below:

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Exemption Based on Value of Clearances (SSI) 13.20

(` in lakhs)
S. Product AA AB AC
No.
(i) Clearance for home consumption 55 40 60
(ii) Captive consumption in the manufacture of 100 80 60
excisable goods
(iii) Export to U.S.A. 90 80 Nil
(iv) Export to Nepal 50 40 39
(v) Job work done under Notification No. 214/86-C.E. 55 30 60
(vi) Goods manufactured in rural area with brand name 45 35 35
of others

The unit seeks your advice as to whether they are eligible for SSI exemption for the year 2014-15.
Explain the basis for your conclusions.

Answer
XYZ & Co. unit will be entitled to exemption in the year 2014-15, if its turnover in the year
2013-14 was less than `400 lakh. As per Notification No. 8/2003 CE dated 01.03.2003, which
governs the provisions relating to small scale exemption, following items will not be included
for calculating the turnover limit of `400 lakh of previous year:
(i) Captive consumption in the manufacture of excisable goods
(ii) Export to USA
(iii) Job work done under Notification No.214/86 CE
Only the goods bearing the brand name of others, which are ineligible for the grant of SSI
exemption, are excluded for the purpose of said limit. Since, goods manufactured in rural
area with brand name of others are eligible for SSI exemption; the same will not be excluded
for calculating the said limit.
Therefore, the turnover to be considered for the limit of `400 lakh will be computed as under:
Product Clearance for Export to Goods manufactured Total
home Nepal in rural area with Turnover
consumption brand name of others
(` in lakhs)
AA 55 50 45 150
AB 40 40 35 115
AC 60 39 35 134
399

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13.21 Central Excise

Since turnover of the unit during the year 2013-14 is less than `400 lakh, the unit is entitled to
SSI exemption from excise duty in the year 2014-15.

Exercise
1. What are the reasons for clubbing of clearances of SSI Units?
2. What are the provisions regarding general exemption to SSI units?
3. Write a note with reference to Notification No. 8/2003 dated 01.03.2003 relating to small
scale units:
(A) Availability of CENVAT credit on capital goods
(B) Determination of ‘value’ for the purposes of the said notification
(C) Clearances of excisable goods without payment of duty
4. Can CENVAT credit on capital goods be availed by SSI units that avail the benefit of
exemption notification No.8/2003-CE?
5. Can CENVAT credit on input services be availed by SSI units that avail the benefit of
exemption notification No.8/2003-CE?
6. What are details to be intimated by assessee to Deputy Commissioner/Assistant
Commissioner of Central Excise when he wants to opt for Notification No.8/2003-CE?

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