Full Judgment
2. The dispute relates to the applicability of exemption Notification No. 175/86 particularly with reference to para 4(b) of the said Notification. Para 4 of the said Notification is as under :- "4. The exemption contained in this notification shall be applicable only to a factory which is an undertaking registered with the Director of Industries in any State or the Development Commissioner (Small Scale Industries) as a small scale industry under the provisions of the Industries (Development and Regulations) Act, 1951 (65 of 1951): Provided that nothing contained in this paragraph shall be applicable; (a) in case where the value of clearances from a factory during the preceding financial year or in the current financial year did not exceed or is not likely to exceed rupees seven and a half lakhs ; or (b) in a case where a manufacturer has been availing of the exemption under this notification or any of the notification specified below, during the preceding financial year; 3. The appellants are engaged in the manufacture of HDPE sacks out of HDPE fabric cuts received from outside. The unit is not registered as a small scale industry with the Director of Industries or the Development Commissioner. It is also not registered with the DGTD in the Ministry of Industries. The appellants filed a classification list effective from 23-11-1989 and 1-4-1990 claiming exemption under Notification No.175/86 but the same was rejected by the Assistant Collector observing that the appellants if availed of exemption upto Rs. 7.5 lakhs in terms of Clause (a) of para 4 of the NotificationNo. 175/86 dated 1-3-1986 as amended, can also avail of exemption only upto Rs. 7.5 lakhs in the succeeding year and not full exemption as applicable to registered SSI Unit. Since the appellant is not a registered S.S.I, unit registered with the Director of Industries in any State or Development Commissioner (Small Scale Industries) as a small scale industry under the provisions of the Industries (Development & Regulation ) Act, 1951 (65 of 1951) as per para 4 of the Notification No. 175/86, dated 1-3-1986 as amended. Exemption claimed by the party under Notification No. 175/86 is not admissible. While upholding the views of the Assistant Collector, the Collector (Appeals) held that once a declaration has not been filed nor a classification list submitted or a central excise licence taken out, the unit cannot be said to be availing the exemption under Notification No. 175/86 though they were eligible for the exemption as their clearance were within the exemption limit.
4. Shri Rajesh Kumar, learned Advocate, appearing for the appellants, submitted that the appellant is a small industrial unit and activities of the unit are confined to purchase of H.D.P.E. Woven Fabrics from market and manufacture of H.D.P.E. Woven sacks therefrom on manually operated sewing machines. The appellants have been denied exemption in the years 1989-90 and 1990-91 only on the ground that unit was not registered as a S.S.I. Unit. He submitted that non-registered S.S.I, units are also eligible for benefit in terms of para 4(b) of the Notification since para 4(b) provides requirement of registration as S.S.I. Unit for availing benefit of Notification No. 175/86 will not be necessary in case a unit has been availing of the exemption under this Notification during the preceding financial year. He said that value of H.D.P.E. sacks produced and cleared during the previous year falls within the exemption limit and figures have not been disputed by the Department. Figures of production and clearance for the following years are as follows :-_______________________________________________________________Year Value of Clearances Appellants claim for full in Rs. exemption based on________________________________________________________________1986-1987 7,50,000 para 4 proviso (a)1987-l988 3,81,250 para 4 proviso (a)1988-1989 8,22,300 para 4 proviso (b)1989-l990 13,14,400 para 4 proviso (b)_________________________________________________________________ He contended that it is clear from para 4(b) of the Notification No.175/86 that exemption is applicable to the manufacturer if he has been availing of the exemption during the preceding financial year and in the instant case in view of the fact that in any preceding financial year it did not exceed exemption limit, exemation for the period in question cannot be denied. The plea of exemption with reference to para 4(b) of the notification was specifically taken by the appellants before the authorities below but the same was not considered in deciding the issue. He said that this issue has been covered by the decision of the Tribunal in the case of Accura Industries v. Collector of Central Excise, reported in 1992 (58) E.L.T. 98 (Tribunal). He also contended that there was no mention of duty amount in the show cause notice but the same was demanded subsequent to the passing of the order by the Collector (Appeals) confirming the order passed by the Assistant Collector.
5. Shri Mohan Lal, learned JDR, appearing for the Revenue submitted that admittedly the appellants unit was neither registered as S.S.I.Unit nor obtained excise licence to avail exemption and, accordingly, provisions of Excise Act either for levy or for exemption will be applicable from the date of the commencement and date of licence. For the first time Unit has filed classification list on 23-11-1989 and, accordingly, it is deemed to have commenced production from 1988-89.
For the purpose of applying Excise law eligibility is different from availment of exemption. Availment of exemption is done with the approval of the Department by following procedure while eligibility means that assessee is entitled to exemption. In the instant case the appellants may be entitled to exemption in view of the clearances below exemption limit but since they were not availing and, accordingly, para 4(b) of the notification is not applicable.
6. We have carefully considered the submissions. In the instant case the assessee has manufactured and cleared HDPE sacks well within exemption limit set by Notification No. 175/86, but without filing the declaration. It is apparent from the given facts that the appellants do not have a S.S.I, registration certificate in respect of their unit, hence the question to be considered in this case is whether manufacturer was availing of the exemption would depend whether it was liable to avail exemption on the basis of the conditions set out in the notifications listed in para 4(b). Filing of declaration is not necessary to avail exemption in term of para 4(b) of the notification on the conditions stipulated therein that exemption is applicable if the manufacturer has been availing of the exemption during the preceding financial year. In the instant case it is clear from the facts that value of clearances did not exceed exemption limit in any of the preceding financial year as per figures furnished by the appellants and the same has not been disputed by the Department and, accordingly, they were eligible for exemption. We are not convinced with the argument advanced on behalf of the Department that exemption is not applicable since they were not availing exemption although entitled to the exemption. Tribunal has been consistently taking the view that availment of exemption notification is an independent of exemption from licensing control or filing of declaration as can be seen from the decision in the case of Accura Industries referred to by the appellants' counsel as well as in the case of Mehta Gem Tools Pvt. Ltd. v. Collector of Central Excise, reported in 1993 (63) E.L.T. 668 (Tribunal). We are of the view that non-filing of the declaration for licensing exemption does not deprive them of the exemption under Notification No. 175/86 if it is permissible otherwise. In the facts and circumstances and particularly in view of the fact that their clearances did not exceed exemption limit in the preceding financial years, it has to be held that appellants herein were availing exemption in terms of para 4(b) of the Notification No. 175/86 with reference to the relevant Notifications mentioned therein during the preceding financial year and consequently, benefit of exemption under Notification No. 175/86, dated 1-3-1986 cannot be denied to the appellants for classification list in question for the years 1988-89 and 1989-90. Accordingly, appeal is allowed with consequential relief.