How to calculate limits of Rs. 1 crore and Rs. 4 crore for the purpose of availing SSI exemption under Central Excise

[Surender Gupta]

Under Central Excise, SSI units are eligible for availing exemption upto Rs. 1 crore without availing Cenvat Credit - See notification No. 8/2003 CE dated 1-3-2006.

Alternatively an SSI unit may choose not to avail the exemption and pay central excise duty after availing Cenvat Credit.

The exemption granted to SSI exemption is called as "Exemption based on Value of Clearance".

The term SSI is not defined under central excise. Therefore from the point of view of exemption under notification, no. 8/2003 CE, applicable to SSI units, the main criterial which is taken into account for deciding the eligibility for exemption rate appears to be the turnover of Rs. 4 crores in the preceding financial year.

According to the conditions of notification, a manufacturing unit can avail the SSI exemption upto Rs. 1 crore in the current financial year, if the turnover of the previous year is not exceeding Rs. 4 crores.

Therefore, it is pertinent to point out and must be understood carefully the meaning of value and how to calculate the value of clearance in the current financial year and in the preceding financial year.

These terms in accordance with the provisions of the notification has been discussed hereinbelow.

Meaning of Value

Explanation "C" to the notification defines the meaning of "Value" as: -

(i)  in respect of specified goods which have been notified under section 4A of the Central Excise Act, the value as determined in accordance with the provisions of that section, and

(ii) in respect of specified goods other than those referred to in sub clause (i), the value as determined in accordance with the provisions of section 4 of the Central Excise Act, or the tariff value fixed under section 3 of the said Act;

(Note: - Special provision for Chinaware or Porcelainware and goods are manufactured in a factory belonging to or maintained by the Central Government or by a State Government has also been made in the notification)

How to calculate value of Rs. 1 Crore of the current year

Paragraph 3 of the notification specify the manner or calculation of Rs. 1 Crore

Turnover shall be calculated on or after the 1^st day of April for the financial year.

The following shall not be taken into account: -

(a) Clearances, which are exempt from the whole of the excise duty.

(b) Clearance chargeable to NIL rate of duty.

(c) Clearance on which no excise duty is payable for any other reason.

(d) Clearances bearing the brand name or trade name of another person.

(e) Clearances of the specified intermediate goods used within the factory of production of the specified goods;

(f) clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene.

(g) Export except export to Nepal and Bhutan

(h) Deemed Export (to FTZ / SEZ / EOU / EHTP / STP units / goods supplied under notification no. 108/95)

(i)  Trading goods.

How to calculate value of Rs. 4 Crore of the previous year

Paragraph 3A of the notification specify the manner or calculation of Rs. 4 Crore

Turnover shall be calculated between 1^st day of April and 31^st day of March (both dates inclusive) of the preceding financial year.

(a)  Deemed export - where goods have been removed without payment of duty (to FTZ / SEZ / EOU / EHTP / STP / goods supplied under notification no. 108/95)

(b)  Clearances bearing the brand name or trade name of another person.

(c)  Clearances of the specified intermediate goods used within the factory of production of the specified goods;

(d)  Export except export to Nepal and Bhutan

(e) Clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene.

(f)   Job work under notification no. 214/86 CE dated 25-03-1986 or

(g)  Job Work under notification no. 83/94 CE dated 11-04-1994 or 84/94 CE dated 11-04-1994