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Commissioner of Central Excise, Chennai v. M/s. Nebulae Health Care Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2789 of 2007)Decided 27 Oct 2015
Civil Appeal No. 2789 of 2007
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

The assessees were small-scale manufacturers entitled to excise exemptions under a series of notifications for SSI units. They also made medicines and rubber parts under other companies' brand names, paid excise duty on those goods, and took CENVAT (input) credit on the inputs used for them. The department argued that taking this credit meant they had lost the right to the SSI exemption and issued show-cause notices for the years 1999 to 2004.

Decision Breakdown

The Supreme Court dismissed both appeals and upheld the Appellate Tribunal's (CESTAT) decisions in the assessees' favour. The Court held that the notifications in force for those years excluded goods bearing another's brand name only from the calculation of the aggregate value for exemption, and only under specific conditions. The condition on which the department relied was not present in the earlier notification (No. 175/86), so the earlier decision in Ramesh Food Products could not be applied to the later notifications. The Court also stressed that each notification must be read strictly on its own terms, and held that the assessees had correctly claimed the exemption.

Lesson Learnt

Tax exemptions are decided by the exact wording of the notification in force for the relevant period, so a business should check the precise conditions rather than relying on a general rule from an older notification. Claiming input credit on one line of business does not automatically cancel an exemption on another, at least under the notifications considered here.

Official source (sci.gov.in)View Judgment (PDF)

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