By TIOL News Service

MUMBAI, JULY 21, 2017: THE appellants are engaged in the manufacture of Stainless Steel Utensils, Kitchenware and Cutlery Articles and are availing value based SSI exemption. They are supplying the goods to merchant exporters in addition to the clearances made to their domestic buyers. They have not included the clearance value in respect of supply made to merchant exporter treating the same as export clearances.

Accordingly, in respect of the remaining clearances, which were made to domestic buyers, they claimed SSI exemption as the aggregate value of such clearances was within the SSI exemption limit of Rs. 100 lakhs. The appellant claimed that against the supplies made to merchant exporter, the merchant exporter issued Form 14B and/or Form H. In addition, the appellant also submitted export documents of merchant exporter claiming that the goods cleared by the appellant have been exported by the merchant exporter.

The adjudicating authority did not accept both the contentions of the appellant by taking the stand that supplies made against Form 14B and/or Form H are acceptable only if exports were made directly by the manufacturer and that the proforma invoice issued by the merchant exporter is pre-dated than the date of clearance of goods, therefore, whatsoever export documents submitted are not relevant to the clearances made by the appellant.

Accordingly, the said clearances were not considered for the purpose of export and consequently, demand of duty, interest and penalties were confirmed.

Aggrieved, the appellant is before the CESTAT.

After considering the elaborate submissions made by both sides, the Bench observed as under -

++ We find that the appellant is availing SSI exemption. Accordingly, they are not registered with the Central Excise. The Board vide Circular No. 648/39/2002-CX dated 25.7.2002 had prescribed simplified export procedure for small-scale manufacturer.

After reproducing the referred Circular, the Bench further observed -

"…From the reading of the above Circular, it is seen that the above procedure is primarily applicable in respect of small scale exempted units to export their goods either directly or through merchant exporter and documents prescribed by Sales Tax Department is Form H or ST-XXII Form or any other equivalent Sales Tax Form is acceptable as proof of export. The adjudicating authority interpreted the Circular in a manner that the goods should be supplied directly from the unit itself. As per the facts of the present case, we find that the goods were directly supplied by the appellant manufacturer from their factory to the merchant exporter and the merchant exporter in turn exported the goods. Therefore, in our considered view, the condition of the Circular that export should be through merchant exporters or directly from the unit itself stand fulfilled. Whenever the manufacturer's goods are exported through merchant exporter, invariably the goods are sold by raising invoices to the merchant exporter and, thereafter, the merchant exporter export the goods and for that reason the Sales Tax Department issue Form H and Form 14B in respect of the goods supplied by the manufacturer to the merchant exporter. The Board has very consciously prescribed the aforesaid Sales Tax Form as proof of export for the reason that the said Forms are issued by the Sales Tax Department only in respect of those goods, which are exported. In respect of the goods supplied by the appellant, the merchant exporters have obtained the necessary Sales Tax Form H/form 14B from the Sales Tax authorities, which contain the details of supply of goods by the appellant and export thereof. The basic objective of such clearance is that if the manufacturer's goods cleared to merchant exporter and thereafter exported, the same shall be treated as export and value thereof is not includible in the aggregate value of clearance for the purpose of SSI exemption. Therefore, the interpretation of the adjudicating authority is very narrow and defeats the entire objective of the simplified export procedure prescribed by the Board. It is very obvious that incase of merchant exporter, the manufacturer supplier does not have locus-standi to export the goods directly from his factory. It always happens that first goods purchased by the merchant exporter and thereafter merchant exporters do all the procedures such as preparation and filing of documents for export to the Customs authority. Therefore, the assumption of the adjudicating authority that the goods should have been exported directly from the appellant's units is misleading of the clarification given in the Board's Circular. In our considered view, if the supplies made by the appellant get correlated with the details bearing in the Sales Tax Form H and/or Form 14B, the same must be accepted as proof of export and neither any duty can be demanded on such clearances nor the same is includible in the aggregate clearance value of the exempted goods under SSI exemption. We have also perused the certificates issued by the merchant exporter, which fortify the claim of the appellant that the goods cleared by them have been exported and it cannot be brushed aside particularly when the appellants have submitted Form-H/Form-14B. Since Sales Tax forms have been considered by Board as proof of export, no further documents are required for the purpose of proof of export."

Citing, inter alia , the decision in the case of Ramani Plastics Pvt. Ltd. - 2015-TIOL-116-CESTAT-MAD & Merry - 2008-TIOL-295-CESTAT-MUM, the Bench concluded that the impugned order does not sustain, hence set aside the same.

The Appeal was allowed with consequential relief.

(See 2017-TIOL-2523-CESTAT-MUM)