By TIOL News Service

NEW DELHI, SEPT 12, 2017: THE appellant obtained CE registration in respect of Unit-I and filed a declaration on 21.04.2008 for availing area based exemption under Notification No.50/2003-CE dated 10.06.2003 in respect of Unit-II. While filing the intimation to avail exemption under the said notification in respect of Unit-II, the appellant submitted detailed ground plan demarcating Unit-I and Unit-II of the manufacturing facility in the said premises.

The Revenue held a view that the factory of the appellant is one and the same and as such they cannot avail exemption under Notification No.50/2003-CE for some of the products and not in respect of some other products.

The Commissioner denied the exemption under notification No. 50/2003-CE and confirmed Central Excise duty demand of Rs.3,45,87,178/- with equal penalty.Penalties were also imposed u/r 26 on partner and officials.

The appellant is before the CESTAT and while rebutting the findings of the adjudicating authority submitted -

+ In terms of notification 50/2003-CE, the exemption is available to industrial units located in the specified area, manufacturing specified goods.

+ The exemption is neither manufacturer-specific nor factory-specific but unit-specific.

+ There is no bar in having two units within the same factory. The notification clearly provides for exemption to "industrial units" located in the specified areas.

+ The notification uses two expressions "unit" & "factory" at different places. The interpretation of the Commissioner that the exemption should be in respect of whole factoryis not legally tenable.

+ The terms "unit" & "factory" used in the said notification cannot be said to be conveying the same meaning or used synonymously.

+ A unit in the factory is a part of the said factory and will have separate identity if involved in an identifiable manufacturing activity on its own.

The AR justified the order confirming the demand by placing before the Bench the following facts -

"The appellants had only one factory with no clear demarcation of two different units. They have common registration with DIC, Sales Tax, Service Tax, Pollution Control Authorities, common electricity connection and generator facilities. The work force of the entire factory is commonly dealt with for labour law, ESI, etc. There is no unit-wise recognition by any authority and as such the claim of the appellant that the statutory provisions applicable to Unit-I & II should be examined separately, is not acceptable."

After considering the submissions made, the Bench observed -

++ We note that para 2 of the said notification which talks about application of exemption to different kinds of units clearly states that the said exemption is for new industrial unit set-up in the declared area or industrial units existing but undertaking substantial expansion. In other words, the exemption itself is available only to "industrial units". The exemption is not extended to factory. It is clear that the terms of the notification when read together will clearly reveal that different terms are used in different contexts and summary conclusion based on inference and presumption as made by the original authority is not supported.

++ We note that the said clarification (letter dated 21.03.2006 of the CBEC) brings-out that the exemption is to be applied even to a new assembling line which in any case will be part of an already existing factory having other manufacturing unit/facility.

++ In various decisions 2015-TIOL-2487-CESTAT-DEL, the Tribunal held that terms "unit" and "factory" cannot be accorded the same meaning for the purpose of Notification No.50/03-CE.

++ The notification grants exemption to new industrial units or existing industrial units undertaking substantial expansion. The exemption is not with reference to a factory. This is clear from the wordings of the notification.

++ We also agree that the definition of "factory" under Section 2(e) of the Central Excise Act is much wider and cannot be made applicable to a unit/industrial unit involved in manufacture of specified goods. All such units are necessary part of a factory, if located in the contiguous area. Each division of a factory manufacturing different identifiable items or undertaking different identifiable processes will have to be considered as a unit of the factory.

Concluding that the impugned order is not legally sustainable, the same was set aside and the appeals were allowed with consequential relief.

(See 2017-TIOL-3299-CESTAT-DEL)