Quantity-based exemption follows separate excise registration from the registration date, while penalty falls where the department accepted the unit structure.

A newly registered excisable unit was recognised separately for quantity-based exemption purposes from the date of its central excise registration, because the separate registration was not under challenge. Clearances from the earlier unit up to that date had to be aggregated for computing the exemption limit, so the duty demand on the earlier unit was upheld. Penalty was not sustainable where the department itself had granted and accepted separate registration for the two units; it was therefore set aside.

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Issues: (i) Whether the quantity-based exemption under Notification No. 6/2000-C.E. was to be applied separately to the second unit only from the date of its excise registration. (ii) Whether penalty was sustainable in the facts of the case.

Issue (i): Whether the quantity-based exemption under Notification No. 6/2000-C.E. was to be applied separately to the second unit only from the date of its excise registration.

Analysis: The exemption was linked to a factory's clearances, but the Tribunal treated registration under the central excise law as the operative basis for recognising the new unit as a separate factory for excise purposes. Since the second unit was granted separate registration from 25-9-2000 and that registration was not under challenge, the Tribunal held that the new unit could be treated separately from that date. At the same time, clearances from the earlier unit up to September 2000 had to be aggregated for working out the exemption limit.

Conclusion: The exemption was separately available to the newly registered unit from the date of registration, and the duty demand on the earlier unit was upheld.

Issue (ii): Whether penalty was sustainable in the facts of the case.

Analysis: The Tribunal noted that the department itself had granted separate registration and recognised the two units. In those circumstances, the imposition of penalty was not justified.

Conclusion: Penalty was not sustainable and was set aside.

Final Conclusion: The duty demand was maintained, but the penalty was deleted, resulting in only partial relief to the assessee.

Ratio Decidendi: Where a new excisable unit has been granted separate registration and that registration is not under challenge, the unit may be recognised separately for exemption purposes from the date of registration, while penalty cannot be sustained if the department itself has accepted the separate registration and unit structure.

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