Separate factory identity preserves exemption where contemporaneous records show bifurcation before amendment curtails the benefit.

Distinct spinning and dyeing units were treated as separate factories for exemption purposes where contemporaneous resolutions, departmental notices, separate registration applications and related correspondence showed that the original unit had been bifurcated before the exemption was curtailed by amendment. Common ownership or management alone did not justify clubbing the units into one factory or denying the notification benefit. Earlier authorities supporting separate factory identity on similar facts were followed, while Revenue's cases were distinguished on their facts. The result was that the exemption remained available to the assessee and the confirmed demands were unsustainable.

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Issues: Whether the assessee's spinning unit and dyeing unit were separate factories entitled to be treated independently for the exemption under the relevant notifications, and whether the benefit could be denied on the ground that the units were under the same management.

Analysis: The exemption under Notification No. 35/95-C.E. granted nil rate of duty to dyed yarn made out of duty-paid yarn, and the subsequent amendment by Notification No. 84/95-C.E. excluded clearances from a factory having facility for producing single yarn. The decisive question was whether the assessee had, in fact, bifurcated the original unit into two distinct factories before the amendment took effect. The record showed contemporaneous resolutions, notices to the department, applications for separate factory registration, and correspondence indicating that the spinning unit and dyeing unit were treated as separate establishments. The mere fact that both units were under the same management did not, by itself, make them one factory. The reasoning in earlier decisions recognizing separate factory identity despite common ownership and common premises supported the assessee. The authorities relied on by the Revenue were distinguished on their facts.

Conclusion: The spinning and dyeing units were separate factories, and the exemption could not be denied on the footing that the units were merely one composite factory.

Final Conclusion: The demands confirmed in the impugned orders were unsustainable, and the assessee was entitled to the benefit of the notifications.

Ratio Decidendi: Where distinct factories are shown by contemporaneous acts and records to have been separated before an exemption is curtailed by amendment, common ownership or management alone does not justify clubbing them or denying the statutory exemption.

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