Exemption limit under excise notification computed on purchaser's own aggregate clearances after bona fide factory transfer

For exemption under Notification No. 8/01-C.E., the computation of the clearance limit depended on the factual setting contemplated by the notification. Clause 2(v) governed a single manufacturer clearing specified goods from one or more factories, while clause 2(vi) applied to one or more manufacturers clearing from the same factory. After a bona fide transfer of the factory, the purchaser was treated as the only manufacturer operating from two factories, so the seller's earlier clearances, already clubbed in the seller's own case, could not be re-attributed to the purchaser. The exemption was therefore to be computed on the purchaser's own aggregate clearances, and the demand and interest confirmation failed.

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Issues: Whether, for availing the exemption under Notification No. 8/01-C.E. dated 1-3-2001, the clearances made by the previous owner from the factory before its transfer to the appellant were required to be clubbed with the appellant's clearances, and whether clause 2(v) or clause 2(vi) governed the computation of the exemption limit.

Analysis: The exemption under Section 5A(1) of the Central Excise Act, 1944 was available up to the prescribed aggregate value of first clearances in a financial year, and its conditions had to be applied according to the factual setting contemplated by the notification. Clause 2(v) dealt with a single manufacturer clearing specified goods from one or more factories, while clause 2(vi) dealt with one or more manufacturers clearing specified goods from the same factory. After the appellant purchased the factory, it became the only manufacturer operating from two factories, and the earlier clearances of the seller had already been clubbed in the seller's own case under clause 2(v). As the transfer was bona fide and genuine, the appellant could not be denied the benefit of exemption by treating the seller's earlier clearances as its own for the same period.

Conclusion: Clause 2(v) applied, not clause 2(vi), and the appellant was entitled to compute the exemption limit on the basis of its own aggregate clearances from its two factories. The demand and interest confirmation were unsustainable and the appellant succeeded.

Ratio Decidendi: Where a bona fide transfer of a factory leaves one manufacturer operating from more than one factory, the exemption notification must be applied on the basis of the manufacturer's aggregate clearances under the clause governing one manufacturer with multiple factories, and the previous owner's separately clubbed clearances cannot be re-attributed to defeat the exemption limit.

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