Excise duty on iron ore pellets fails where the pelletisation plant is not a factory under the Factories Act

Pellets produced from iron ore in an integrated pelletisation plant were held not liable to central excise duty where the plant was not a factory within the meaning of the Factories Act. On that basis, the duty demand on the pellets was found unsustainable and consequential relief followed for the assessee. The order noted reliance on Notification No. 118/75 and a limitation plea under Rule 10 of the Central Excise Rules, but the relief rested on the principal excise-dutability issue alone.

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Issues: Whether pellets manufactured from iron ore in the petitioner's pelletisation plant were liable to central excise duty under Item 68 of the Central Excise Tariff when the plant was not a factory within the meaning of the Factories Act.

Analysis: The petitioner was called upon to pay duty on pellets made in its pelletisation plant for use within its own integrated manufacturing operations. The decisive consideration accepted in the order was that the pelletisation plant was not a factory within the meaning of the Factories Act. On that basis, the Government held that no duty was attracted on the pellets. The order also noted the petitioner's reliance on Notification No. 118/75 and the plea of limitation under Rule 10 of the Central Excise Rules, but relief was granted on the principal ground alone.

Conclusion: The duty demand on the pellets was not sustainable, and the revision application was allowed in favour of the assessee.

Final Conclusion: The impugned order-in-appeal was set aside and the petitioner obtained consequential relief on the principal excise-dutability issue.

Ratio Decidendi: Where pellets are produced in a plant that is not a factory within the meaning of the Factories Act, central excise duty is not attracted on such pellets for the purpose considered in the order.

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