Composite factory treatment supports common excise registration, captive yarn exemption, and Modvat credit where manufacturing is integrated.

Separate manufacturing premises divided by a public road were treated as one factory where the evidence showed integrated production, substantial transfer of yarn between units, common electricity supply, and shared statutory registrations for sales tax, factories, pollution control, ESI and PF. On that basis, common central excise registration was supported, and the captive-clearance exemption for yarn and the related Modvat credit on the fabric division were available as consequences of composite manufacture. The allegation of backdating was unsupported by the record, which showed receipt of the registration application in April 1996 and subsequent grant of registration. The duty, credit and penalty demands therefore could not be sustained.

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Issues: Whether the two manufacturing units, though separated by a public road, were rightly treated as one factory for grant of common central excise registration and, consequently, whether the duty exemption on captive clearance of yarn and the Modvat credit on the fabric division were correctly availed.

Analysis: The allegation that the common registration certificate had been backdated was found unsupported by evidence, while the records showed receipt of the application in the range office in April 1996 and grant of registration thereafter. The units were treated as part of the same factory because the yarn manufactured in one unit was substantially used in the other, the electricity supply was common, and the statutory and administrative indicators such as sales tax, factories, pollution control, ESI and PF registration also pointed to a single integrated manufacturing setup. On that basis, the two units were held to function as a composite mill, making the exemption for captive yarn clearances and the corresponding credit facility available.

Conclusion: The common registration was validly granted, the exemption and Modvat credit claims were sustainable, and the duty, credit and penalty demands could not stand.

Ratio Decidendi: Where separate premises are in substance part of the same factory with interlinked manufacturing and common infrastructure, a duly granted common registration cannot be denied retrospective effect to defeat the exemption and credit consequences flowing from composite production.

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