2014 (11) TMI 821 - HC - Central Excise

CESTAT sets aside Final Order, denies Small Scale Industry exemption post-amalgamation.

COMMISSIONER OF CENTRAL EXCISE, MADURAI Versus VIDYASAGAR TEXTILES LTD.

COMMISSIONER OF CENTRAL EXCISE, MADURAI Versus VIDYASAGAR TEXTILES LTD. - 2014 (308) E.L.T. 453 (Mad.) Issues:Interpretation of Small Scale Industry exemption in the context of amalgamation scheme.Analysis:The case involved a Civil Miscellaneous Appeal against the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. The dispute arose from the Small Scale Industry exemption claimed by the respondent after being amalgamated with another company. The appellant contended that the amalgamation was effective from 1-4-2000, as approved by the High Court, and thus, the exemption claimed till 23-9-2000 was not valid. On the contrary, the respondent argued that the amalgamation process was completed on 1-4-2000, sanctioned by the High Court on 28-7-2000, and registered on 28-9-2000, justifying the exemption till 23-9-2000.The appellant raised substantial questions of law regarding the entity status of the respondent during the amalgamation period and the entitlement to Small Scale Industry benefit under relevant notifications. The appellant highlighted the resolution passed by the Board of Directors confirming the effective date of amalgamation as 1-4-2000, emphasizing that the respondent should not have claimed the exemption beyond this date. The Commissioner of Central Excise (Appeals) upheld the show cause notice, but the CESTAT allowed the appeal, considering a previous decision where the transfer date differed from the effective date.The Court referred to precedents to determine the effective date of amalgamation, emphasizing that the respondent was considered a new entity from 1-4-2000 post-amalgamation. The Court noted that since no specific date was mentioned in the High Court's order regarding the effect of amalgamation, the effective date could be inferred as 1-4-2000 based on the amalgamation date. Consequently, the Small Scale Industry exemption granted till 23-9-2000 was deemed invalid post 1-4-2000, as the respondent was considered a new entity.In conclusion, the Court allowed the Civil Miscellaneous Appeal, setting aside the Final Order of the CESTAT. The judgment clarified that the respondent's claim for Small Scale Industry exemption beyond the effective amalgamation date was not valid, considering the entity's new status post-amalgamation.