2015 (7) TMI 628 - AT - Central Excise

Tribunal allows duty exemption for separate factory units, waives pre-deposit requirement

The Tribunal ruled in favor of the appellant, allowing the exemption for Unit II while paying duty for Unit I within the same factory complex. It found ... Waiver of pre deposit - Benefit of the area based exemption Notification No. 50/2003-C.E. - exemption for unit II which was in same compound as Unit I - Denial on the ground that Unit I is not availing exemption, therefore, unit II would not be eligible - Held that:- there are two units in a factory and both the units manufacturing Automobile parts but different parts. The appellant company, however, has obtained central excise registration in respect of the Unit I and the site plan enclosed with the registration certificate shows the location of the Unit I as well as Unit II. The appellant in respect of the Unit II have filed the required declaration for availing exemption Notification No. 50/2003-C.E. on 21-4-2008 and in respect of Unit II, they have also filed a declaration for exemption from obtaining registration and thus, while in respect of Unit II, there is no central excise registration, in respect of Unit II the department has issued a separate central excise registration. Thus, the department itself has treated the appellant’s factory as consisting of two units Unit I for which the central excise registration has been issued and Unit II for which the appellant have claimed exemption from obtaining registration. In respect of Unit I, the appellant has paid the duty and cleared the goods for export under rebate claim. In respect of Unit II, full duty exemption under Notification No. 50/2003-C.E. has been claimed. - the term ‘factory’ and ‘industrial unit’ have to be interpreted keeping in view the Central Excise Department’s practice to treat each section or part of a factory manufacturing different commodity as separate manufacturing units for purpose of L-4 licence and that each section or part of the factory is to be treated as separate industrial unit. Therefore, the word ‘industrial unit’ cannot be used in the sense of a factory as a factory may have more than one industrial units. The duty exemption under the exemption Notification No. 50/2003-C.E. is in respect of the goods cleared from an “industrial unit”. Thus it is very much possible for an assessee manufacturing different products located in the area specified under Notification No. 50/2003-C.E. to claim exemption in respect of the goods cleared from one industrial unit in the factory and opt to pay duty in respect of the goods cleared from another industrial unit in the same factory. - Stay granted. Issues:Interpretation of excise duty exemption under Notification No. 50/2003-C.E. for two manufacturing units within the same factory complex.Analysis:The case involved a dispute regarding the excise duty exemption under Notification No. 50/2003-C.E. for two manufacturing units within the same factory complex. Unit I and Unit II, located in the same factory compound, were manufacturing different automobile parts. The appellant company opted for duty payment for Unit I and exemption for Unit II. The department issued a show cause notice denying the exemption to Unit II, treating both units as one factory due to common registrations and facilities. The Commissioner upheld the denial, imposing duty demand, interest, and penalties. The appellant challenged this order through appeals and stay applications.The appellant argued that the term 'unit' in the exemption notification differs from 'factory,' citing relevant case laws. They emphasized that a factory may have multiple industrial units with separate registrations. They contended that Unit II's exemption should not be denied based on Unit I's duty payment. The appellant highlighted separate central excise registrations for both units and disputed the invocation of extended limitation period and penalties.The Departmental Representative opposed the stay applications, asserting that both units were treated as one factory in the declaration for exemption. They argued that once duty payment is chosen for one part of a factory, exemption cannot be claimed for another part. The representative justified the extended limitation period and penalties due to alleged suppression of facts by the appellant.The Tribunal considered the submissions and found that both units were located in the notified area under the exemption notification. It noted separate central excise registrations for Unit I and Unit II, indicating the department's recognition of two distinct units within the factory. Citing the Supreme Court's precedent, the Tribunal held that each section of a factory manufacturing different goods should be treated as a separate industrial unit. Therefore, the appellant could claim exemption for Unit II while paying duty for Unit I.Consequently, the Tribunal found the impugned order incorrect and waived the pre-deposit of duty demand, interest, and penalties, deeming them as causing undue hardship. The stay applications were allowed, enabling the hearing of the appeals without the requirement of pre-deposit.In conclusion, the Tribunal's decision favored the appellant's interpretation of the excise duty exemption, emphasizing the distinction between industrial units within a factory complex. The waiver of pre-deposit indicated a prima facie view in favor of the appellant, ensuring a fair hearing of the appeals.