2015 (12) TMI 232 - HC - Central Excise

Duty demand upheld for combined factories under common ownership; aggregation key for excise duty exemption

The Tribunal upheld the duty demand, ruling that separate factories under common ownership should be collectively assessed for excise duty exemption based ... SSI exemption - Availment of concessional rate as per Notification No.7/97-CE dated 1st March, 1997, Notification No.38/97-CE dated 27th June, 1997, Notification 9/98-CE dated 2nd June, 1998 and Notification No.9/99-CE dated 28th February, 1999 - Clubbing of clearances - Held that:- Manufacturer is entitled for exemption if the aggregate value of clearances of all excisable goods for home consumption from one or more factories or from a factory by one or more manufacturers does not exceed ₹ 3 crores in the preceding financial year - The fact that the two factories are of one manufacturer is clear from the fact that common balance sheet is being filed. It, is therefore irrelevant to contend that the two factories have separate entrances managing staff or central excise registration. What is relevant is that a manufacturer, if he has one or more factories, would be entitled for exemption at concessional rate of duty if the aggregate value of clearances of all excisable goods does not exceed ₹ 3 crores. Since the appellant has another factory, which is manufacturing an excisable commodity, its clearances have to be added while considering the exemption notification. Since the aggregate clearances exceeded the limit of ₹ 3 crores, the appellant was not entitled for exemption. The adjudicating authority rightly issued the show cause notice and quantified the demand. - Decided against assessee. Issues:1. Whether two factories of the same manufacturer can be treated as separate legal entities for the purpose of excise duty exemption under specific notifications.Analysis:The appellant, engaged in manufacturing Polymer Vinyl Acetate and other adhesives, claimed excise duty concession under specific notifications for being a small-scale industry unit. However, the department contended that the appellant's chemical division was not a separate entity but part of a larger textile division, leading to the issuance of show cause notices for duty demand. The appellate authority, considering various factors like separate management, premises, staff, and end products, ruled in favor of the appellant, citing the Supreme Court precedent emphasizing distinct legal identities for factories under common ownership.Subsequently, the department filed a second appeal before the Tribunal, which overturned the appellate authority's decision, upholding the duty demand. The appellant challenged this decision, arguing that the chemical division should be treated independently for excise duty exemption. The Tribunal analyzed the relevant notification criteria, emphasizing that a manufacturer with multiple factories must consider aggregate clearances of all excisable goods. As the combined clearances exceeded the threshold, the appellant was deemed ineligible for the exemption.The Tribunal distinguished previous cases cited by the appellant's counsel and relied on a Supreme Court judgment involving a similar scenario to justify clubbing clearances of different divisions under a common manufacturer for exemption assessment. Consequently, the Tribunal dismissed the appeal, affirming the duty demand and ruling against the appellant. The decision highlighted the importance of aggregate clearances in determining eligibility for excise duty exemptions, emphasizing the manufacturer's collective production value across all factories.In conclusion, the Tribunal's decision upheld the duty demand, emphasizing the aggregation of clearances from all factories of a single manufacturer for excise duty exemption assessment. The judgment underscored the legal principle that distinct factories under common ownership should be considered collectively for determining eligibility for duty concessions, based on the combined value of clearances across all units.