Factory-specific exemption principle: separate registered premises could not lose benefit merely because the manufacturer had another unit.

An exemption notification framed with reference to a factory, and its proviso, was applied on a premises-specific basis rather than by treating all units of the same manufacturer as one. Separate premises for single yarn and double yarn were registered under the Central Excise Rules and treated by the department as distinct factories; single yarn was also cleared on payment of duty to the other unit for manufacture. On those facts, the proviso could not be used to deny exemption to the separately registered factory. The exemption therefore remained available, consistent with the place-of-manufacture principle.

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Issues: Whether the proviso inserted in Notification No. 35/95-CE by Notification No. 84/95-CE denied exemption to double yarn cleared from separately registered factory premises merely because the same manufacturer also had facilities for producing single yarn elsewhere.

Analysis: The exemption and its proviso were held to operate with reference to a factory, not merely to the identity of the manufacturer. The record showed that the premises for single yarn and double yarn were separately registered under Rule 174 of the Central Excise Rules, 1944, were treated by the departmental authorities as distinct factories, and the single yarn was cleared on payment of duty to the other unit for use in manufacture. On those findings, the proviso could not be invoked to deny exemption to a separately registered premises functioning as an independent factory. The reasoning was consistent with the place-of-manufacture principle.

Conclusion: The exemption was held to remain available to the assessee, and the departmental appeal failed.

Ratio Decidendi: Where an exemption notification is expressed with reference to a factory, the disqualification attached to facilities for producing another product applies only if the clearances are from that same factory, and not merely because the same manufacturer owns another separately registered premises with such facilities.

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