Tribunal rules interconnected premises form single factory for excise duty, allowing exemption

The Tribunal, on 28.10.2016, ruled that interconnected premises of the respondent-assessee constituted a single factory for excise duty purposes, enabling exemption under Notification No. 10/96-CE for blended EVA compound used in PVC Footwear manufacturing. Ownership and control were key factors, outweighing physical separation, leading to dismissal of Revenue's appeal. The decision emphasized that the EVA compound's production and usage across the premises did not warrant treating them as separate factories, affirming the eligibility of the respondent-assessee for the exemption.

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Issues: Eligibility for exemption under Notification No. 10/96-CE for blended EVA compound; Determination of whether two premises constitute separate factories for excise duty purposes.

Analysis:
1. The appeal before the Appellate Tribunal CESTAT NEW DELHI involved the eligibility of the respondent-assessee for exemption under Notification No. 10/96-CE concerning the blended EVA compound used in the manufacture of PVC Footwear. The Revenue contended that the EVA compound produced at an intermediate stage was not eligible for exemption as it was transferred between premises belonging to the same assessee but considered as different factories. The original authority imposed duty demand, penalty, and ordered confiscation of goods, which was set aside by the Commissioner (Appeals), leading to the Revenue's appeal.

2. The Tribunal considered the definition of "factory" under Section 2(f) of the Central Excise Act, 1944, which includes any premises where manufacturing processes related to excisable goods are carried out. The impugned order found that the respondent had a single registration under various laws, and both premises were under their control. It was established that both locations were part of one factory, enabling the consumption of the EVA compound within the factory for footwear production, thus qualifying for the exemption under the notification.

3. The Revenue argued that the physical separation of the premises and the lack of separate Central Excise registration implied they should be treated as distinct factories. However, the Tribunal disagreed, emphasizing that both locations were owned by the same assessee and involved in the footwear manufacturing process. The process of preparing the EVA compound in one premise and using it in another did not warrant denying the exemption, especially when no evidence suggested treating them as separate factories. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the eligibility of the respondent-assessee for the exemption under Notification No. 10/96-CE.

4. In conclusion, the Tribunal's decision on 28.10.2016 clarified that the interconnected premises of the respondent-assessee constituted a single factory for excise duty purposes, allowing the blended EVA compound's exemption in the manufacture of PVC Footwear. The judgment highlighted the importance of ownership and control in determining factory status, rejecting the Revenue's argument based on physical separation alone.

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