Strict construction of excise exemptions: expanded cement units without an independent new kiln cannot claim preferential notification relief.

Fiscal exemption notifications must be construed strictly, and a merely modernised or expanded existing unit cannot be treated as a new factory unless the new arrangement is independent in all material respects. The Delhi HC held that the respondent-company's Nadikude kiln remained the same kiln operating since 1983, so the expanded unit did not qualify under Notification No. 36-C.E. dated 1-3-1987. It further held that Notification No. 124/87-C.E. required a clinkerisation unit to commence production within the specified period, which the Visakhapatnam and Vijayawada plants did not satisfy. The plea of hostile discrimination also failed because the comparators were factually different and mistaken benefits to others created no enforceable right to parity.

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Issues: (i) Whether the respondent-company was entitled to exemption under Notification No. 36-C.E. dated 1-3-1987 for any of its factories on the footing that the expanded unit was a new or substantially expanded factory that commenced production after 1-4-1986; (ii) Whether the respondent-company was entitled to exemption under Notification No. 124/87-C.E. dated 29th April, 1987 for the factories/units said to have commenced production during the earlier specified period; (iii) Whether denial of exemption to the respondent-company while exemption had been granted to other manufacturers amounted to hostile discrimination under Article 14 of the Constitution of India.

Issue (i): Whether the respondent-company was entitled to exemption under Notification No. 36-C.E. dated 1-3-1987 for any of its factories on the footing that the expanded unit was a new or substantially expanded factory that commenced production after 1-4-1986.

Analysis: The exemption under the notification was confined to cement manufactured in a factory that had commenced production on or after 1-4-1986, and the amended proviso still required clinker to be produced in a factory whose production of clinker had commenced during the relevant period. The material showed that the key kiln at Nadikude remained the same and had been functioning since 1983, with only modernisation and addition of a precalcinator and ancillary units. The expansion was therefore not an independent new unit in all respects, and the concept of a substantially expanded unit could not be stretched to add words not found in the notification.

Conclusion: The respondent-company was not entitled to exemption under Notification No. 36-C.E. dated 1-3-1987 for any of its factories.

Issue (ii): Whether the respondent-company was entitled to exemption under Notification No. 124/87-C.E. dated 29th April, 1987 for the factories/units said to have commenced production during the earlier specified period.

Analysis: The earlier notification, as amended, required the clinkerisation unit to have commenced production during the specified period. The respondent-company itself treated the Nadikude kiln as the same kiln that had commenced production in the earlier period, which was inconsistent with a claim that production under the same line had begun afresh after 1-4-1986. The Visakhapatnam and Vijayawada plants also did not satisfy the requirement because no independent clinkerisation unit or kiln had commenced production within the relevant period in the manner contemplated by the notification.

Conclusion: The respondent-company was entitled to exemption only to the limited extent accepted for the Nadikude unit under the earlier notification, and not for the Visakhapatnam or Vijayawada plants.

Issue (iii): Whether denial of exemption to the respondent-company while exemption had been granted to other manufacturers amounted to hostile discrimination under Article 14 of the Constitution of India.

Analysis: The respondent-company's manufacturing arrangement was materially different from that of the other manufacturers cited for comparison, because their new lines were independent and had separate kilns, whereas the respondent-company continued to use the same kiln for both the old and new lines. Any mistaken benefit granted to others could not confer a corresponding right on the respondent-company, and unequal treatment was not established where the factual and operational basis of the units was different.

Conclusion: The plea of discrimination failed and there was no violation of Article 14.

Final Conclusion: The exemption notifications were construed strictly, the respondent-company's expanded arrangement was held not to amount to an independent new unit for the relevant relief, and the challenge based on parity and discrimination was rejected.

Ratio Decidendi: A fiscal exemption confined to factories or clinkerisation units commencing production within a specified period cannot be extended to a merely modernised or expanded existing unit unless the new arrangement is independent in all material respects, and parity with wrongly benefited comparators does not create an enforceable claim to equal treatment.

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