Separate factory status under central excise turns on independent manufacturing setup, not common ownership or proximity alone.

Common ownership and physical proximity do not, by themselves, make two manufacturing units one factory for central excise purposes. The decisive test is whether the premises function as a single factory under the excise law; separate entrances, staff, management, end products, and independent registration support separate identity. Where there is no interdependence of manufacture and one unit's product is not the other's raw material, the units remain distinct factories. On those facts, the demand and penalty based on treating the two units as one were unsustainable, and the appeals succeeded.

---

---

Issues: Whether two units owned by the same company and situated near each other constituted one factory for central excise purposes, or were separate factories entitled to be treated independently for exemption and duty liability.

Analysis: The relevant test was whether the premises formed one factory within the meaning of the excise law. Mere common ownership, a common balance-sheet, or physical proximity did not establish unity of the factories. The two units had separate entrances, separate staff, separate management, different end products, and were separately registered with the Central Excise Department. There was no interdependence of manufacture, and the product of one unit was not the raw material of the other. The statutory registration scheme also treated the certificates as valid only for the specified premises, supporting separate identity where the units were independently run.

Conclusion: The two units were separate factories and could not be treated as one merely because they were owned by the same company and had common boundaries. The duty demand and penalty based on the contrary view were unsustainable, and the appeals succeeded.

Ratio Decidendi: For central excise purposes, separate premises carrying on distinct manufacturing activities with separate registration, staff, management, and products remain separate factories; common ownership or proximity alone does not merge them into one factory.

---