Deemed factory registration preserved exemption eligibility where no certificate issued within time under Central Excise rules.

An application for registration of a second unit, supported by layout plans and clarifications, triggered the deeming provision in Rule 174(9) of the Central Excise Rules because no certificate was issued within 30 days; the unit was therefore treated as a separate factory by operation of law. On that footing, the dyeing unit was not regarded as a factory producing single yarn, and the amended proviso to Notification No. 35/95-C.E. read with Notification No. 84/95-C.E. did not disqualify the assessee from exemption. The duty demand based on denial of exemption could not be sustained.

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Issues: (i) Whether the appellants' second unit was to be treated as a separate factory by reason of the application for registration under the Central Excise Rules and the statutory deeming provision. (ii) Whether the dyeing unit, treated as a separate factory, remained eligible for exemption under Notification No. 35/95-C.E. as amended by Notification No. 84/95-C.E.

Issue (i): Whether the appellants' second unit was to be treated as a separate factory by reason of the application for registration under the Central Excise Rules and the statutory deeming provision.

Analysis: The appellants had applied for registration of the second unit as a factory and had also submitted the relevant layout plan and clarifications. Under the deeming provision in Rule 174(9) of the Central Excise Rules, registration is taken to have been granted if no certificate is issued within the prescribed period of 30 days. In these circumstances, the absence of an express certificate could not be used to deny the legal status of a separate factory.

Conclusion: The second unit had to be treated as a factory by operation of law, and the absence of a formal certificate did not defeat the appellants' case.

Issue (ii): Whether the dyeing unit, treated as a separate factory, remained eligible for exemption under Notification No. 35/95-C.E. as amended by Notification No. 84/95-C.E.

Analysis: The exemption was denied by the Department on the footing that the yarn was cleared from a factory having facilities for producing single yarn. The Tribunal held that, on the facts, the appellants had bifurcated the composite establishment before the amending notification took effect and that the dyeing unit, once recognised as a separate factory, was not a factory producing single yarn. The amended proviso therefore did not disentitle the appellants from the exemption.

Conclusion: The dyeing unit was eligible for the exemption and the duty demand could not be sustained.

Final Conclusion: The appellate authority accepted the appellants' claim that the dyeing unit constituted a separate factory and that the exemption under the relevant notification remained available, resulting in cancellation of the impugned duty demand.

Ratio Decidendi: Where an application for factory registration is made and the statutory period expires without a certificate being issued, the unit is deemed to be registered, and such deemed separate factory status cannot be denied for purposes of exemption merely because no express certificate was granted within time.

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