AI Drafter 
TaxTMI 
TaxTMI 
1991 (9) TMI 233
X X X X Extracts X X X X
X X X X Extracts X X X X
....2543/87 Sakthi Sugars, Appakudal 13-6-1985 8-4-1985 to 28-6-1985 Rs. 13,84,362.00 29-10-1986 2. The facts relevant for determination of the dipute in the first appeal are that Range Officer, Central Excise, Karur, learnt that the appellants had erected two coal fired boilers and were producing steam, an excisable commodity falling under Item 68 of the Central Excise Tariff and that the steam so produced was being released through pipe line to sugar factory of M/s. Deccan Sugars of Abkhari Ltd. (DS). The Range Officer discovered that the central excise duty payable on steam was not being paid; that no central excise licence had been applied for the production of steam and the procedural formalities required to be observed had not been fulfilled. When the Inspector, Central Excise, Pugalur asked the appellants by his letter dated 12-11-1984 to take out a central excise licence, they replied in their letter dated 12-l2-1984 that they had leased their coal fired boiler to M/s. Deccan Sugars Ltd., and that the production of steam continues to be done by the sugar mills for captive consumption in their factory for manufacturing sugar. 3. Investi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Supervisory staff and the managerial staff belonged to M/s. TNPL; (d) the compensation, if any, paid to any workmen working in the boiler plant would be paid by M/s. TNPL; and (e) the provident fund etc., payments of such staff were made by M/s. TNPL. 7. Among the grounds taken in the appeals are that under Notification 118/75-C.E., dated 30-4-1975 the goods falling under Item 68 were exempt from duty provided they were intended for use in the factory in which they were manufactured, or in any other factory of the same manufacturers and this exemption was fully applicable to steam manufactured in the coal fired boilers in all the three cases; that the boilers were required to be installed by the appellants within the factory premises of the sugar mills on lease basis for the purpose of production of steam for captive consumption within the sugar mills; that the appellants had entered into lease agreement with the sugar mills who provided the land free and the appellants erected the boilers and handed them over for being run by the sugar mills on lease; that the letter by which the sugar mills requested for deletion of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Code 639 117 are found to be manufacturing steam from 7-12-1984 which falls under tariff Item No. 68 in their coal fired boiler erected in the premises of M/s. Nava Bharat Ferro Alloys Ltd., (Deccan Sugars), Pugalur and are supplying the same to M/s. Deccan Sugars, Pugalur without taking out a Central Excise licence and clearing the same without payment of duty." (emphasis supplied). 9. The learned Counsel submitted that it was clear from the words of the show cause notice that the authorities themselves had proceeded on the basis that the boiler was erected in the premises of the sugar mills, and M/s. TNPL could not, in these circumstances, be held liable for payment of duty on the steam which was eligible for exemption from duty under Notification 118/75. 10. Shri Natarajan placed reliance on the following decisions in support of his claim that M/s. TNPL were not the manufacturers of steam :- (a) M/s. Neerullah Gazanfarullah v. Employees State Insurance Corporation, Kanpur [1982 LAB IC 56]. This was a case under the Employees' State Insurance Act in which a question arose whether the two establishments - one in which tube wells wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere manufacturing process with the aid of power is carried on. Thus, there is not only functional unity between the two premises but in our opinion there is also unity of ownership, unit of employment and unity of work." (emphasis supplied). (b) M/s Agents & Manufacturers v. Employees State Insurance Corporation [1974 Lab IC 220 Delhi HC]. It was held in this case that for the purposes of the ESI Act, 1948, where the manufacturing process was carried on by power at two places one furlong apart and polishing and packing was done at a third place, polishing etc., being incidental to the manufacturing process, workers at all places were employees within the meaning of the Act and all the three places form part of one factory. The High Court had relied on the definition of factory given in Halsbury's Laws of England in which it has been stated that separate buildings, even though a considerable distance apart, may, if used for one continous manufacturing process, constitute a single factory. (c) S.G. Chemicals & Dyes Trading Employees Union v. S.G. Chemicals & Dyes Trading Ltd. [1986 Supreme Court Cases (L&S) 303]. The S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the language of the notification. If a tax payer is within the plain terms of an exemption, it cannot be denied its benefit by calling in aid any supposed intention of the exemption. The appellants having fulfilled the conditions clearly laid down in Notification 118/75, they are entitled to the exemption contained therein." 11. Appearing for the respondent - Collectors, Shri J.N. Nair, the learned Departmental Representative, first referred to letter dated 15-6-1983 from M/s. Deccan Sugars, which, being important, is reproduced below :- The Superintendent of Central Excise 15-6-1983 Karur Through The Inspector of C.E., Pugalur Dear Sir,    Additions, alterations and deletions inside the factory premises. We enclose the approved ground plan of the factory and also a new plan in triplicate showing the area shaded in red to be excluded since we propose to provide this area to Tamil Nadu Newsprint & Papers Ltd., Pugalur to constr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the first letter to M/s. TNPL on 12 November, 1984 and followed it up with further enquiries. He submitted that there was nothing about the land on which the boilers were erected in the Lease Agreement. This aspect was covered by the requests of the three sugar mills to the respective central excise authorities made much earlier for exclusion of the land from their ground plans as a result of which these areas in which the boilers were installed did not form part of the sugar factories for purposes of Section 2(e) of the Central Excises & Salt Act, 1944. 14. The learned DR contested the claim of Shri Natrajan about the relevance and applicability of the ratio of the decisions on ESI Act and Factories Act to a matter which was governed by the Central Excises & Salt Act, 1944. Shri Nair placed reliance on the decision of the Tribunal in the case of M.M. Khambhatwala, Ahmedabad v. Collector of Central Excise, Baroda [1987 (31) E.L.T. 995 (Tribunal)] from which he read out para 5 : "The contention of the learned advocate is that the word "factories" in the Notification No. 80/80-CE should mean "factories" as defined in the Factories Act, 1948 and not in Section 2(e) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts cases would be covered by Notification 118/75. He also submitted photocopy of Order C.No. V/68/15/4/86-C. Ex.Adj. dated 5-4-1987 passed by Collector of Central Excise, Trichy in a similar case concerning M/s. TNPL and M/s. Arignar Anna Sugar Mills Ltd., Kurungulam in which the Collector had held that M/s. TNPL had no liability to duty on steam, in similar circumstances. Shri Nair contested the claim of Shri Natarajan on the ground that in that case there is no evidence to show that the area in which boilers were installed had been excluded from the sugar factory and this is the reason why the Collector had recorded as under in para 4 of his order : "4. From the Department's side, it is placed on record that the area occupied by M/s. TNPL's Boiler and auxiliary services are situated within the boundry of the sugar factory of M/s. Arignar Anna Sugar Mills, Kurungulam as approved by the Central Excise authorities. 5. The operative portion of the Notification No. 118/75-C.E., dated 30-4-1975 read as under :- "Goods falling under Item 68, manufactured in a factory and intended for use in the factory in which they are manufactured or in any other factory of the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the cases under the ESI Act and the Factories Act are not relevant for purposes of an exemption notification under the Central Excises & Salt Act, as held by the Tribunal in the case of M.M. Khambhatwala v. CCE, Baroda (Supra) which was cited by the learned DR. Moreover, what is important to remember is that we are interpreting an exemption notification, which, according to the well settled principles of law, has to be interpreted in its plain meaning. In the cases cited by Shri Natarajan what fell for consideration was not the applicability of exemption available under Notification 118/75 to the circumstances of these cases for determining whether the different units constituted a 'factory' for that purpose but whether they could be treated as factory for purposes of the ESI Act and the Factories Act. Different considerations apply for these different purposes. 20. Further, what has been overlooked while citing those cases is the fact that the Sugar Mills had by positive action taken by them excluded the areas in which the boilers were erected from their factory. Now, Rule 174 which requires a manufacturer to take out a licence stipulates an application to be made in the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed premises to which such person may be lawfully entitled. Place Date (Licensing Authority)          Renewal of the Licence Date of renewal Year for which renewed Signature of renewing authority " (Emphasis supplied) 23. Rule 43 stipulates that every manufacturer who intends to manufacture excisable goods for the first time shall before commencing operations, give notice in writing to the Collector and shall specify therein the nature of the raw materials which he intends to use. Rule 44 stipulates that every manufacturer who is required by the collector so to do, shall, before beginning to manufacture, excisable goods other than salt, liable to duty on manufacture, declare in t....