TaxTMI 
TaxTMI 
2003 (12) TMI 206
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....s have been treated as single manufacturing units for the purpose of denial of the benefit of exemption under certain Central Excise notifications. The groups units are enumerated below : I 1. M/s. Arvind Processors 2. M/s. Raj Processors 3. M/s. Mangalmurti Processors II 1. M/s. Swadeshi Dyeing and Bleaching 2. M/s. Silver Processors III 1. M/s. National Dyeing and Bleaching 2. M/s. Gopal Processors 3. M/s. Deep Processors 4. M/s. Sudarshan Processors 5. M/s. Harish Processors IV 1. M/s. Yeshwant Co-operative Processors 2. M/s. Ichalkaranji Processors V 1. M/s. Laxmi Co-operative Processors 2. M/s. Vishnu Laxmi Processors VI 1. M/s. Deccan Processors 2. M/s. Ganesh Processors VII 1. M/s. Shri Viankaesha Processors 2. M/s. Shri Saraswati Processors VIII 1. M/s. Rahul Processors IX 1. M/s. Swastik Dyeing and Bleaching 2. M/s. Shri Datta Calendering 3. M/s. Shree Ram Processors X 1. M/s. Bom....
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....her than the processes specified in the said Table". For the period prior to 8-11-1982, similar exemption and proviso was contained in Notification No. 80/76-C.E., dated 16-3-1976 as amended vide Notification No. 292/79-C.E., dated 24-11-1979. 5. Shri Datta Calendering (SDC) was set up in 1975 and was engaged in the process of calendering of Cotton Fabrics with the aid of power, but without grooved rollers and was also availing the exemption under Notification No. 253/82-C.E. 6. M/s. Shree Ram Processors (SRP) was set up on 14-5-1976 as a Proprietary concern and was converted into Partnership firm on 8-4-1978. SRP was engaged in the following activities viz: (i) Bleaching of Grey Cotton Fabrics by hand; and (ii) Mercerising by Hand-operated machines. SRP was paying the duty under the Compounded Levy Scheme till 1979 and was holding separate Central Excise L-4 Licence. Thereafter, SRP was availing total exemption under Notification No. 130/82-C.E., dated 20-4-1982 which granted total exemption to Cotton Fabrics processed without aid of power or steam. 7. Between 5-9-1985 and 7-9-....
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....is having common time office and a common clerk who looks after the work of time office and expenses are born by M/s. SDBF. (viii) Shri Brijmohan Bora Writes 'Khatavni of M/s. SRP, M/s. SDC, and M/s. SDBF, who is actually on the payrole of M/s. SDBF without getting remuneration from M/s. SRP, M/s. SDC. (ix) Shri Ramchandra Shankar Moghe, Partner of M/s. SDBF, is a key person in all the three units and supervise all the technical operations in M/s. SRT, M/s. SDC and but gets profit share only from M/s. SDBF. He was also partner in M/s. SRP upto 9-4-1985 as a representative of trustee of M/s. Shri Hari Textile Trust. (x) It was also observed that M/s. SDBF and M/s. SRP have different water connections but M/s. SRF had dead water connection and it is seen that M/s. SRP is getting water by tanker and water from SDBF also, for which water charges are borne by M/s. SDBF. (xi) It was also observed that M/s. SDBF is having two power meter connections. Out of which one power meter is supplying electricity to M/s. SDC and charges are borne by M/s. SDBF and also ....
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.... and stentering by hand. (xxi) As per the balance sheets expenses for coal and fire wood appearing in the balance sheet of all the three units which indicates that though the boiler belongs to M/s. SDBF the steam is utilised by M/s. SDC, M/s. SRT. (xxii) Also it was observed that all workers of M/s. SRP, M/s. SDC and M/s. SDBF are using common sanitary block existing in the premises of M/s. SDBF and maintained by M/s. SDBF only. (xxiii) There is common maintenance staff for M/s. SDBF, M/s. SDC and M/s. SRT. But they are paid by M/s. SDBF. (xxiv) It can be seen from the partnership deed that Shri Ramchandra Shankar Moghe partner of M/s. SDBF's wife Mrs. Ujwala Ramchandra Moghe is partner of M/s. SDC. Similarly Shri T.L. Vyas partner of M/s. SDBF's wife is partner of M/s. SDC Mrs. Premlata Tulsiram Vyas. Similarly Shri R.S. Moghe and Shri V.S. Moghe are brothers who are partners in M/s. SDBF. Shri V.S. Moghe partner of M/s. SDBF's son Shri Arvind Vasudeo Moghe is partner of M/s. SDC. Also son of Shri S.L. Vyas partner of M/s. SDBF, Shri R.V. Vyas is partner of M/s. SDC. So also Mrs. Manjushri Moghe partner of M/s. SRP is related to Shri....
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.... M/s. SRP are situated in the premises of M/s. SDBF for which rent is paid by M/s. SRP but there is no rent contract. The rent is paid from 1-1-1984. The rent involved is not paid by any of the units in cash or by cheques, but it is simple book adjustment. (c) M/s. SRP Jaisingpur non-power-operated unit is receiving grey fabrics from the merchants with the instructions that the fabrics supplied by them etc. are to be bleached and mercerised. There are no specific instructions to transfer bleached and mercerised fabrics to SDBF for stentering, folding, bailing, and to M/s. SDC for calendering, however hand bleached and mercerised fabrics is invariably sent to M/s. SDBF and M/s. SDC to carry out finishing operations. There is no agreement between non-power operated unit and power operated unit to conduct the business in the manner explained above. 11. The notice alleged that : (a) In terms of Notification No. 80/76-C.E. and 122/76-C.E. both dated, 16-3-1976 as amended by the Notification No. 253/82, dated 8-11-1982 and by Notification No. 54/85, dated 17-3-1985 fabrics subjected to the ....
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....art of the order. No penalty is imposed in view of the facts and circumstances of the cases." However, the Collector discharged the show cause notice on the grounds of limitation holding that the existence of these apparently independent units was or should have been within the knowledge of the departmental officers and that in view of the tacit or explicit approval granted to the units, the demand, if any, would be effective only prospectively. 13. Hence these appeals by the Revenue and the assessees and cross-objections of assessees in Revenue's appeals. 14. We have heard both sides and record our findings as under : I. Entire demand is time-barred and proviso to Section 11A(1) is inapplicable : (a) All the units have come into existence much prior to 24-11-1979, when the disputed proviso was added to Notification No. 80/76-C.E. for the first time. Therefore, major premise of wilful suppression on account of deliberate fragmentation of units is incorrect. Prior to 24-11-1979, even if all the units are treated as one factory, all the activities would have been exempt. Bleaching/Dyeing etc. would be exempt as done without ....
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....ctory of production were wholly exempt from payment of BED and AED. (d) Vide another Notification No. 290/79-C.E., also dated 24-11-1979, unprocessed cotton fabrics of T.I. No. 19I(9) were wholly exempted from BED and AED when used within the factory of production for further manufacture of processed cotton fabrics, falling under T.I. No. 19I(b). (e) On the same date i.e. 24-11-1979, another Notification No. 292/79-C.E. was also issued amending Notification No. 80/76-C.E. introducing the fateful proviso to the latter. Vide Notification No. 293/79-C.E., dated 24-11-1979 similar proviso was added to Notification No. 122/76-C.E. (f) As is obvious, the purpose for introducing the proviso in Notification No. 80/76-C.E. was to ensure that the duty would be paid by an integrated/composite mill at the final stage, say calendering. This is, because, but for the proviso, no duty would be paid on dutiable processes like bleaching, dyeing or printing carried on with aid of power or steam accompanied with dutiable finishing processes like Calendering, Stentering....
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....s a part of the subsequent Notification No. 253/82-C.E., rules out any possibility of wilful suppression of facts with an intent to evade payment of duty against the Respondents. If anything, the creation of independent units - and not the fragmentation, as alleged - and that to much prior to 24-11-1979 had achieved, albeit unknowingly, the real object and purpose of the legislature. In the light of the above discussion we uphold the finding that the demands are barred by limitation. II. "Manufacturing Process" would be exempt under Notification No. 137/77-C.E., dated 18-6-1977 having been undertaken without aid of power or steam and "Finishing Processes" viz. Calendering and Stentering do not amount to "manufacture" : (a) Prior to 1979, the relevant sub-item No. I of Tariff Item No. 19 read as under : "COTTON FABRICS - …… …. ….. 1. Cotton Fabrics other than (i)....
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.... Cotton fabrics when processed without the aid of power or steam are also proposed to be exempted from both basic and additional duty of excise." Notification No. 137/77-C.E., dated 18-6-1977 was continued as Notification No. 130/82-C.E., dated 20-4-1982. (b) As seen from Para 4, Page 1 of Annexure 'A' to SCN, activities of SRP are bleaching by hand and mercerising by hand-operated machines. Hence, these activities would be wholly exempt under Notification No. 130/82-C.E. effective from 20-4-1982 and under Notification No. 137/77-C.E., dated 18-6-1977 prior to 20-4-1982. As per Para 6 - Page 2 of Annexure 'A' to SCN, SDC is undertaking calendering with aid of power, admittedly with plain rollers. Such process of "calendering" has been held to be not amounting to "manufacture" within the meaning of Section 2(f) of the Act by the Hon'ble Supreme Court vide judgments rendered in the case of Siddeshwari Cotton Mills (P) Ltd v. UOI & Another reported in 1989 (39) E.L.T. 498, and also Mafatlal Spinning & Manufacturing Co. Ltd. v. CCE, 1989 (40) E.L.T. 218 (S.C.); and Bhartiya Textiles v. CCE, 1991 (53) E.L.T. 358 (Tribunal). ....
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....L.T. 654 (Tribunal), the CEGAT dealing with an identical situation concluded that no duty would be payable. We therefore answer this issue in favour of the assessees. III. Bar contained in proviso to Notification No. 253/82-C.E. applies qua a factory and not qua a manufacturer : (a) The bar created under proviso to Notification No. 253/82-C.E. is 'qua factory' and not 'qua manufacturer'. This is clear from a plain reading of the Notification. Admittedly, in the present case, all the three units were different factories and recognized and accepted as such by the department which had issued separate L-4 Licences to the units who had even paid duty separately under Compounded Levy Scheme upto 1979 and well before the period of alleged demand. The various processes were also being carried on separately in the said factories. Therefore, the benefit of exemption under Notification No. 80/76-C.E. as amended by Notification No. 292/79-C.E. and/or Notification No. 253/82-C.E. cannot be denied to the Respondents. This is the law laid down by the CEGAT in the case of CCE v. Kanjur Bleaching Co. Pvt. Ltd., 2000 (117) E.L.T. 47 (Tribunal). The ....