2011 (1) TMI 991 - AT - Central Excise

Clubbing of factory - SCN issued alleging that the units I & II of Malu Paper Mills Ltd. should be treated as one manufacturing unit and clearances of paper of both the units should be taken into consideration for calculating the total quantity exemption of 3500 MT under Notification No.3/2001 and demanding Central Excise duty and also proposing to impose penalty and also demanding interest on the duty payable - Held that - As decided in Rollatainers Ltd. 2004 (7) TMI 92 - SUPREME COURT OF INDIA two factories in the same premises owned by the same owner with common balance sheet would be eligible for exemption under Notification No.6/2000-CE separately as they are registered separately with the Central Excise department. The said exemption which was the predecessor to notification No.3/2001 pertained to paper and paper board if the aggregate clearance from a factory in a financial year did not exceed 3500 MT which is also the position in the case before us. Also see Amaravathi S V Paper Mills Ltd. 2010 (7) TMI 172 - SUPREME COURT . Thus Unit No.I & II of Malu Paper Mills Ltd. are separate factories and each one of them is entitled for separate exemption under Notification No.3/2001-CE dated 01/03/2001. In favour of assessee.

Summary

Issues involved:
Departmental appeal challenging the order of the Commissioner (Appeals) regarding the treatment of two manufacturing units as separate factories for exemption under Notification No.3/2001.

Analysis:
1. The main issue in this case was whether two manufacturing units of a company should be treated as one factory or separate factories for the purpose of availing exemption under Notification No.3/2001. The department argued that since both units were located on the same piece of land, had a common gate, and shared common management, they should be considered as one factory. The department relied on a tribunal decision to support their argument.

2. On the other hand, the respondent contended that the units should be treated as separate factories based on separate excise registrations, independent machinery, and different varieties of products manufactured in each unit. The Commissioner (Appeals) agreed with the respondent's argument and held that the units should be treated as separate factories eligible for exemption under the notification.

3. The Tribunal analyzed previous judgments, including Rollatainers Ltd. and Amaravathi S V Paper Mills Ltd., where the courts held that separate factories on the same premises could be eligible for exemption if registered separately and met the conditions of the notification. The Tribunal found the situation in this case similar to the precedents and held that each unit of the company should be considered a separate factory entitled to individual exemption under Notification No.3/2001.

4. Therefore, the Tribunal upheld the order of the Commissioner (Appeals) and rejected the department's appeal, concluding that the two units of the company should be treated as separate factories for the purpose of exemption under the notification. The judgment clarified the criteria for determining separate factories and emphasized compliance with registration requirements and production capabilities for availing exemptions under relevant notifications.