2011 (5) TMI 840 - HC - Central Excise

Whether Tribunal has erred in granting the benefit contained in Notification No.138/86 especially when the proviso V of the Notification No.138/86 clearly stipulates that the exemption contained in the Notification shall not apply to a manufacturer of paper and paper board who avails of the exemption under Notification No.175/86 Held that - manufacturer who had availed the benefit of notification No.175/86 and the manufacturer who availed of the benefit of notification No.138/86 being distinct legal entities clause (v) would not be attracted application is accordingly rejected

Summary

Issues:
Interpretation of Notification No.138/86 and Notification No.175/86 regarding simultaneous benefit availed by a manufacturer under both notifications.

Analysis:
The case involved a dispute over the applicability of Notification No.138/86 and Notification No.175/86 under the Central Excise Act, 1944. The respondent, a manufacturer of paper and paper board, initially operated as a partnership firm availing the benefit of Notification No.175/86. After the dissolution of the partnership, the business was taken over by another entity, M/s Indo Col Chem Ltd., as a proprietorship concern. The dispute arose when the Department sought to recover excise duty from the respondent, alleging that they had wrongly availed benefits under both notifications simultaneously. The Assistant Collector initially discharged the notice, stating that the change in the firm's constitution did not constitute simultaneous benefit under both notifications. However, the Commissioner (Appeals) overturned this decision, leading to an appeal before the Tribunal.

The Tribunal, after considering the evidence, found that the dissolution of the partnership resulted in a complete change in legal identity, with the goods now being manufactured by M/s Indo Col Chem Ltd. The Tribunal interpreted clause (v) of the proviso under Notification No.138/86, which prohibits a manufacturer from availing benefits under both Notification No.175/86 and Notification No.138/86 simultaneously. The Tribunal categorically found that the respondent did not claim benefits under both notifications at the same time, as the partnership firm ceased to exist after 30.11.1992. Therefore, the Tribunal concluded that there was no violation of clause (v) as the manufacturer who availed benefits under Notification No.175/86 was distinct from the one availing benefits under Notification No.138/86.

The Court, upon reviewing the Tribunal's findings, concurred that the proposed question of law did not arise from the impugned order. The Court noted that the Tribunal correctly found that the respondent did not simultaneously avail benefits under both notifications. As the manufacturer under each notification was a separate legal entity due to the change in the firm's constitution, the prohibition under clause (v) did not apply. Consequently, the Court rejected the application, affirming the Tribunal's decision and discharging the rule.

In conclusion, the judgment clarified the interpretation of Notification No.138/86 and Notification No.175/86 regarding the simultaneous benefit availed by a manufacturer under both notifications. The Court upheld the Tribunal's decision, emphasizing that the change in the firm's constitution resulted in distinct legal entities, thereby not violating the prohibition against simultaneous benefits under the two notifications.