2013 (4) TMI 300 - HC - Central Excise

Exemption under Notification No. 88/88 - recognition from Khadi and Village Industries - held that - Under the certificate given by KVIC, the petitioner appears to have been given recognition for manufacturing detergent etc. in respect of 27 manufacturing centres enumerated in the list appended thereto. However, village Iyava, Sanand does not find place in the said list. The petitioner had initially availed cash assistance from Gujarat State Khadi Gramodhyog Board for the purpose of starting its factory at Chhatral which appears to be one of the locations enumerated in the said list. However, instead of starting the factory at Chhatral, the petitioner set up a unit at Iyava, Sanand. It may be pertinent to note that it is not the case of the petitioner that Iyava, Sanand is one of the centres listed in the recognition certificate. The petitioner as an institution, per se, has not been granted recognition by the KVIC, but it has been granted recognition conditionally, namely in respect of location of units or manufacturing centres for village industry goods as specified thereunder. Thus, when the recognition granted to the petitioner is conditional, in respect of any other manufacturing unit except those specified in the certificate of recognition, the petitioner would be an unrecognized institution. - Benefit of exemption denied - decided against the assessee.

Summary

Issues Involved:
1. Entitlement to exemption under Notification No. 88/88-C.E.
2. Recognition of the manufacturing unit by the Khadi and Village Industries Commission (KVIC).
3. Compliance with conditions specified in the exemption notification.

Issue-wise Detailed Analysis:

1. Entitlement to exemption under Notification No. 88/88-C.E.:
The petitioner, a public trust and a society, challenged the dismissal of their appeal by the Tribunal, which upheld the order of the Commissioner of Central Excise demanding excise duty and confiscating goods. The petitioner claimed exemption under Notification No. 88/88-C.E., which exempts certain goods from excise duty if manufactured in rural areas by recognized institutions. The petitioner argued that both conditions for exemption were met: the goods were manufactured in a rural area, and the institution was recognized by KVIC. However, the authorities held that the exemption was not applicable as the manufacturing unit at Iyava, Sanand was not recognized by KVIC.

2. Recognition of the manufacturing unit by KVIC:
The core issue was whether the recognition by KVIC applied to the institution as a whole or specific manufacturing units. The petitioner argued that recognition was for the institution, not individual units. However, the adjudicating authority and the Tribunal found that the recognition certificate from KVIC specified certain manufacturing centers, and Iyava, Sanand was not included. The recognition was conditional and linked to specific units, not the institution as a whole. The Tribunal concluded that the method of recognition by KVIC was for specific units, and since Iyava, Sanand was not listed, the unit was not recognized.

3. Compliance with conditions specified in the exemption notification:
The exemption under Notification No. 88/88-C.E. required two conditions: goods must be manufactured in rural areas and by recognized institutions. While the first condition was met, the second condition was disputed. The adjudicating authority and the Tribunal found that the petitioner did not meet the second condition as the unit at Iyava, Sanand was not recognized by KVIC. The recognition certificate listed 27 manufacturing centers, excluding Iyava, Sanand. The authorities held that recognition was conditional and specific to listed units. The petitioner failed to provide evidence to counter this finding. Consequently, the petitioner did not satisfy the conditions for exemption and was liable to pay excise duty.

Conclusion:
The High Court dismissed the petition, upholding the Tribunal's order. The court found no legal infirmity in the Tribunal's decision, concluding that the petitioner did not meet the conditions for exemption under Notification No. 88/88-C.E. The petitioner's unit at Iyava, Sanand was not recognized by KVIC, and thus, the petitioner was not entitled to the exemption. The court discharged the rule with no order as to costs.