2012 (12) TMI 919 - AT - Central Excise

Benefit of Notification No. 29/96-C.E. (N.T.) dated 3-9-1996 - Whether during the period of dispute common central excise registration had been correctly granted to the appellant or not - Held that - Manual of Supplementary Instructions separate registration is required in respect of separate premises of the same manufacturer except in the cases where two or more premises are actually part of the same factory where process are interlinked but are separated by public road canal or railway line and that the fact that the two premises are part of the same factory to be decided by the Commissioner based on the factors such as the product being manufactured in one premises being substantially used in the other premises for manufacture of final products large number of raw materials being common common electricity supply common labour force common administration/work management common sales tax registration and assessment common income tax assessment etc. In this case the bulk of the yarn manufactured in the yarn unit is used in the fabric unit for manufacture of fabrics. It is also not denied that the electricity supply of the two units is common and the sales tax assessment and administration is also common. Beside this we also find that the appellant have one single registration under the Factories Act and Pollution Control Act and that other statutory authorities like ESI PF etc. In view of this we hold that the two units of the appellant company have to be treated as one factory and hence common registration certificate has been correctly granted to them. Since during the period of dispute they had already been issued a common registration they have to be treated as composite mill and hence the benefit of Notification No. 22/96-C.E. dated 23-7-1996 for the purpose of duty exemption in respect of yarn cleared by the yarn division to fabric division and the benefit of Notification No. 29/96-C.E. (N.T.) dated 3-9-1996 for the purpose of Modvat credit to fabric division had been correctly availed and as such the demands for duty and Modvat credit against the appellant company are not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Validity of common central excise registration for two manufacturing units.
2. Allegations of backdating common registration and misuse of duty exemptions and Cenvat credit.
3. Imposition of penalties on the company and its employees.

Issue 1: Validity of common central excise registration for two manufacturing units:
The appellant had separate central excise registrations for a yarn unit and a fabric unit until April 1996 when they applied for a single registration, which was accepted. The department alleged that the common registration was backdated, but there was no evidence to support this claim. The records indicated that the application was received in April 1996, and the common registration was granted. The Tribunal found that the yarn and fabric units were interconnected, sharing common resources like electricity supply and administration, meeting the criteria for a common factory. As a result, the common registration was deemed valid, allowing the appellant to avail duty exemptions and Cenvat credit.

Issue 2: Allegations of backdating common registration and misuse of duty exemptions and Cenvat credit:
The department alleged that the common registration was improperly granted, leading to the misuse of duty exemptions and Cenvat credit. However, the Tribunal determined that the units were effectively operating as a composite mill, justifying the common registration. As a result, the benefits of duty exemption for yarn clearance and Modvat credit for fabric division were rightfully claimed by the appellant. The demands for duty and Cenvat credit were deemed unsustainable, leading to the dismissal of penalties on the company, its employees, and the range staff.

Issue 3: Imposition of penalties on the company and its employees:
The Commissioner had imposed significant penalties on the appellant company and its employees based on the alleged misuse of duty exemptions and Cenvat credit. However, the Tribunal's analysis concluded that since the common registration was valid and the benefits were rightfully claimed, the penalties were unwarranted. The impugned order was set aside, and the appeals were allowed, absolving the appellant of the duty demands, Cenvat credit claims, and associated penalties.

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