2014 (9) TMI 738 - AT - Central Excise

Exemption under Notification No. 3/2001-CE - exemption to kraft paper and boards cleared for home consumption up to a quantity of 3500 MTs in a financial year - two units of the assessee situated in the same premises - revenue contends that that Unit No. II cannot be treated as a separate factory for claiming exemption as there is no separate excise registration for Unit No. II - Held that - Any premises or part of any premises wherein any manufacturing process is carried out is a factory for the purpose of Central Excise Act. In the present case, if we apply the definition to Unit No. II, which is located in a different building and has its own plant and machinery for manufacture and where manufacturing process is undertaken is a factory. Therefore, the contention of the Revenue that, merely because there is no separate excise registration there was no separate factory is bereft of any logic and accordingly the same has to be rejected. Further, it is also on record that, before commencement of production, the appellant had intimated to the department that they are commencing production in Unit No. II and they will be applying for Central Excise registration after crossing the exemption limit of ₹ 10 lakhs. It is also on record that, subsequently on 12/03/2002, the respondent-assessee applied for registration for Unit No. II and the department granted separate Central Excise registration for Unit No. II effective from 01/04/2002. The very fact of granting separate Central Excise registration for Unit No. II by the department itself proves that Unit No. II is a separate Central Excise registration. Therefore, non-obtaining of registration prior to 01/04/2002 does not mean that the two units were only one factory and they are not separate factories. - Following decision of Rollatainers Ltd. vs. Commissioner of Central Excise, Delhi III 2004 (7) TMI 92 - SUPREME COURT OF INDIA - Decided against Revenue.

Summary

Issues:
1. Whether Unit No. II can be treated as a separate factory for grant of duty exemption under Notification No. 3/2001-CE?
2. Whether the two units located in the same premises should be considered as one factory or two separate factories for the purpose of availing duty exemption benefits?

Issue 1 Analysis:
The appeal filed by the Revenue challenged the lower appellate authority's decision to grant duty exemption to Unit No. II under Notification No. 3/2001-CE. The Revenue argued that both units, I and II, shared common facilities and were situated in the same premises, thus Unit II should not be treated as a separate factory. The Revenue contended that the units were set up to avail undue exemption benefits. However, the respondent argued that Unit II was started as a separate factory, with separate machinery and higher specifications for manufacturing kraft paper/board. The respondent maintained separate records and procedures for Unit II and had informed the authorities about starting Unit II as a separate entity. The respondent also highlighted the conditions of Notification No. 3/2001-CE, emphasizing that they met the requirements for exemption. The respondent's counsel cited relevant legal precedents supporting the claim that separate units under the same ownership could be treated as distinct factories eligible for exemption benefits.

Issue 2 Analysis:
The Tribunal analyzed the definition of a factory under the Central Excise Act, which includes any premises where manufacturing processes are carried out. The Tribunal noted that Unit II had a separate building, machinery, and manufacturing processes, fulfilling the criteria to be considered a factory. The Tribunal emphasized that obtaining separate Central Excise registration for Unit II further supported its status as a distinct factory. Legal precedents, such as the cases of Rollatainers Ltd. and Amaravathi S.V. Paper Mills Ltd., were referenced to validate the concept of separate factories within the same premises owned by a single manufacturer. The Tribunal distinguished the cited cases by the Revenue, stating that the facts and issues involved were different from the present case. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the lower authorities' decision to grant duty exemption to Unit II as a separate factory under Notification No. 3/2001-CE.

In conclusion, the Tribunal upheld the grant of duty exemption to Unit II, considering it a separate factory based on legal definitions, precedents, and compliance with notification conditions. The judgment emphasized the importance of distinct manufacturing processes and registrations in determining separate factory status, rejecting the Revenue's argument that the units should be treated as one factory.