2014 (11) TMI 821 - HC - Central Excise

SSI benefit under notification No. 8/2000 C.E., dated 1-3-2000 - whether the Small Scale Industry exemption granted to the respondent can be extended till 23-9-2000, since the respondent has been amalgamated with other Textile Company, by name, Palani Andavar Cotton and Synthetic Spinners Limited on 1-4-2000 - Held that - High Court has not given specific date with regard to effect of date of amalgamation. But, admittedly the respondent has been amalgamated with Palani Andavar Cotton and Synthetic Spinners Limited on 1-4-2000. Since in the order passed by the High Court no specific date has been given apart from the date of amalgamation i.e., on 1-4-2000 and also on the basis of the decision referred to supra, it is made clear that in the instant case the Court can very well come to a conclusion that the so called amalgamation has been given effect to from 1-4-2000. Since amalgamation is having its effect from 1-4-2000, the Small Scale Industry exemption granted till 23-9-2000 to the respondent cannot be accepted. To put it in short, after 1-4-2000 i.e., from the date of amalgamation the respondent has been clothed a new company. Under the said circumstances, the respondent is not entitled to avail Small Scale Industry exemption which has been granted earlier till 23-9-2000. CESTAT, without considering the fact that no specific date is available in the order passed by the High Court with regard to effect of amalgamation and also without considering the resolution passed by the Board of Directors of the respondent to the effect that amalgamation has come into effect from 1-4-2000, has erroneously allowed the appeal and thereby set aside the order passed by the Commissioner of Central Excise (Appeals) and in view of the discussions made earlier, the argument advanced by the learned counsel appearing for the appellant is really having merit, whereas the argument putforth on the side of the learned counsel appearing for the respondent does not hold good and further the substantial questions of law raised on the side of the appellant are having substance and altogether the present Civil Miscellaneous Appeal is liable to be allowed - Decided in favour of revenue.

Summary

Issues:
Interpretation of Small Scale Industry exemption in the context of amalgamation scheme.

Analysis:
The case involved a Civil Miscellaneous Appeal against the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. The dispute arose from the Small Scale Industry exemption claimed by the respondent after being amalgamated with another company. The appellant contended that the amalgamation was effective from 1-4-2000, as approved by the High Court, and thus, the exemption claimed till 23-9-2000 was not valid. On the contrary, the respondent argued that the amalgamation process was completed on 1-4-2000, sanctioned by the High Court on 28-7-2000, and registered on 28-9-2000, justifying the exemption till 23-9-2000.

The appellant raised substantial questions of law regarding the entity status of the respondent during the amalgamation period and the entitlement to Small Scale Industry benefit under relevant notifications. The appellant highlighted the resolution passed by the Board of Directors confirming the effective date of amalgamation as 1-4-2000, emphasizing that the respondent should not have claimed the exemption beyond this date. The Commissioner of Central Excise (Appeals) upheld the show cause notice, but the CESTAT allowed the appeal, considering a previous decision where the transfer date differed from the effective date.

The Court referred to precedents to determine the effective date of amalgamation, emphasizing that the respondent was considered a new entity from 1-4-2000 post-amalgamation. The Court noted that since no specific date was mentioned in the High Court's order regarding the effect of amalgamation, the effective date could be inferred as 1-4-2000 based on the amalgamation date. Consequently, the Small Scale Industry exemption granted till 23-9-2000 was deemed invalid post 1-4-2000, as the respondent was considered a new entity.

In conclusion, the Court allowed the Civil Miscellaneous Appeal, setting aside the Final Order of the CESTAT. The judgment clarified that the respondent's claim for Small Scale Industry exemption beyond the effective amalgamation date was not valid, considering the entity's new status post-amalgamation.