1998 (5) TMI 416 - AT - Central Excise

Summary

Issues:
Applicability of proviso to Notification 35/95 regarding exemption for double yarn clearance from a factory having facilities for producing single yarn.

Analysis:
The appeal was filed by the Commissioner of Central Excise Vadodara challenging the order passed by the Commissioner dropping the demand for duty on clearance of double yarn. The Respondents, manufacturers of Cellulose Spun Yarn, were availing exemption under Notification No. 35/95 for manufacturing double yarn after paying duty on single yarn. The issue revolved around whether the exemption applied to a factory having facilities for producing both single and double yarn. The Department contended that the exemption was meant for yarn made in small units and sought to deny it to integrated units. The Ld. JDR highlighted that the Respondents operated as an integrated unit, manufacturing single yarn in one section and using it to produce double yarn in another section. The Ld. Counsel for the Respondents argued that if the factory premises for single and double yarn were distinct, the proviso to the Notification would not apply. The Tribunal analyzed the proviso, emphasizing that it referred to a factory's facilities for producing single yarn, not the manufacturer. The Commissioner and Assistant Commissioner had found the Respondents' two units to be separate factories based on relevant material and factual findings. The Tribunal cited precedents where the place of manufacture determined exemption eligibility, not the manufacturer.

The Tribunal found that the two units of the Respondents were separate factories as per the Commissioner and Assistant Commissioner's findings. The activities in the units were not so integrated that one could not function without the other. The Tribunal referenced previous cases to support its decision, highlighting that the proviso referred to a factory, not a manufacturer. The case law emphasized that the place of manufacture was crucial for exemption eligibility. As the two units were treated as separate factories and the activities were distinct, the Tribunal upheld the Commissioner's order as legal and proper. The appeal by the Commissioner was rejected, affirming the decision regarding the exemption for double yarn clearance from the factory having facilities for producing single yarn.