2019 (2) TMI 1230 - AT - Central Excise

SSI Exemption - unit is situated in rural area or not - use of brand name of others - clearance of goods on behalf of loan licensee where the goods were cleared under brand name of loan licencee - unit falling in rural area or not - Held that - The appellant s factory is located at GIDC (Gujarat Industrial Development Corporation) area - The Appellant has produced certificate issued by the GIDC which makes it clear that the appellant has been allotted land by the GIDC on lease hold right basis for purpose of industrial activities. The GIDC has acquired the land by Land acquisition act provisions of industrial activities. It effectively means that the land has become an industrial land and is a notified area for industrial activities - once the area is declared as industrial area it would also be deemed notified area under the Gujarat Municipality Act, 1963. This is a deeming fiction and does not take any other formality and the notified area is ipso facto governed by the provisions of Gujarat Municipalities Act, 1963. This also means that such area has come out of the purview of Gram panchayat that it does not remain the rural area. The survey number of the land where the appellant s unit is located have been acquired for establishment of GIDC and the land falls under GIDC for which notification has been issued - even though place falls under village, but if it has been notified like in the present case as an industrial area under GIDC such village will no longer to be rural area in terms of the definition given above. Therefore, it is absolutely clear that the place i.e. GIDC-Dholka where appellant s unit is located is not rural area. Accordingly, the contention of the Revenue is baseless and without support of any evidence contrary to the various evidences produced by the appellant. The Hon ble Apex Court in the case of Saij Gram Panchayat Vs. State of Gujarat & Othrs. 1999 (1) TMI 531 - SUPREME COURT has held that the notified area for industries are Industrial townships and are thus do not fall under the ambit of Gujarat Panchayats Act, 1961. In view of such findings of the Apex Court, it can be said that the Appellant s factory being situated in notified Industrial area which is governed by the GIDC is not a unit located in rural area. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for SSI exemption under Notification No. 8/2003 - CE.
2. Allegations of unit located in rural area.
3. Confirmation of demands and penalties by lower authorities.
4. Interpretation of industrial area status and its impact on rural area classification.
5. Application of relevant legal precedents.

Analysis:

Issue 1: Eligibility for SSI exemption under Notification No. 8/2003 - CE
The appellant, engaged in manufacturing medicines, claimed SSI exemption under Notification No. 8/2003 - CE for goods manufactured on their own account. However, they were also manufacturing goods on behalf of a loan licensee, clearing them under the licensee's brand name and paying duty at tariff rate. The dispute arose when the aggregate value of clearances exceeded the SSI Turnover for the year 2003-04, leading to demands and penalties. The appellant contested the demand, arguing it was based on assumptions without concrete evidence. The appellate tribunal ruled in favor of the appellant, emphasizing the need for revenue to substantiate allegations with evidence. The tribunal held that goods manufactured under a loan licensee's brand name were not eligible for SSI exemption, aligning with legal precedents and setting aside the demands and penalties.

Issue 2: Allegations of unit located in rural area
The core contention revolved around the location of the appellant's factory, with revenue authorities alleging it fell in a rural area, impacting SSI exemption eligibility. The appellant presented evidence, including a certificate from GIDC, indicating the factory's location in an industrial area. The tribunal analyzed the legal definitions of rural areas and industrial areas, emphasizing the impact of industrial area status on rural classification. The tribunal highlighted the certificate's significance, confirming the factory's location in a notified industrial land, thereby rejecting revenue's baseless contentions. Legal precedents, such as the Saij Gram Panchayat case, were cited to support the tribunal's conclusion that the factory was not situated in a rural area, leading to the reversal of demands and penalties.

Issue 3: Confirmation of demands and penalties by lower authorities
After multiple rounds of litigation, the demands and penalties imposed by lower authorities were upheld, leading to the present appeals. The tribunal scrutinized the lower authorities' orders, noting the lack of concrete evidence supporting the allegations against the appellant. The tribunal emphasized the need for substantiated claims and evidence in such matters, ultimately overturning the lower authorities' decisions and ruling in favor of the appellant.

Issue 4: Interpretation of industrial area status and its impact on rural area classification
The tribunal delved into the legal framework governing industrial areas, highlighting the implications of such designations on rural area classifications. By referencing relevant statutes and definitions, the tribunal established that once an area is declared an industrial area, it no longer retains its rural status. The tribunal's analysis of the GIDC certificate and RTI reply reinforced the industrial nature of the appellant's factory location, negating revenue's assertions regarding rural classification.

Issue 5: Application of relevant legal precedents
In rendering its decision, the tribunal relied on legal precedents, including the Apex Court judgment in CCE, Chennai Vs. Nebulae Health Care Ltd. The tribunal aligned its findings with established legal principles and precedents, emphasizing the importance of factual evidence and adherence to statutory definitions in determining SSI exemption eligibility and rural area classification. The tribunal's decision to set aside the demands and penalties was informed by a thorough analysis of legal precedents and statutory provisions.

Overall, the appellate tribunal's detailed analysis and reliance on legal principles resulted in the reversal of demands and penalties imposed on the appellant, highlighting the significance of evidence-based decision-making and adherence to statutory definitions in tax matters.