2006 (2) TMI 11 - AT - Central Excise

Central Excise Appellant running two units and producing two different products in the same premises No separate entities of units Credit allowable

Summary

Issues:
1. Admissibility of modvat credit for LDO used in the generation of electricity.
2. Whether Mahabir Jute Mills Ltd. and Mahabir Syntex are separate entities for claiming modvat credit.
3. Interpretation of CENVAT rules regarding the eligibility of a manufacturer to take credit on inputs.
4. Determining if two lines of production in the same factory constitute separate factories for modvat credit purposes.

Analysis:
1. The appellant, a Public Limited Company engaged in jute product manufacturing, installed a synthetic yarn spinning unit within its existing factory premises. They received LDO as an input for electricity generation, utilized in both jute and yarn production lines, and claimed modvat credit.

2. The Central Excise authorities contended that Mahabir Jute Mills Ltd. and Mahabir Syntex were separate entities due to distinct central excise registrations. However, the appellant argued that legally, they were one entity, emphasizing that the yarn facility was a unit of the jute mill.

3. The appellant cited Rule 57AB, asserting that as a single manufacturer with one factory housing both production lines, they were entitled to credit for inputs used in manufacturing excisable goods. Reference was made to a tribunal decision supporting the view that multiple registrations did not establish separate factories.

4. The Departmental Representative argued that separate licensing and distinct production lines warranted treating them as separate factories. However, the tribunal found that both jute and yarn production were part of the same juridical person, Mahabir Jute Mills Ltd., sharing factory premises and electricity supply.

5. Consequently, the tribunal ruled in favor of the appellant, allowing the appeal and directing the return of the cash credit amount. It was determined that the appellant, as a single manufacturer with two production lines in one factory, was eligible for modvat credit as per the CENVAT rules.