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Issues:
Interpretation of the term "factory" under the Central Excises and Salt Act, 1944 for the purpose of exemption notification regarding excise duty on goods used within the factory. Analysis: The petitioner, a Government of India Undertaking, operates multiple units within a single factory premises. These units include a Refinery Unit, a Xylene Unit, and a Polyester Staple Fibre Unit, all managed by the petitioner. The Refinery Unit produces Low Sulphur Heavy Stock (LSHS), classified under Chapter 27, Heading 2713.30 of the Central Excise Tariff Act, 1985. A notification issued in 1989 granted duty exemption for goods used within the factory for manufacturing excisable goods or as fuel for such manufacture. The petitioner claimed exemption for LSHS used in the Xylene and Polyester Staple Fibre Units, which was initially approved. However, a show cause notice was later issued for modification of the classification list, demanding a substantial amount from the petitioner. The dispute arose when the Assistant Collector of Central Excise rejected the petitioner's contention that the three units should be considered a single factory under the Act. The Collector of Central Excise (Appeals) upheld the demand, dismissing the petitioner's appeal and application for waiver of pre-deposit. The Collector's decision was based on the view that the Xylene and Polyester Staple Fibre Units, though situated within the same boundary wall, were separate factories, contrary to the petitioner's argument. In response, the petitioner filed a writ petition contending that the Collector had misconstrued the term "factory" in the notification. The High Court, in its judgment, highlighted that the Collector failed to consider relevant legal precedents, including the definition of "factory" under the Act. Referring to past cases like J.K. Synthetic Ltd. and M/s. Sreeram Piston & Rings Ltd., the Court emphasized that the term "factory" encompasses all premises where excisable goods are manufactured, not limited to specific units within the same boundary. Additionally, the Court cited the Delhi High Court's decision in Delhi Cloth & General Mills Co. Ltd., which addressed a similar scenario of interconnected units within a factory. Consequently, the High Court set aside the Collector's order and directed a re-hearing of the matter, instructing the Collector to consider the legal principles outlined in previous judgments. The Court emphasized the need for a detailed, reasoned decision by the Collector, taking into account any financial hardships raised by the petitioner. The Court also imposed a stay on the demand until the re-hearing process is completed, ensuring that the petitioner's assets are protected during this period. In conclusion, the High Court's judgment focused on the correct interpretation of the term "factory" under the Central Excises and Salt Act, emphasizing a broad definition that includes all premises where excisable goods are manufactured. The Court's decision aimed to ensure a fair and thorough reconsideration of the petitioner's case by the Collector, in line with established legal principles and precedents.
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