2002 (9) TMI 109 - SC - Central Excise

Whether the cement manufactured by the appellant is entitled to the benefit of the exemption notification No. 23/1989-C.E. dated 1st March 1989 issued by the Central Government under sub-section (1) of Section 5A of the Central Excises and Salt Act 1944? Held that - A reading of Notification No. 175/1986-C.E. shows that it relates to small scale industry as is evident from paragraph (4) thereof. From the certificate issued by the Development Commissioner it is evident that S.S.I. units are not required to take industrial licence therefore the question of certifying licenced capacity does not arise. So far as the production capacity of the S.S.I. unit is concerned the certificate issued by the Director mentions that the production capacity of the appellant is 40 tonnes per day which is far less than 200 metric tonnes per day. It is gainsaying that the licenced capacity will always be less than the production capacity. It has never been the case of the Revenue that the notification does not apply to cement manufactured by S.S.I. It cannot also be disputed that an S.S.I. unit being exempt under the Industries (Development and Regulation) Act 1951 is not required to have licenced production capacity. There being no controversy about the fulfilment of the other requirements of the notification by the appellant we are of the view that Portland cement manufactured by the appellant is entitled to the benefit of the notification. The authorities are directed to extend the benefit of the exemption Notification No. 23/1989-C.E. to the cement manufactured by the appellant. In favour of assessee.

Summary

Issues:
- Interpretation of exemption notification No. 23/1989-C.E. for cement manufacturing by a small scale industry.
- Certification of licenced capacity for availing exemption benefits.
- Applicability of exemption notification No. 175/1986-C.E. to prevent double advantage for small scale industries.

Analysis:
1. Interpretation of Exemption Notification: The key issue in this case was the interpretation of exemption notification No. 23/1989-C.E. regarding the eligibility of a small scale industry manufacturing cement for reduced excise duty. The notification specified criteria such as classification under a particular sub-heading, use of vertical shaft kiln, and licenced capacity not exceeding 200 tonnes per day. The appellant, a small scale industry manufacturing cement, claimed entitlement to the exemption based on these criteria.

2. Certification of Licenced Capacity: Another crucial aspect was the certification of licenced capacity as required by the exemption notification. The appellant approached the Development Commissioner for certification, but faced challenges as S.S.I. units are not mandated to hold industrial licences. The certificate provided by the Director of Industries indicated a production capacity of 40 tonnes per day, which was below the threshold specified in the notification. The dispute centered on whether this certification fulfilled the notification's requirements.

3. Applicability of Exemption Notification No. 175/1986-C.E.: The proviso in the exemption notification No. 23/1989-C.E. raised the issue of preventing small scale industries from availing double benefits. The appellant argued that since small scale industries are exempt from licenced production capacity requirements under the Industries (Development and Regulation) Act, 1951, they should not be excluded from the benefits of the notification. The contention was that the proviso aimed to prevent S.S.I. units from benefiting twice, not to exclude them from the exemption.

4. Judgment: The Court analyzed the provisions of both exemption notifications, emphasizing that S.S.I. units are exempt from licenced production capacity requirements. Considering that the appellant's production capacity was well below the specified limit, the Court concluded that the appellant, being a small scale industry, was entitled to the benefit of the exemption notification No. 23/1989-C.E. The order under challenge was set aside, directing the authorities to extend the exemption benefits to the cement manufactured by the appellant. The civil appeals were allowed with no order as to costs, resolving the issues in favor of the appellant based on a comprehensive interpretation of the relevant legal provisions and factual circumstances.