1985 (1) TMI 187 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 71/78-CE regarding exemption limit for Excise Duty.
- Entitlement of separate exemption for a new manufacturer using premises of a previous licensee.
- Clubbing of clearances for determining concession eligibility under the notification.
- Validity of demand-cum-show cause notices issued to the appellants.
- Applicability of Section 11 A and Rule 10 of Central Excise Rules, 1944.

Analysis:
1. The central issue in this case was the interpretation of Notification No. 71/78-CE regarding the exemption limit for Excise Duty. The question at hand was whether a new manufacturer, who purchased machinery and leased premises from a previous licensee, could claim a separate exemption under the same notification after the previous licensee had almost exhausted the exemption limit.

2. The appellants argued that they were a new and distinct manufacturer, not related to the previous factory owner, and thus entitled to a separate exemption. They contended that the grant of a new Central Excise license based on a fresh ground plan indicated the establishment of a new factory premises. The appellants also highlighted that the machinery used was portable and not the old immovable equipment, emphasizing the distinction between the manufacturer and the factory.

3. The Collector of Central Excise (Appeals) dismissed the appeal, citing that the value of specified goods cleared from the factory at a nil rate of duty should not exceed Rs. 5 lakhs under the notification. The Collector noted the absence of evidence that old machinery was replaced with new machinery. The appellants challenged this decision, arguing that the Collector failed to recognize them as a new manufacturer and wrongly applied the notification's provisions.

4. The Tribunal referred to previous cases to support its decision. It distinguished between cases where ownership of a factory changed hands but manufacturing activity continued at the same premises, emphasizing that clearances by different manufacturers using the same factory must be clubbed together to determine the concession limit. The Tribunal reiterated that the concession was to the factory, not the manufacturer, to prevent abuse of the notification.

5. The Tribunal rejected the appellants' argument that the cancellation of the previous license and the grant of a new license transformed the factory into a new one. It emphasized that the concept of the "same factory" referred to the place of manufacture, which had not been proven to be new in this case. The Tribunal upheld the differentiation between a factory and a manufacturer as consistent with the Act and Rules.

6. Regarding the applicability of Section 11 A and Rule 10 of the Central Excise Rules, 1944, the Tribunal upheld a previous decision rejecting the argument that the demand could not be confirmed under Section 11 A when the show cause notice was issued before its effectiveness. The Tribunal agreed with the earlier decision that the recovery proceedings should not cease with the deletion of Rule 10.

7. Ultimately, the Tribunal found in favor of the respondent, dismissing the appeal based on the interpretation of the notification, the distinction between factory and manufacturer, and the applicability of relevant legal provisions.