1987 (10) TMI 155 - AT - Central Excise

Summary

Issues Involved:
1. Whether the blending of coffee and chicory powder constitutes a manufacturing activity liable for Central Excise duty.
2. Whether the factory and sales units should be considered as a single factory for the purpose of determining liability under the Factories Act.
3. Whether the number of workers in the factory and sales units should be clubbed together to determine if they meet the definition of a factory under the Factories Act.
4. Whether the manufacturing activity carried out in the factory and sales units qualifies for exemption under relevant notifications.
5. Whether the demand for duty and penalties imposed by the Collector of Central Excise were justified.

Issue-wise Detailed Analysis:

1. Whether the blending of coffee and chicory powder constitutes a manufacturing activity liable for Central Excise duty:
The appellants admitted that coffee-chicory blend was sold in their units and acknowledged that, per the decision in the Brooke Bond case (1984 Vol. 15 E.L.T. 32 A.P.), coffee-chicory blend is an excisable product under Item 68 C.E.T. However, they contended that the blending was done at the sales units and not in the factory, arguing that these units were not factories as defined by the Factories Act. The Department's position was that the blending occurred in the factory, making it liable for excise duty.

2. Whether the factory and sales units should be considered as a single factory for the purpose of determining liability under the Factories Act:
The Department argued that the factory and sales units should be considered together as a single entity, thus constituting a factory under the Factories Act. The appellants contended that each unit should be considered independently, and none of them met the criteria of a factory as defined in Section 2(m) of the Factories Act. The Tribunal noted that the relevant legal question was whether the words "any premises including the precincts thereof" could encompass the factory and the sales units as a single factory.

3. Whether the number of workers in the factory and sales units should be clubbed together to determine if they meet the definition of a factory under the Factories Act:
The Tribunal examined precedents under the Employees State Insurance Act, which held that non-contiguous units could be considered a single factory if their activities were interconnected and conducted by the same person. However, the Tribunal found that in this case, the blending of coffee and chicory powder was a single activity that did not require interconnected work across different units. Since the number of workers in each unit never equaled or exceeded ten, none of the units qualified as a factory under the Factories Act.

4. Whether the manufacturing activity carried out in the factory and sales units qualifies for exemption under relevant notifications:
The Tribunal noted that the appellants argued that the quantity of coffee-chicory blend produced was below the exemption limits prescribed in the relevant notifications. However, this contention was deemed unnecessary to address due to the finding that none of the units constituted a factory.

5. Whether the demand for duty and penalties imposed by the Collector of Central Excise were justified:
The Tribunal concluded that since none of the units met the definition of a factory under the Factories Act, the blended coffee-chicory product was not liable for excise duty. Consequently, the duty demand and penalties imposed by the Collector were set aside.

Conclusion:
The appeals were allowed, and the order of the Collector of Central Excise was set aside. The Tribunal determined that the manufacturing activity of blending coffee and chicory powder did not occur in a factory as defined by the Factories Act, thus exempting the product from excise duty. The Tribunal did not find it necessary to address other contentions regarding the quantity of production and exemption limits due to this primary finding.