1984 (8) TMI 213 - AT - Central Excise

Summary

Issues Involved:
1. Whether M/s. Swastika Metal Works and M/s. Swastika Metal Works (Utensils Division) should be treated as a single manufacturer or separate entities for Central Excise duty purposes.
2. Validity of the show cause notice issued by the Collector.
3. Applicability of Notification 176/77-C.E., dated 18-6-1977, regarding exemption based on capital investment in plant and machinery.
4. Interpretation of the term "industrial unit" under the relevant notification.

Issue-wise Detailed Analysis:

1. Whether M/s. Swastika Metal Works and M/s. Swastika Metal Works (Utensils Division) should be treated as a single manufacturer or separate entities for Central Excise duty purposes:
The appellants argued that M/s. Swastika Metal Works and M/s. Swastika Metal Works (Utensils Division) are two separate, independent, and distinct partnerships. They provided evidence such as separate partnership deeds, separate registrations with various authorities, and a rental agreement for the use of plant and machinery. The Collector, however, held that both units should be deemed as one industrial unit, stating that the demarcation was an eye-wash and both firms were family concerns. The Tribunal, relying on precedents and the interpretation of "industrial unit" by the Bombay High Court, found that the Utensils Division should be considered a separate industrial unit for the purpose of the notification.

2. Validity of the show cause notice issued by the Collector:
The appellants contended that the show cause notice was invalid as it was barred by limitation and was issued by the Collector instead of the Assistant Collector. They argued that the earlier findings of the Assistant Collector should have been superseded by another order before any retrospective demand for duty. The Tribunal did not address this issue in detail as it found in favor of the appellants on the primary issue of whether the units were separate entities.

3. Applicability of Notification 176/77-C.E., dated 18-6-1977, regarding exemption based on capital investment in plant and machinery:
The notification exempts goods from excise duty if the capital investment in plant and machinery in the industrial unit does not exceed Rs. 10 lakhs. The appellants argued that the Utensils Division's investment was less than Rs. 3 lakhs, and thus, it should be entitled to the exemption. The Collector had combined the investments of both units, which exceeded Rs. 10 lakhs, and denied the exemption. The Tribunal held that the Utensils Division should be considered a separate industrial unit with its own investment, thereby qualifying for the exemption.

4. Interpretation of the term "industrial unit" under the relevant notification:
The Tribunal referred to the judgment of the Bombay High Court, which interpreted "industrial unit" to mean "a separate or isolable part, concerned with the industry, of a complex." The Tribunal found that the Utensils Division, which manufactured utensils in a separate building with its own plant and machinery, met this definition. Therefore, it should be treated as a separate industrial unit for the purposes of the notification.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The Tribunal concluded that M/s. Swastika Metal Works and M/s. Swastika Metal Works (Utensils Division) are separate industrial units. Consequently, the capital investment in the Utensils Division alone should be considered for the exemption under Notification 176/77-C.E., dated 18-6-1977.