1988 (3) TMI 341 - AT - Central Excise

Summary

Issues:
- Duty payable on readymade garments manufactured by two appellants during a specific period.
- Eligibility for duty-free removals and exemption limit.
- Ownership of firms manufacturing the garments.
- Claim of separate factories by the appellants.
- Interpretation of proviso 2 of Notification 150/71.
- Approval of premises and machinery usage.

Analysis:
The case involved two appellants, M/s. Bhavana Apparells and M/s. Indu Apparells, who received show cause notices for duty payable on readymade garments manufactured and removed during a specific period. The Collector of Central Excise granted partial exemption to the appellants out of the duty-free clearances of Rs. 5 lakhs for the year and imposed penalties, which were confirmed by the Central Board of Excise and Customs. The main issue was whether each appellant was eligible for the full exemption limit individually.

The appellants argued that they operated as separate factories based on a lease agreement where a portion of the premises of M/s. Indu Apparells was leased to M/s. Bhavana Apparells. However, it was found that the entire factory premises were in possession of M/s. Indu Apparells initially, and the approval for altering the licensed premises was not obtained when M/s. Bhavana Apparells commenced operations. Additionally, both appellants used the same machinery, indicating a shared manufacturing facility.

The Tribunal concluded that despite the manufacturing activity being carried out by the two appellants during separate periods, the factory was considered as one entity throughout the year. Therefore, the benefit of exemption was limited to a total sum of Rs. 5 lakhs collectively, not individually to each appellant. The lower authorities' decision was upheld, and the appeals were dismissed based on the interpretation of proviso 2 of Notification 150/71, which restricts the exemption based on the value of articles cleared from the factory.