2009 (5) TMI 183 - AT - Central Excise

Benefit of exemption in terms of Notification No. 8/2001-CE dated 1-3-2001 has been denied to the appellants herein on the ground that their unit is situated in an urban area and not in rural area as claimed by them (para 4(c) of the notification stipulates that exemption would be available to branded goods provided they are manufactured in a factory located in a rural area). - we find force in the submissions of the appellants that since the land revenue records clearly show that Thelliyar Agaram is a village and since Thelliyar Agaram is not specifically notified as an urban area by the Central Government or State Government the Revenue cannot determine that the manufacture of the branded goods was in a factory located in an urban area so as to disallow the benefit of SSI exemption notification

Summary

Issues:
1. Denial of exemption under Notification No. 8/2001-CE based on the location of the manufacturing unit in an urban area instead of a rural area.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Chennai, dealt with the issue of denial of exemption to the appellants under Notification No. 8/2001-CE due to the location of their manufacturing unit in an urban area. The authorities had relied on the Tamilnadu Urban Land Tax Act, 1966, to determine the area's urban status within 16 kilometers of Chennai city limits. However, the appellants argued that the village where their factory was situated was not specifically notified as an urban area by the government, relying on land revenue records. The Tribunal agreed with the appellants, citing precedents like Karunya Matha Social Centre v. CCE, Cochin, Katyani Foods & Beverages (P) Ltd v. CCE, Meerut, and CCE, Bangalore v. Srijee Foods. These cases established that unless an area is officially designated as urban, the Revenue cannot disallow exemption benefits. Therefore, the Tribunal held that the manufacturing unit was in a rural area, not urban, allowing the benefit of exemption and setting aside the duty demand and penalty imposed.

In conclusion, the judgment clarified that the appellants were entitled to the exemption under Notification No. 8/2001-CE as their factory was located in a rural area, not an urban area as claimed by the authorities. The decision emphasized the importance of official government notifications designating urban areas and highlighted the reliance on land revenue records to determine the nature of the area. By following established precedents and legal principles, the Tribunal upheld the appellants' right to the exemption, ultimately allowing their appeal and overturning the duty demand and penalty imposed.