1993 (2) TMI 208 - AT - Central Excise

Summary

Issues:
Interpretation of Notification 175/86 regarding aggregate value of clearances from factory split into sub-units; Whether split-up units can be considered independent entities for exemption eligibility.

Analysis:
The appeal arose from the order of the Collector of Central Excise (Appeals), Madras, granting the benefit of Notification 175/86 to the respondent who obtained a separate license for a portion of a factory previously run by another entity. The respondent argued for independent treatment under the notification due to taking over a leased unit previously operated by another entity. The Collector (Appeals) considered only clearances from the respondent's portion of the factory for the exemption calculation, excluding clearances made by the previous operator. The Revenue contested this decision, asserting that the entire factory constituted one unit and the aggregate clearances should include production from the entire factory.

The Department argued that the notification specified limits for aggregate clearances from a factory, and the production from the entire factory should be considered for determining eligibility under the notification. They contended that splitting a larger unit into sub-units during a financial year to evade clearance limits was against the purpose of the notification. The respondent did not present any arguments during the hearing.

The Tribunal noted the unique situation of a factory being split into two units during a financial year for exemption under Notification 175/86. It analyzed the purpose of the notification, emphasizing that the aggregate value of clearances from a factory should not exceed specified limits. The Tribunal determined that the unit split into sub-units should be considered a continuation of the original factory, and production from the entire factory should be included in the clearance calculations. It concluded that the respondent was not eligible for the exemption for the years in question as the aggregate clearances exceeded the limits specified in the notification.

In conclusion, the Tribunal set aside the Collector (Appeals) order and allowed the appeal, emphasizing that interpreting the notification to allow evasion of clearance limits by splitting units would defeat the legislative purpose. The decision highlighted the importance of considering the total production from a factory, even if split into sub-units, to prevent circumvention of clearance limits outlined in the notification.