1995 (7) TMI 157 - AT - Central Excise

Issues Involved:
1. Eligibility for Excise Duty Exemption under Notification No. 124/87-C.E.
2. Definition and Interpretation of "New Factory" under the Central Excise Law.
3. Whether modernisation and expansion qualify as establishing a new factory.
4. Application of Promissory Estoppel.

Detailed Analysis:

1. Eligibility for Excise Duty Exemption under Notification No. 124/87-C.E.:
The appellants, M/s Kanoria Industries Ltd., claimed excise duty exemption under Notification No. 124/87-C.E., dated 29-4-1987, which provided partial excise duty exemption to cement manufactured in a factory that commenced production between 1-1-1982 and 31-3-1986. The Assistant Collector of Central Excise, Gulbarga, and subsequently the Collector of Central Excise (Appeals), Bangalore, rejected the appellants' claim on the grounds that their factory did not qualify as a new factory that commenced production during the specified period. The Tribunal upheld this decision, stating that the appellants' factory was merely modernised and expanded, not newly established.

2. Definition and Interpretation of "New Factory" under the Central Excise Law:
The term "factory" as defined under Section 2(e) of the Central Excises and Salt Act, 1944, includes any premises where excisable goods are manufactured. The Tribunal emphasized that a new factory must be established without merely expanding or modernising an existing factory. The Supreme Court's decision in Bajaj Tempo Ltd. v. Commissioner of Income Tax, Bombay, AIR 1992 SC 1622, was cited, which stated that a new undertaking should not be formed by transferring existing machinery or material. The Tribunal concluded that the appellants' factory did not meet this criterion as it was an existing unit that underwent modernisation and expansion.

3. Whether Modernisation and Expansion Qualify as Establishing a New Factory:
The Tribunal examined various documents and communications from the appellants, which indicated that the factory underwent substantial expansion and modernisation, including the installation of new equipment worth Rs. 14.50 crore. However, the Tribunal noted that a significant portion of the old equipment remained in use, and no new licences were obtained under the Factory Act or Central Excise Law. The Tribunal referred to the Central Board of Excise and Customs Circular dated 17-4-1989, which stated that substantial expansion or modernisation does not qualify for excise duty exemption unless a new factory comes into existence. The Tribunal concluded that the appellants' factory was not a new factory but an existing one that had been modernised.

4. Application of Promissory Estoppel:
The appellants argued that they were under the impression that their modernised factory would qualify as a new factory for excise duty exemption, based on various communications from the Ministry of Industry. However, the Tribunal rejected this argument, citing the Supreme Court's decision in Shri Bakul Oil Industries v. State of Gujarat, 1987 (27) E.L.T. 572 (SC), which held that the government is under no obligation to grant tax exemption and that promissory estoppel cannot operate against legislative functions. The Tribunal concluded that there was no representation by the government that the appellants' modernised factory would qualify for the exemption, and thus, the doctrine of promissory estoppel did not apply.

Conclusion:
The Tribunal upheld the rejection of the appellants' claim for excise duty exemption under Notification No. 124/87-C.E. The Tribunal found that the appellants' factory did not qualify as a new factory that commenced production during the specified period, as it was an existing unit that underwent modernisation and expansion. The Tribunal also rejected the appellants' argument based on promissory estoppel, stating that there was no representation by the government that their modernised factory would qualify for the exemption. Both appeals were dismissed.

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