1995 (12) TMI 167 - AT - Central Excise

Summary

Issues: Interpretation of Notification 175/86 for exemption eligibility based on factory clearances.

Analysis:
The appeal before the Appellate Tribunal CEGAT, MADRAS involved a dispute regarding the eligibility of exemption under Notification 175/86 for the respondents, who owned a factory for producing HDPE strips and sacks. The factory was leased to another company, M/s. Polyspin Pvt. Ltd., and production continued after the lease termination. The Revenue contested the exemption granted by the Collector (Appeals) to the respondents based on the aggregate value of clearances from the factory. The main contention revolved around whether the clearances exceeded Rs. 1.5 crores from the factory of the respondents in the preceding financial year, considering the factory's inclusion in M/s. Polyspin Ltd.'s license for multiple sheds.

The Tribunal analyzed the definition of "factory" under Section 2(e) of the Central Excise Act, 1944, which did not require the premises to be licensed under the Act. It emphasized that as long as the shed of the respondents was capable of independent production, the value of clearances should be calculated based on that specific factory. The Tribunal highlighted that licensing a factory is a procedural requirement for revenue collection and does not impact the eligibility for exemption. Even though M/s. Polyspin Ltd. included the respondents' shed in their license during the lease period, once the lease was terminated, the factory was operated by the respondents themselves. The Tribunal concluded that if the clearances from the respondents' shed were considered separately, they fell within the exemption limit of Rs. 1.5 crores, thereby upholding the Collector (Appeals)'s decision.

In the final judgment, the Tribunal dismissed the appeal from the Revenue, affirming the Collector (Appeals)'s order granting exemption to the respondents under Notification 175/86. The decision was based on the interpretation of the factory's definition and the specific circumstances of the case, where the respondents' independent production capacity justified calculating clearances solely from their factory for exemption eligibility.