1998 (1) TMI 167 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 175/86.
2. Interpretation of "aggregate value of clearances" under para 3 of Notification No. 175/86.
3. Applicability of the exemption to units taken on lease.
4. Precedent cases and their relevance to the current case.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 175/86:
The primary issue was whether the appellants were eligible for the exemption under Notification No. 175/86. The appellants claimed they were entitled to the exemption as a Small Scale Industry (SSI) unit based on their SSI certificate and the fact that they started production in July 1987. However, the lower authorities ruled against this, stating that the total value of clearances by the previous owner, M/s. Daulat Ram Dharam Bir Auto Pvt. Ltd., exceeded Rs. 1.5 crores in the preceding financial year, thereby disqualifying the unit from the exemption.

2. Interpretation of "Aggregate Value of Clearances" under Para 3 of Notification No. 175/86:
The appellants argued that the term "the factory" in para 3 of the notification should be interpreted to mean a single factory and not all factories owned by the same manufacturer. They contended that the clearances of just the unit they took over were below Rs. 65 lakhs, thus qualifying for the exemption. Conversely, the respondent argued that para 3 clearly stipulates that the aggregate value of clearances from one or more factories of the same manufacturer should be considered. The Tribunal agreed with the respondent, noting that para 3(a) and 3(b) should be read together to come to a harmonious conclusion, which means considering the total clearances from all factories of the same manufacturer.

3. Applicability of the Exemption to Units Taken on Lease:
The appellants contended that since they had taken over the unit on lease and held an SSI certificate, they should be eligible for the exemption. The respondent countered that the exemption applies to the unit and not the manufacturer, and since the unit had exceeded the clearance value of Rs. 1.5 crores in the preceding year, it was not eligible for the exemption. The Tribunal supported this view, emphasizing that the status of the unit does not change with a new lessee if the aggregate clearances exceeded the stipulated limit in the preceding year.

4. Precedent Cases and Their Relevance:
The appellants cited the case of Commissioner of Central Excise, Madurai v. Ganesh Agro Pack (P) Ltd., where the Tribunal held that a factory leased to another manufacturer could still be eligible for the exemption if the aggregate clearances were within the limit. However, the Tribunal distinguished this case by noting that the clearances in the cited case were within the Rs. 1.5 crore limit, unlike the current case where the clearances exceeded this amount.

The Tribunal also referenced the Gujarat High Court judgment in Indica Laboratories Pvt. Ltd. v. Union of India, which supported the interpretation that the aggregate value of clearances from one or more factories should be considered. This precedent reinforced the Tribunal's decision to deny the exemption.

Conclusion:
The Tribunal upheld the lower authorities' decision that the appellants were not entitled to the exemption under Notification No. 175/86. The aggregate value of clearances from all factories of M/s. Daulat Ram Dharam Bir Auto Pvt. Ltd. exceeded Rs. 1.5 crores in the preceding financial year, disqualifying the unit from the exemption. The appeal was thus rejected.

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