2006 (7) TMI 59 - AT - Central Excise

Central Excise - Rural Industry- A unit undisputedly located in rural areas- The appellant is entitle for the benefit of exemption- The commissioner is against the exemption provided to it- But the Apex court put his decision in favour of the Appellant unit.

Summary

Issues:
1. Eligibility for exemption from excise duty on Laundry Soap under Notification No. 88/88-C.E.
2. Recognition of the unit as an 'institution' by Khadi and Village Industries Board.
3. Usage of 30 HP diesel engine for soap production and entitlement for exemption under Notification 28/64-C.E.

Eligibility for Exemption under Notification No. 88/88-C.E.:
The appeal was filed against the Commissioner's order denying exemption from excise duty on Laundry Soap. The Commissioner held that the appellant's company was not eligible for the exemption. The appellant argued that the unit fulfilled the requirements for exemption under the Notification as it was situated in a rural area and recognized by the Khadi and Village Industries Commission/State Khadi and Village Industries Board. The Commissioner's decision was based on the unit not being recognized as an 'institution' by the Board, despite certificates issued by relevant authorities. The Tribunal found that the word 'institution' in the Notification had a broad scope and did not necessarily require the unit to be charitable. The purpose of the exemption was to promote rural upliftment, and the unit's location in a rural area served a public cause. Therefore, the Tribunal held that the appellant was rightly eligible for the concessions under the Notification.

Recognition of the Unit as an 'Institution' by Khadi and Village Industries Board:
The Commissioner relied on a letter from the Project Officer, Malapuram, which contradicted the certificates issued by other authorities regarding the unit's recognition as an 'institution'. The Tribunal emphasized that the ordinary dictionary meaning of 'institution' should be considered in the absence of a defined meaning in the Notification. The Tribunal concluded that even if the unit engaged in commercial activities, it could still qualify as an 'institution' for the exemption under the Notification. The Tribunal also highlighted that the unit's location in a rural area and its recognition by the KVI Board supported its eligibility for the exemption.

Usage of 30 HP Diesel Engine and Entitlement for Exemption under Notification 28/64-C.E.:
The Commissioner denied the appellant's entitlement for exemption under Notification 28/64-C.E. due to the use of a 30 HP diesel engine for soap production. However, the Inspector of Factories and Boilers confirmed that the unit did not use steam/electric power for heating in the manufacturing process. The Tribunal referred to a Supreme Court case emphasizing that duty was attracted only when power was used for heating. As there was no evidence of power usage for heating, the Tribunal held that the appellant was entitled to the benefit of the Notification. The Commissioner's finding in this regard was deemed unsustainable, and the appeal was allowed with consequential relief by setting aside the impugned order.