1999 (7) TMI 180 - AT - Central Excise

Summary

Issues involved:
Whether the appellants were eligible for the benefit of exemption from payment of Central Excise duty under Notification No. 201/87-C.E. for printing frames used in another unit. Whether the factory of M/s. East India Exclusive Fabrics Ltd. can be considered as the factory of the appellants.

Analysis:

Issue 1: Eligibility for exemption under Notification No. 201/87-C.E.:
The appeal questioned the eligibility of M/s. East India Cotton Mfg. Co. Ltd. for exemption from Central Excise duty under Notification No. 201/87-C.E. for printing frames used in M/s. East India Exclusive Fabrics Ltd. The notification exempted printing frames when used within the factory of production or in any other factory of the same manufacturer. The appellants argued that M/s. East India Exclusive Fabrics Ltd. should be treated as their own factory due to a lease agreement. However, the Tribunal found that M/s. East India Exclusive Fabrics Ltd. was a separate entity with its own balance sheet, profit & loss account, and operations. The lease agreement only covered specified machines, and ownership remained with M/s. East India Exclusive Fabrics Ltd. Consequently, the Tribunal ruled that the appellants were not eligible for the exemption under the notification.

Issue 2: Factory classification of M/s. East India Exclusive Fabrics Ltd.:
The key consideration was whether the factory of M/s. East India Exclusive Fabrics Ltd. could be deemed as the factory of the appellants. The Tribunal noted that both entities were separate companies under the Companies Act, 1956, with distinct financial and operational structures. Statements indicated that non-duty paid printing frames were sent to M/s. East India Exclusive Fabrics Ltd. for fabric printing on a job charges basis. The lease agreement only covered specific machines, not the entire factory. Therefore, the Tribunal concluded that M/s. East India Exclusive Fabrics Ltd. could not be considered the factory of the appellants, leading to the rejection of the appeal and confirmation of the original order denying the exemption.

In conclusion, the Tribunal upheld the original Order-in-Original passed by the Additional Collector of Central Excise, Faridabad, denying the appellants the exemption under Notification No. 201/87-C.E. The judgment emphasized the separate legal identities of the companies involved and the limited scope of the lease agreement in determining factory classification. Consequently, the appeal was rejected, and no modifications were deemed necessary regarding the redemption fine and penalty.