1999 (7) TMI 350 - Commissioner - Central Excise

Summary

Issues:
1. Eligibility of the respondents to avail benefits of Notification 48/77, dated 1-4-1977.

Analysis:
The case revolves around the eligibility of the respondents to benefit from Notification 48/77, dated 1-4-1977. The Assistant Commissioner had initially allowed the benefit, leading to an appeal. The core question was whether the respondents met the criteria outlined in the notification. The allegations in the Show Cause Notice (SCN) suggested that the respondents, a subsidiary of a foreign company, might not be entitled to the exemption. The key issue was whether the part of the capital held by a foreign company disqualified the respondents from availing the notification's benefits.

The appeal highlighted that the conditions under the explanation to Notification 48/77 needed to be read conjunctively for eligibility. The respondents refuted the allegations, emphasizing that they were not a foreign company as per the Companies Act, 1956. They argued that since the majority of their shares were held by an Indian company, they should qualify for the exemption. Moreover, they relied on a Supreme Court judgment to support their position.

The judgment delved into the definition of a foreign company under the Companies Act, clarifying that both the respondents and the alleged foreign company were incorporated in India. The court disagreed with the respondent's claim that they were not a subsidiary of the foreign company. It explained the criteria for determining subsidiary companies under the Companies Act, emphasizing that the respondents fell under this definition. The court also analyzed the shareholding structure to establish that the majority of shares were held by an Indian company, supporting the respondents' position.

Ultimately, the court interpreted the conditions of the notification, emphasizing that both requirements needed to be met simultaneously for eligibility. Citing a Supreme Court decision, it concluded that since the respondents did not hold shares in a foreign company, they were entitled to the benefits of Notification 48/77. The court deemed the application made by the Assistant Commissioner as frivolous and dismissed the appeal filed by the Department, emphasizing that the respondents met the eligibility criteria for the notification.