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TMI Blog1995 (7) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of the Essential Commodities Act, and the cement industry was regulated by the provisions of the Cement Control Order, 1967. The Government had contemplated various measures to encourage setting up new cement units and to augment the supplies of the cement in the Vth plan period. On 29-4-1987 partial excise duty exemption was provided to the cement manufactured in a factory which had commenced production between 1-1-1982 to 31-3-1986, under Notification No. 124/87-C.E., dated 29-4-1987. This exemption Notification was amended, and the quantum of exemption varied from time to time. The amending Notification No. 201/88-C.E., dated 16-5-1988 made it clear that not only the cement but even the production of clinkers should have commenced during the above specified period. On 10-7-1987, the appellants wrote to the Assistant Collector of Central Excise, Gulbarga that during the time-1982, they had installed a new dry process kiln and that the cement manufactured by them from their new dry process plant should be deemed to have been manufactured from a new plant. They claimed that it could be said that they had commenced production of cement between 1-1-1982 and 31-3-1986 for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2-1995 when Shri L.P. Asthana, learned Advocate appeared for the appellant. Shri Sharad Bhansali, learned SDR represented the respondent. 4. Shri L.P. Asthana, the ld. advocate traced the history of the case and referred to the facts and the various stages of the present proceedings. The unit initially worked on the `wet process, and subsequently was converted into `dry process. In this conversion, a number of equipment were replaced and substantial amount of money was invested. The appellants company was under the impression that their dry process plant could be considered as a new factory for the purposes of various incentives, including excise duty relief. He referred to the various communications from the Ministry of Industry, and submitted that they qualified to be called a new factory. As the premises remained the same, they did not obtain approvals and licences as for a new factory. It was also pleaded that other units similarly placed had been extended the benefit of excise duty exemption, while they have been discriminated against. In support of his various contentions, the ld. advocate relied upon the following decisions :- (i) Collector of Central Excise, v. Birla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon. High Court had referred it as a new unit. 6. In rejoinder, the ld. Advocate stated that the concept of the `factory as per excise law was not relevant. He referred to the Delhi High Court decision in the case of Andhra Cement Company Ltd. v. Union of India, 1990 (33) STL 25 (Delhi), and pleaded for the acceptance of the appeal. 7. We have carefully gone through the facts and circumstances of the case and have given our due thought and consideration to the submissions made by both the sides. 8. The appellants established a cement factory in the year 1955 at Bagalkot (Karnataka) with the initial licensed capacity of one lakh tonne of cement per annum. It appears that the central excise licence was taken in the year 1957. The process of manufacture was the wet process in which the raw materials are ground wet and fed to the kiln as a slurry. In the year 1977-78, the appellants company took a decision to switch over to the dry process of manufacture in which the raw materials are ground dry and fed to the kiln as a dry powder. Some old equipment was discarded and some new equipment was purchased. At some stage they had declared that the new equipment was worth about 14.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that too on wet process with very high energy consumption (v) Central Board of Excise and Customs Circular dated 17-4-1989 refers to the fact that a new factory should come into existence and if the substantial expansion as per Section 13 of the Industrial Development and Regulation Act, 1951 is merely an expansion or modernisation of the already existing factory, then the benefits of the excise exemption notification would not be available. 9. For ease of reference notification No. 124/87-C.E., dated 29-4-1987 is extracted below : Notification, No. 124/87-Central Excises In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts cement falling under sub-heading No. 2502.20 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and manufactured in a factory which has commenced production during the period commencing on the Ist day of January, 1982 and ending with the 31st day of March, 1986, from so much of the duty of excise leviable thereon under the said Schedule as is in excess of the amount calculated at the rate of Rs. 205 per tonne : 1. Provided that such cement is manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or material. The formation should not be by such transfer . In the case of Textile Machinery Corporation Ltd. v. CIT, West Bengal, AIR 1977 SC 1134, the Supreme Court had observed as under : The true test, is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under Section 15C or not. In order that the new undertaking can be said to be not formed out of the already existing business, there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the physical identity with the old unit preserved . In the case of Union of India v. Wood Papers Ltd. - 1990 (47) E.L.T. 500 (SC), the Hon. Supreme Court in para 3 of their judgment, with regard to exemption Notification No. 163/65-C.E. which provided exemption to the commodity paper, manufacturing in any factory commencing production for the first time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion during the given period, to the extent such production of paper was attributable to the enlarged capacity. [Discussed by the Supreme Court in the case of Union of India v. Wood Papers Ltd., 1990 (47) E.L.T. 500 (SC). Notification No. 130/83-C.E., dated 27-4-1983 provided partial exemption to sugar produced in new units or expansion projects. The exemption notification before us neither by the ordinary meaning of the words used nor by giving them the fullest amplitude covers the old factory which had undergone the changes as effected by the appellants. No reasonable construction of the exemption notification will cover the factory of the type which was producing cement all along before the stipulated period, and in which only the process of grounding of some of the raw materials - wet or dry - is changed, in the manner as in the present case. Before grounding, the raw materials are crushed, and after the processing in the kiln, the raw material `gypsum is added. Thereafter, the processing in ball mill and tube mill is done. After passing through the air separator, the finished product is ready. (Refer new Encyclopaedia Brittaniea XV edition page 1076 and 1077]. In this view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udible from computing the value of investment on plant and machinery. In the break up of the total capital cost of expansion of Rs. 9.75 crores (details filed in the court by the appellants on 21-2-1995), the cost of Rs. 4.60 crores was said to be towards quarry equipment (Rs. 103 lakhs), foundation and civil engineering (Rs. 66.01 lakhs), sales tax, freight, octroi and insurance (Rs. 96.03 lakhs), erection charges (Rs. 42.44. lakhs), electrical equipment (Rs. 55.26 lakhs), pre-operation expenses (Rs. 56 lakhs), misc. fixed assets (Rs. 25 lakhs), railway-siding (Rs. 5 lakhs), margin money (Rs. 5 lakhs) and contingency (Rs. 6 lakhs). This break up does not reflect that a new factory for production of cement with the declared capacity had been established. 16. The appellants had referred to certain Government Resolutions regarding establishment of new cement units, expansion of existing units, fixation of ex-works retention prices, switching over to the dry process, from the wet process, etc. Various incentives had been announced by the Ministry of Industry to the new units. None of these establish that the appellants factory was a new factory for purpose of Notification No. 124/87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective in effect, although it covers the factory coming into operation in the past. As in Jan. 1982/March, 1986, no one could represent that the exemption as provided by Notification No. 124/87-C.E. will be issued in April, 1987. The notification as worded does not otherwise reflect any retrospective representation being made by the Government for having been established a factory in the past. It only provides exemption to the cement which is manufactured in a factory which has been established during the given period. 18. In the case of Andhra Cement Co. Ltd. v. Union of India, 1990 (33) STL 25 (Delhi), the Delhi High Court had noted that the units which have made substantial expansion or modernisation of the existing units are also entitled to the relief provided the same is done through a new factory . In the present case, there is no new factory. The High Court had ruled that starting of new kiln is not a necessary pre-condition for getting the benefit of production by the new unit. In the case before us, we have considered the totality of the circumstances and have not gone only by the starting of the kilns. 19. Taking all the relevant considerations into accounts w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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