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TMI Blog1991 (9) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-6-1985 8-4-1985 to 28-6-1985 Rs. 13,84,362.00 29-10-1986 2. The facts relevant for determination of the dipute in the first appeal are that Range Officer, Central Excise, Karur, learnt that the appellants had erected two coal fired boilers and were producing steam, an excisable commodity falling under Item 68 of the Central Excise Tariff and that the steam so produced was being released through pipe line to sugar factory of M/s. Deccan Sugars of Abkhari Ltd. (DS). The Range Officer discovered that the central excise duty payable on steam was not being paid; that no central excise licence had been applied for the production of steam and the procedural formalities required to be observed had not been fulfilled. When the Inspector, Central Excise, Pugalur asked the appellants by his letter dated 12-11-1984 to take out a central excise licence, they replied in their letter dated 12-l2-1984 that they had leased their coal fired boiler to M/s. Deccan Sugars Ltd., and that the production of steam continues to be done by the sugar mills for captive consumption in their factory for manufacturing sugar. 3. Investigation showed that M/s. Deccan Sugars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n working in the boiler plant would be paid by M/s. TNPL; and (e) the provident fund etc., payments of such staff were made by M/s. TNPL. 7. Among the grounds taken in the appeals are that under Notification 118/75-C.E., dated 30-4-1975 the goods falling under Item 68 were exempt from duty provided they were intended for use in the factory in which they were manufactured, or in any other factory of the same manufacturers and this exemption was fully applicable to steam manufactured in the coal fired boilers in all the three cases; that the boilers were required to be installed by the appellants within the factory premises of the sugar mills on lease basis for the purpose of production of steam for captive consumption within the sugar mills; that the appellants had entered into lease agreement with the sugar mills who provided the land free and the appellants erected the boilers and handed them over for being run by the sugar mills on lease; that the letter by which the sugar mills requested for deletion of certain area from their ground plan was only a proposal and had no relevance to any event and the ultimate release arrangement was conceived, executed and formalised by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro Alloys Ltd., (Deccan Sugars), Pugalur and are supplying the same to M/s. Deccan Sugars, Pugalur without taking out a Central Excise licence and clearing the same without payment of duty. (emphasis supplied). 9. The learned Counsel submitted that it was clear from the words of the show cause notice that the authorities themselves had proceeded on the basis that the boiler was erected in the premises of the sugar mills, and M/s. TNPL could not, in these circumstances, be held liable for payment of duty on the steam which was eligible for exemption from duty under Notification 118/75. 10. Shri Natarajan placed reliance on the following decisions in support of his claim that M/s. TNPL were not the manufacturers of steam :- (a) M/s. Neerullah Gazanfarullah v. Employees State Insurance Corporation, Kanpur [1982 LAB IC 56]. This was a case under the Employees State Insurance Act in which a question arose whether the two establishments - one in which tube wells were located and the other in which the administrative office was located, although enclosed within separate boundary walls, fell within the definition of factory for the purpose of the ESI Act because the total num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work. (emphasis supplied). (b) M/s Agents Manufacturers v. Employees State Insurance Corporation [1974 Lab IC 220 Delhi HC]. It was held in this case that for the purposes of the ESI Act, 1948, where the manufacturing process was carried on by power at two places one furlong apart and polishing and packing was done at a third place, polishing etc., being incidental to the manufacturing process, workers at all places were employees within the meaning of the Act and all the three places form part of one factory. The High Court had relied on the definition of factory given in Halsbury s Laws of England in which it has been stated that separate buildings, even though a considerable distance apart, may, if used for one continous manufacturing process, constitute a single factory. (c) S.G. Chemicals Dyes Trading Employees Union v. S.G. Chemicals Dyes Trading Ltd. [1986 Supreme Court Cases (L S) 303]. The Supreme Court held in this case that under Clause (m) of Section 2 of the Factories Act the definition of factory was wide enough to cover so many different processes set out in sub clause (i) of Clause (k) of Section 2 thereof. Shri Natarajan read out from Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption contained therein. 11. Appearing for the respondent - Collectors, Shri J.N. Nair, the learned Departmental Representative, first referred to letter dated 15-6-1983 from M/s. Deccan Sugars, which, being important, is reproduced below :- The Superintendent of Central Excise 15-6-1983 Karur Through The Inspector of C.E., Pugalur Dear Sir, Additions, alterations and deletions inside the factory premises. We enclose the approved ground plan of the factory and also a new plan in triplicate showing the area shaded in red to be excluded since we propose to provide this area to Tamil Nadu Newsprint Papers Ltd., Pugalur to construct coal fired boilers. Therefore, we request you to delete the items No.37 and 59 from this approved plan. Thanking you, Yours faithfully, (Sd.) MS Sivaswami, Encl. Process Superintendent, (Seal) c/- The Inspector of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of liability to duty had to be considered in the purview of the Central Excises Salt Act, he submitted that the considerations which guided the decision under the ESI Act and the Factories Act were not at all relevant for the purposes of the appeals. He also cited the decision of the Gujarat High Court in the case of Ambalal Sarabhai v. Govt.of India [1991 (54) E.L.T. 30] in which it was held that since Sarabhai Common Services who were manufacturing steam were distributing it to four participating units of the joint enterprise, it could not be said that Sarabhai Common Sevices were manufacturing it for use in its own factory. The High Court decided that they were not entitled to the benefit of exemption of Notification 118/75. Shri Nair pointed out that the present appeals were covered by this decision since the manufacturers of steam were M/s. TNPL while its users were three sugar mills in their respective factories. 15. Referring to Para 12 of the impugned order passed by Collector of Central Excise, Trichy (Appeal No. 2464/86-D), the learned DR submitted that, the Collector had rightly rejected the appellant s plea because the letter dated 15-6-1983 for exclusion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption under Notification No. 118/75-C.E., dated 30-4-1975 would be available for the steam irrespective of the ownership of the Boiler. 17. We have carefully considered the matter and perused the case records in these three appeals. The short point to be determined is whether steam manufactured in the boilers erected by M/s. TNPL in the areas excluded from the Ground Plans of the three sugar mills was entitled to exemption from duty under Notification 118/75-C.E., dated 30-4-1975. The notification provides two conditions for exemption :- (a) The goods falling under item 68 should be manufactured in a factory and (b) (i) should be intended for use in the factory in which they are manufactured or (ii) should be intended for use in any other factory of the same manufacturer. 18. Applying these conditions to the present appeal, it is clear that the area in which the boilers were erected by M/s. TNPL in the three cases was not within the factory premises of the sugar mills after they had got it excluded from their ground plans to provide this area to Tamilnadu Newsprint Papers Ltd. to construct coal fired boilers , even if the steam generated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torage 22. Form L-4 which is the licence under the Central Excise Rules, 1944 to manufacture excisable goods makes the following stipulation with regard to premises :- Mr./Messrs . of having undertaken to comply with the conditions prescribed in the Central Excise Rules, 1944, and any orders issued thereunder and having paid the prescribed licence fee is/are hereby authorised to manufacture .. (during the three years ending ) in the under mentioned premises subject to the provisions of the Rules. (6. Situations and description of premises as described in the application for licence.) 2. The privilege conferred by this licence extends only to the manufacturer of . . 3. No corrections in the licence will be valid unless ordered and attested by a Central Excise Officer not lower in rank than the licensing authority. 4. This licence may be revoked or suspended or its renewal may be refused, if any declaration made or information given in the application thereafter is found to be false or if any undertaking given in such application is not carried out. 5. The grant of this licence shall be without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approval of the Central Excise authorities for exclusion of the areas which they provided to M/s. TNPL for construction of coal fired boilers. They could have, if they chose to erect the boilers within their respective factories, sought the approval of the Central Excise authorities under these Rules by making a declaration to that effect and indicating the same in the ground plans for their factories. Their licences would then have also required amendment and steam would have been added as an excisable commodity in the Schedule appended thereto. The fact that instead of doing this, they chose to have the areas excluded goes to show beyond any doubt that they did not want to add the boilers to their factories; nor did they wish to avail of the exemption under Notification 118/75, because, in that case, they would have been required to comply with other formalities of the Central Excise Rules. One could have laid the blame at the door of the sugar mills for not having complied with the requirements of the rules if they had not taken the initiative of making it clear that the area in which the boilers were erected did not remain part of their factory premises by seeking amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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