Clubbing of clearances of various firms - Different firms to be treated as different manufacturers for exemption limit - Regarding - Central Excise - 6/92

Clubbing of clearances of various firms - Different firms to be treated as different manufacturers for exemption limit - Regarding Circular No. 6/92 Dated 29-5-1992 [From F. No. 213/15/1992-CX. 6] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Clubbing of clearances of various firms - Different firms to be treated as different manufacturers for exemption limit - Regarding. The issue of clubbing of clearances of various firms to arrive at the aggregate value of clearances for the purposes of Notification No. 175/86-C.E., dated 1-3-1986 has been examined by the Board. Similar issue was also examined in the past for the purposes of regulating the exemption from duty granted under the Notification No. CER 8(5)-Central Excise dated 1-3-1956 as under :— (i) Different firms will be treated as different manufacturers for the purpose of the exemption limit. But if a firm consisting of certain partners say, A, B, C has got more than one factory, all these factories should, of course, be combined. Limited companies whether public or private are separate entities distinct from shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. (ii) As mentioned above, if there are the two firms with only some of the partners in common each firms is entitled to separate exemption limit, and hence the question of distributing the exemption does not arise. If one firm or one individual owns several factories he or it gets exemption only in respect of one lot of 125 tons and the manufacturer being only one entity there is no question of distributing the exemption. (iii) If there are more than one mill under the control of one manufacturer there is no question of choosing any 'mill' for the purposes of exemption. The Central Excise department is concerned with a manufacturer which may be an individual, a firm a limited company etc. Further in the context of Notification No. 176/77, dated 18-6-1977 which exempted units manufacturing goods falling under item 68 Central Excise Tariff upto a value of Rs. 30 lakhs in a year, the similar issue was re-examined. The legal position that emerged was as under :— The plain meaning of the term 'Manufacturer' in the exemption Notification No. 176/77 dated 18-6-1977 is a person who manufacturers and this applies with greater appropriateness in the context, to a firm engaged in manufacture, than to the individual partners composing it. To the same effect was the view expressed by Kerala High Court in Rice Oils Mills Partnership Firm v. Deputy Superintendent of Central Excise, Trichirapally (1960 KL 1087). The question whether different partnerships having common partners, are treatable as separate manufacturers of the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured etc. Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say A.B. C. has got more than one factory, all these factories should, of course, be combined. Limited companies whether public or private, are separate entities distinct from the shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not arise. If one firm or one individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity, there will be no question of distributing the exemption. Whether or not in the expression 'by or on behalf of a manufacturer' the expression 'from one or more factories' is added, the effect would be the same if the manufacturer is also the same. The expression 'one or more factories' only further clarified that whether the factory is one or more, it is the clearances by or on behalf of the same manufacturer which is to be taken into consideration for purpose of interpreting the exemption Notification. The matter requires to be viewed accordingly. 2. The Board had then felt the position as mentioned above including in respect of Notification No. CER-8(5)-CE dated 1-3-1956 was sufficient to deal with the interpretation under Notification No. 176/77 dated 18-6-1977. Now in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 (1 of 1944), for the purpose of ensuring uniformity of levy of duties of excise, the Central Board of Excise and Customs have ordered that the general principles as mentioned above in the context of Notification No. 176/77 dated 18-6-1977 will be applicable to Notification No. 175/86 also. The Board have issued the above order on 29-5-1992. Sub : - The text of the Direction issued under Section 37B is as follows :— "In exercise of the powers conferred under Section 37-B of the Central Excise Act, 1944, for the purpose of ensuring uniformity of levy of duties of excise the Central Board of Excise Customs has ordered that the following general principles will be applicable to Notification No. 175/86-CE :— (i) The question whether different partnerships having common partners are treatable as separate manufacturers or the same manufacturer, would be a question of fact in each case to be determined on the basis of such factors among other, like composition of the partnership, existence of the factory, licence, nature of goods manufactured etc. (ii) Different firms will be treated as different manufacturers for the purpose of exemption limit. But if a firm consisting of certain partners say A, B C, has got more than one factory, all these factories should of course be combined. Limited companies whether public or private are separate entities distinct from the shareholders composing it. Hence each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. (iii) If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not arise. If one firm or individual owns several factories, he or it gets exemption only in respect of one individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity there will be no question of distributing the exemption. (iv) Whether or not in the expression 'by or on behalf of a manufacturer' the expression 'from one or more factories' is added, the effect would be the same if the manufacturer is also the same. The expression 'one or more factories' only further clarifies that whether the factory is one or more, it is the clearances by or on behalf of the same manufacturer which is to be taken into consideration for purposes of interpreting the exemption notification'.