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2018 (2) TMI 787

Area Based Exemption - Benefit of N/N. 50/03-CE dated 10.6.2003 - denial of duty exemption on the ground that unit No.III is just an addition to the existing Unit and it cannot be considered as an independent unit - circular No.939/29/2010-CX dated 22.12.2010 - Whether in the facts and circumstances of the case, the benefit of Notification No.50/03 dated 10.6.2003 can be denied to the unit No.III on the ground that the unit No.III was not an independent industrial unit but an addition of unit? .....

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ular has no relevance. - The appellant has started three different units on the same plot of land and having separate plant and machinery, separate, inputs, manpower, finances and are manufacturing different products, therefore, all the three units cannot be considered as one unit. In fact in the factory, there are three different units, therefore the Unit No.III is separate from Unit No.I is entitled for exemption under N/N. 50/03-CE. - Appeal allowed - decided in favor of appellant. - .....

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due declaration to the department for manufacturing of the said items. On 17.8.2014, the appellant obtained registration for the unit No.I to commence production on 18.8.2004, the Deputy Commissioner vide letter dated 8.10.2014 denied the duty exemption to the goods cleared by the unit No.3 relying on the circular No.939/29/2010-CX dated 22.12.2010 on the ground that unit No.III is just an addition to the existing Unit and it cannot be considered as an independent unit. The appellant protested .....

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nd similar interpretation should be adopted while construing the meaning of the term industrial unit for the purpose of notification. Therefore, any independent and self-sustainable manufacturing section of a factory qualifies as distinct industrial unit for the purpose of said Notification. He relied on the following case laws: (1) Devidayal Electronics and Wires Ltd. & another Vs. UOI-1984 (16) ELT 30 (Bom.) (2) CCE Vs. Himalayan Co-op Milk Product Union Ltd.-2000 (122) ELT 327 (SC) (3) CC .....

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ontrol board, generator set, water source, effluent treatment plant, sewerage system and canteen, it will not disentitle unit No.III to qualify as new and separate identifiable industrial unit in view of the decision of Hon ble Patna High Court in the case of Hindustan Malleables & Forgings Ltd.-1991 (191) ITR 70 (Patna). 5. He further submits that in the present case, if unit No.1 is closed, it would not impact the functioning of unit No.III. Therefore, the fact of use of common facilities .....

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not affect their existence as separate units. He submits that the Deputy Director of Industries vide letter dated 4.6.2010 stated that the addition of plant and machinery has been taken on the records and that other terms and conditions of commencement of commercial production would remain unchanged, have no bearing in determining whether or not unit No.III should constitute as an independent unit or not, for the reason that said statement was only regarding the terms and conditions subject to w .....

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t be termed as separate unit. 7. Heard the parties and considered the submissions. 8. On careful consideration of the submissions of both sides, we find that the following issues emerge: Whether in the facts and circumstances of the case, the benefit of Notification No.50/03 dated 10.6.2003 can be denied to the unit No.III on the ground that the unit No.III was not an independent industrial unit but an addition of unit. 9. In this case, we find that, all the units are set up in the same plot of .....

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from time to time which mandate that the appellant has complied with conditions of the notification by intimating to the department. The claim of the appellant is that the said items has been cleared for the first time at the time of filing of the said declarations. For ease of convenience the declarations filed by ten appellant from time to time are extracted below: WIPRO Applying Thought Date: 05th July, 2004 Baddi/AR/Exc/File-002 To, The Assistant Commissioner, Central Excise, Khalini Shimla .....

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Factories :Plot No.77 EPIP Phase-I, Jharmajri Tehesil :Nalagarh Disst.Solan (H.P.) c) Descriptions of inputs Used in manufacture of Specified goods :Noodles, Perfumes, oils/fatty acid, Caustic soda, Tale, Kaolin, Color etc. d) Descriptions of the Specified goods Produced :Toilet Soap e) Date on which option Under this notification Has been exercised : It will be informed in due course since the date of commercial production is not yet finalized. Thanking You, Yours Sincerely For WIPRO LIMITED Au .....

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year. 4. We also submit the following particulars:- f) Name & address of the Manufacturer : M/s WIPRO LIMITED Plot No.77 EPIP Phase-I, Jharmajri Tehesil :Nalagarh, Disst. Solan (H.P.) g) Location/ Location of Factory / Factories : Plot No.77 EPIP Phase-I, Jharmajri Tehesil :Nalagarh Disst.Solan (H.P.) h) Descriptions of inputs Used in manufacture of Specified goods :Oils like PFAD, PKFAD, NERBO, CPO, CPS i) Descriptions of the Specified goods Produced : Fatty Acid, Noodles, Glycerine j) Date .....

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dated 10/06/2003 from the first clearances during the current financial year and we also declare that we shall not withdraw the option to avail the exemption during the remaining part of the financial year. 2. We also submit the following particulars:- a) Name and Address of the Manufacturer M/s Wipro Limited, Plot No.77, EPIP Phase I, Jharma Tehsil Nalagarh, DisttSolan (H.P.) b) Location/ Location of Factory/ Factories M/s Wipro Limited, Plot No.77, EPIP Phase I, Jharma Tehsil Nalagarh, DisttSo .....

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12. In view of above discussions, the issue emerges whether all the units located in the same factory can be treated a separate unit in terms of the Notification No.50/03-CE dated 10.6.2003. For better appreciation, Notification No.50/2003 is extracted below:- Exemption to goods other than specified goods cleared from units located in the Industrial Growth Centre of Industrial Development Centre or Export Promotion Industrial Part or Industrial Estate or Industrial Area or Commercial Estate or S .....

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e, as the case may be, leviable thereon under any of the said Acts: Provided that the exemption contained in this notification shall apply subject to the following conditions, namely:- (i) The manufacturer who intends to avail of the exemption under this notification shall exercise his option in writing before effecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year; (ii)The .....

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existing before the 7th day of January, 2003, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five per cent on or after 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2010]. 13. As per the said notification, the exemption is available to industrial unit. Now we have to decide whether the industrial unit is a factory or not. The said issue came up .....

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yan Co-op Milk Product Union Ltd. (supra), the Hon ble Apex Court had an occasion to examine the issue and relying on the decision of Bombay High Court in the case of Devidayal Electronics & Wire Ltd. wherein the Apex Court has observed as under: 6. The Tribunal while allowing the appeal followed a decision of Bombay High Court reported in 1984 (16) E.L.T. 30 (Bom.) - Devidayal Electronics & Wires Ltd. and Another v. Union of India and Another. The similar notification in respect of an e .....

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imposed since the goods manufactured were removed without payment of duty. It was pleaded that cartons were exempted under a notification exempting all products of printing industry. The Court, however, held that cartons though may be printed, cannot be held to be product of printing industry. They will be relatable to packaging industry. Hence, the benefit, as pleaded, was not admissible. Insofar as the other arguments raised about the value of the investment made for manufacture of printed car .....

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create complications where a factory manufacturing goods falling under more than one tariff item but has only one generator of power plant, so in such cases in what manner generator or power plant was to be allocated between two items. The plea raised was negatived and it was held that total value of the entire machinery in the industrial unit should be taken into account. At this stage, it would be appropriate to point out the difference in the language used in two notifications. We find that i .....

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sible to take into consideration the value of investment of all the plants and machinery manufacturing different items viz. goods other than the said goods . 7. In our view the Tribunal rightly preferred the view taken in the case of Devidayal (supra). The factual hurdles like a common generator may be in use by different units in the factory complex as indicated in the case of Golden Press (supra) can well be worked out by devising proper method while apportioning the value of different plants .....

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of the value of the capital investment from time to time on plant and machinery installed in the industrial unit in which the said goods, under clearance, are manufactured, is not more than rupees ten lakhs. It is of significance to note that although the earlier part of the Notification refers to goods cleared by or on behalf of the manufacturer from one or more factories , the Proviso speaks of an industrial unit . Therefore, the industrial unit has not been used in the sense of a factory, bu .....

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re this Court did not interfere with the orders passed by the Central Excise Tribunal [1. CCE v. Prem Cables Pvt. Ltd. - 1989 (43) E.L.T. 739 (Tribunal) - Affirmed by this Court in 1997 (83) E.L.T. A-46. 2. Texspin Engg. & Mfg. Works v. CCE, Final Order No.204/86-D, dated 11-4-1986 - Affirmed by this Court in 1990 (50) E.L.T. A57. Our attention was also drawn to a judgment of the Bombay High Court in Devidayal Electronics & Wires Ltd & Anr. v. Union of India & Anr. - 1984 (16) E. .....

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ly eligible for exemption under this notification. 9. As regards, the cylinder unit, this unit had started production sometime in 2001 and this unit undertook expansion of installed capacity only in December, 2003 which was completed on Jan. 2004, as result of which, installed capacity for production of cylinders increased to 552460 per annum from the earlier capacity of 368440 per annum. It is not in dispute that the capacity expansion was achieved by adding certain machinery, namely, five Mig .....

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e manufacturing units and each section or part of the factory would be independently eligible for exemption, as the duty exemption under Notification No.50/2003-C.E. is unit-wise and not factory-wise. 17. This issue was again examined by this Tribunal in the case of Prakash Straw Board Pvt.Ltd. (supra), wherein this Tribunal has followed the decision in the case of Tirupati LPG Industries Ltd. observed as under: 7. We further find that in the case of Tirupati LPG Industries Ltd. v. CCE, Meerut-I .....

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g the course of the arguments, learned AR relied on the circular No.960/03/2012-Cx dated 17.2.2012. 19. We have examined the said circular and para 2 of the circular which reads as under: 2. References have been received from field formations as well as from trade and industry seeking clarification regarding admissibility of benefit under area-based exemption Notification No.49/2003-CE and Notification No.2003-CE both dated 10.6.2003, in the following situations: a. When there is a change in the .....

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ties cannot be the reason to deny the benefit of the exemption in the light of the decision of the Hon ble Patna High Court in the case of Hindustan Malleables and Forgings Ltd. (supra) wherein the High Court has examined the issue and observed as under: 9. So far as the objection regarding common of power is concerned that per se cannot be a ground for denying the deduction claimed because this reason by itself cannot destroy the independent identity of the unit. Similarly common management of .....

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that in the case of Rollatainers Ltd. (supra), the Hon ble Apex Court has examined the issue and observed as under: 8. Simply because both the factories are in the same premises that does not lead to the inference that both the factories are one and the same. In the present case, from the facts it is apparent that there is no commonality of the purpose, both the factories have a separate entrance, there is a passage in between and they are not complimentary to each nor they are subsidiary to eac .....

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by the Commissioner, Central Excise, New Delhi-III on September 28, 2001 in both the appeals. No order as to costs. 22. We also take note of the fact that recently the issue has been examined by this Tribunal in the case of Victoria Automotive INC (supra), wherein the facts of the case are as under: 2. The jurisdictional officers of Central Excise conducted certain enquiry and verification regarding the eligibility of the main appellant for the abovementioned area based exemption. The Revenue en .....

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rities and utility agencies. We note that such appreciation is not directly relevant to examine the application of exemption under Notification No.50/03. In fact, the appellant also did not contest the fact that they have only one factory in the said location. They only pleaded that in the said factory there were two identifiable manufacturing units involved in the manufacture of different types of products in different production lines. We note that there were certain factual errors recorded by .....

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7. He records, incorrectly, that the word industrial unit has not been used in the said notification. Whereas we note that para 2 of the said notification which talks about application of exemption to different kinds of units clearly states that the said exemption is for new industrial unit set-up in the declared area or industrial units existing but undertaking substantial expansion. In other words, the exemption itself is available only to industrial units . The exemption is not extended to fa .....

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factory having other manufacturing unit/facility. 9. The Tribunal while examining the application of exemption under the above said notification in the case of M/s Tirupati LPG Industries Ltd, 2015 (324) ELT 201 (Tri.-Del.) relying on the decision of the Hon ble SC in Reckitt Columan of India Ltd., 1997 (92) ELT 457 (SC) held: in our view, this ground for denial of exemption to cylinder unit is totally incorrect, as held by Apex Court in the case of Reckitt Colman of India Ltd. (supra) each sec .....

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ot correct. 10. In Devidayal Electronics & Wires Limited (supra) while interpreting the provisions of Notification No.74/1978-CE, the Hon ble Bombay High Court held as below: 5. The Notification uses the word factory and it used the words industrial unit . It must, therefore, be assumed that the words were intended to bear different meanings. Put differently the words industrial unit must mean something other than factory . 11. The above-said decision has been noted by the Apex Court with ap .....

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f specified goods. All such units are necessary part of a factory, if located in the contagious area. Each division of a factory manufacturing different identifiable items or undertaking different identifiable processes will have to be considered as a unit of the factory. 13. On careful consideration of the impugned order and the submissions of the appellant against the said order, we find that the impugned order is not legally sustainable. Accordingly, we set-aside the same and allow appeals wi .....

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ry produced more than one excisable goods production is by one unit and as such the clearances cannot be clubbed together. He also correctly followed the decision of CCE Vs. Himalayan Cooperative Milk Product Union Ltd. - 2000(8) SC 642 wherein it was held that the Industrial Unit is a separate isolated part of the plant which is exclusively used for the manufacture of goods for which exemption is claimed. 10. In the specific context of area based exemption, similar issue came up before this Tri .....

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stalled before 7-1-2003, this notification would also cover these unit, which had been set up before 7-1-2003, but commenced commercial production on or after 7-1-2003. Therefore, new industrial unit would include not only those units set up on or after 7-1-2003, but would also include those industrial units which have been set before 7-1-2003. But the new industrial unit set up either on or after 7-1-2003 or set up prior to 7-1-2003, must, for being eligible for the exemption satisfy the condit .....

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nery is run on trial/test basis and if the production is not of the desired quantity and of the desired quality, the necessary adjustments are made. The running of a plant during its commissioning is only a trial run meant to make the necessary adjustments in the machinery and calibrate them to optimise their productivity. Commercial Production starts only when the commissioning i.e. trial run is complete. Though during trial run, there may be some production and the manufacturer may have sold t .....

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cts of the present case. Hence, following the same, we find no infirmity in the order of the Ld. Commissioner (Appeals) in relation to Pan Chatni and Scented Elaichi. 11. As for the expansion of the unit manufacturing Scented Supari, the Ld. Commissioner (Appeals) has correctly followed the above mentioned Honble Apex Court decision while allowing the benefit of substantial expansion. We also find that the ratio laid down in the Para 9 of the Tribunal order, in the case of Tirupati LPG Industri .....

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by Apex Court in the case of Reckitt Colman of India Ltd. (supra) each section or part of a factory manufacturing a different commodity has to be treated as separate manufacturing unit. The same view has been expressed by the Apex Court in the case of Himalayan Co-op. Milk Product (supra) and also Hon ble Bombay High Court in the case of Devidayal Electronics & Wires (supra). Therefore, a factory manufacturing more than one commodity in different sections, has to be treated as consisting of .....

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