TMI Blog2018 (9) TMI 1931X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is a registered company under the Companies Act, no doubt it is a juristic person and every shareholder of the petitioner company is independently a juristic person. Merely because one or more shareholders of the petitioner company is having proprietary interest in other factories that would not ipso facto make the petitioner company that it also have such proprietary interest over the said factories. This distinction has not been considered by the sixth respondent while making the recommendatory note through her order dated 13-2-2003 supplied to the first respondent. The intention of the notification to give exemption to excise duty is to encourage the independent processor and in this regard, the Government of India has given power to the first respondent to independently assess every claim made in this regard by a processor as to whether he is an independent processor for the purpose of exemption of excise duty and such power shall be exercised cautiously and diligently. In the case in hand, merely because the petitioner is a limited company and it is having memorandum of articles and objects to have various activities apart from textile industry, based on which, no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Unit and has been functioning as such. The main job of the processing unit is to process the fabrics, after it has been woven by any other manufacturer and supplied to this company for the purpose of process towards the finished goods as a job work. Though the petitioner company is only a processing unit, it has already been registered under the Central Excise Act, for the purpose of assessment of Central Excise Duty. 4. In this context, the Central Excise Department has issued a notification in Notification No. 11/2001-Central Excise dated 1-3-2001. Under which, the Central Government being satisfied that, it became necessary, in the public interest to exempt excisable goods of the descriptions in the Column No. 3 in the table given in the notification. In the said table, number of items have been given as exempted goods, for the purpose of excise duty, out of which Item No. 3 under the heading or sub-heading Nos. 52.07, 52.08 and 52.09 i.e., cotton fabrics woven on handlooms and processed with aid of power or stream by an independent processor approved in this behalf by the Government of India on the recommendation of the Development Commissioner for Handlooms, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e writ petition and also made an amendment in the prayer to challenge such order of the sixth respondent dated 13-2-2003 making a recommendation to the first respondent not to consider the petitioner as an independent processor for the purpose of issuing certificate to that effect. That is how the writ petition now stands challenging the orders of the sixth respondent dated 13-2-2003 as well as the order passed by the first respondent dated 18-7-2003. 11. Mr. N. Prasad, Learned Counsel for the petitioner would straight away made the submissions that, the petitioner, though a limited company, during the relevant point of time, had been engaging only the processing unit as an independent processor, processing woven fabrics supplied to them. He would further submit that, for the purpose of determination of excise duty, the Revenue i.e., the Central Excise Department by applying the rule called Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998, (hereinafter referred to as the Rules ) determined the excise duty. Therefore, the Central Excise Department has already recognised the petitioner as the independent textile processor by apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, the reasoning given by the sixth respondent in the said order dated 13-2-2003 has no basis to substantiate. Merely because of some of the shareholders of the petitioner company having interest independently in some other spinning mills or textile industries that would not ipso facto makes the petitioner company as if the petitioner company is having an interest of textile like spinning, weaving etc. Therefore, the reasoning given by the sixth respondent, in his order, which was the sole basis for rejecting the claim of the petitioner, for issuance of certificate as an independent processor, has absolutely no legs to stand and therefore, both the orders of the sixth respondent as well as the first respondent are liable to be interfered with. 17. Per contra, Mr. S.R. Sundar, Learned Counsel appearing for the respondents 4 5 would submit that, there is no quarrel for seeking exemption for paying the excise duty under the notification, if the petitioner is an independent processor. He would also submit that, in the case in hand, though it was claimed by the petitioner that he was an independent processor, such a declaration has not been made by the first respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older acquires any interest in the assets of the company. The use of the word assets in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shores, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. 21. By placing reliance on these materials, the Learned Counsel would argue that, as per the explanation given for the words or expression independent processor the words proprietary interest will be more important and in this context, even if a shareholder of a company is having share, in other fabric or textile related activities such as spinning, weaving etc., definitely the company which claim the status of independent processor would lose its identity as an independent processor because of proprietary interest, its shareholders would be having. Therefore, the petitioner company cannot be fit in the meaning of independent processor as explained in this regard for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner for Handloom New Delhi cannot consider the petitioner company as an independent processor . 25. The Learned Counsel for the respondents 1 to 3 would further submit that, since acceptable reasons have been given by the sixth respondent in her communication dated 13-2-2003, accepting the same, the first respondent passed the impugned order rejecting the claim of the petitioner for grant of certificate as an independent processor . 26. Mr. K. Ravikumar, Learned Additional Government Pleader appearing for the sixth respondent would submit that, the petitioner is a Limited Company and it involves not only engaging in processing activity but also engaging in other activities, as has been mentioned in the memorandum of articles and objects of the company and pursuant to such activities, since the petitioner company had been engaging in other activities including its shareholders interest in spinning mills, weaving, etc., the petitioner company lost its status as an independent processor and therefore, the sixth respondent has rightly made a recommendation to the first respondent not to consider the claim of the petitioner as an independent processor . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t respondent has written a letter to the sixth respondent to confirm the status of the petitioner as an independent processor , it means that prima facie the first respondent satisfied with the claim of the petitioner that it is an independent processor based on the supporting materials which had already been annexed along with the application. 32. On receipt of such request from the first respondent, the sixth respondent had sent two officials namely, the Assistant Director of Handlooms and Textiles, Coimbatore and the Managing Director, Tamil Nadu Cooperative Textile Processing Mills Limited, Erode, to enquire into the matter and submit report. Probably, those two officials would have submitted a report to the sixth respondent, who in turn on considering the said report has sent his recommendation through the said communication dated 13-2-2003. On a perusal of the said communication of the sixth respondent dated 13-2-2003 it reveals that, the sixth respondent has very much relied upon the memorandum of articles and the objects of the petitioner company, as provided in the documents supplied by the petitioner company. 33. Based on the memorandum of articles and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any factory engaged in spinning of yarn of cotton or weaving of cotton fabrics. The word manufacturer mentioned therein is nothing but, in this case, the petitioner company, who is the manufacturer who claimed to be exclusively processing fabrics with the aid of power. If such manufacturer having any proprietary interest in any factory engaged in spinning of yarn of cotton or weaving of cotton fabrics, then, such manufacturer cannot claim the status of independent processor . 37. Here, in the case in hand, the manufacturer is the petitioner company. The petitioner company, even according to the respondents, has not engaged in the spinning of yarn or cotton weaving of cotton fabrics and the petitioner company does not have any proprietary interest over the said factories or companies. 38. Merely because one or more shareholders of the petitioner company is having proprietary interest in some other factory engaged in yarn or cotton, it does not mean that the petitioner is having direct control and proprietary interest over the said factories. Since, the petitioner company is a registered company under the Companies Act, no doubt it is a juristic person and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from textile industry, based on which, no decision can be taken that the petitioner company could not be eligible to get the benefit of independent processor merely because, it is having other objects in the memorandum of articles. If this kind of decision is taken to reject the claim of the petitioner, then, the very purpose of giving exemption to the eligible processor would get defeated thereby, the very object of giving exemption notification would also get defeated. Therefore, looking from any angle, the reasoning given by the sixth respondent in her communication dated 13-2-2003 would not be sustainable and based on which, without giving an opportunity to the petitioner since, the first respondent mechanically passed the impugned order rejecting the claim of the petitioner which can also be unsustainable and therefore, this Court has no hesitation to interfere with both the impugned orders. 42. In the result, the following orders are passed :- (i) The impugned orders passed by the sixth respondent in R.c.No. 45327/2001/L1 dated 13-2-2003 and the order passed by the first respondent in NO.DCH/900/2001/P S dated 18-7-2003 are hereby quashed; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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