TMI Blog1992 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... to goods other than blended or compounded lubricating oils and greases - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods (other than blended or compounded lubricating oils and greases) falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced in a factory and - (a) utilised in the factory in which the said excisable goods are produced, for the manufacture of any goods falling under the said Schedule or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both; or (b) allowed to escape in the atmosphere by flare system or otherwise; from the whole of the duty of excise leviable thereon which is specified in the said Schedule." 4. It is the petitioner's case that the Refinery Gas from the Refinery Unit is used partly in the Refinery Unit itself and partly consumed as fuel in the Xylene and Polyester Staple Fibre Unit. The Xylene produced in the Xylene Unit is used Polyester Staple Fibre Unit to produce Pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the basis of the order of the Assistant Collector of Central Excise subject to the petitioner's undertaking to this court not to deal with or dispose of its assets without the leave of this court and except in the usual course of business. 7. Pursuant to the order of Court, the Collector, Central Excise (Appeals) reheard the petitioner and by an order dated 22nd July, 1991, again refused to waive the deposit of the amount due on the basis of the order appealed from. It is this order which is the subject matter of challenge in this writ application. 8. Briefly stated the petitioners have contended that the Collector had misdirected himself in law by incorrectly interpreting the notification in question and the decisions cited before him. It is further stated that the Collector was really required to come to a decision whether the petitioner had a prima facie case which required consideration. No such finding was arrived at by the Collector. It is further submitted by the petitioner that the Collector was required under the law also to consider whether the interest of the revenue would be in jeopardy if the petitioner was not asked to deposit the disputed amount. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled upon to consider whether the two units were one factory within the meaning of Section 2(m) of the Factories Act, 1948. Section 2(m) of the Factories Act is substantially similar to Section 2(e) of this Act and the Central Excises Salt Act, 1944, except that under the former there is a further requirement of a number of people to be employed before a particular unit could be considered to be a factory. The manufacturer had sought to claim exemption under a notification which granted benefit to goods not manufactured in the factory. The assessee had contended that the two units of the assessee were separate and that the goods manufactured in the second unit could not be said to have been manufactured in the assessee's factory. The Tribunal held that the two units comprised one factory because the chromic acid section was admittedly served by the same electricity and water connections. Payments for electricity and water were made by the appellants for the chromic acid section as well as the other sections. The wages and salaries of the workers in the chromic acid section were paid by the appellants. The raw material sodium bichromate was supplied by the appellants to the chromi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Xylene and Polyester Staple Fibre Units had also been mentioned, it would mean that they were within the factory. In Paragraph 4 of the writ petition it has been stated by the petitioner : "Your petitioner states that it duly submitted to the proper officer a plan in respect of its factory covering the said area of 3.926 Square Kilometers used by it for its said manufacturing business. In the plan, the different Units of your petitioner's said factory namely, the refinery unit, the Xylene Unit and polyester staple fibre unit were duly shown. The said factory plan was duly approved by the proper officer." This again has not been controverted by the respondents. Therefore on respondents' own showing the three units of the petitioner must be treated as one factory. 14. The third factual aspect which is covered by the third submission of the respondents related to the gate passes produced by the respondents before this Court. It is true that Rule 52A of the Rules requires that no excisable goods shall be delivered from a factory except under a gate pass signed by the owner of the factory and countersigned by the proper officer. It was therefore contended that since there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Rules, 1944 is required to be followed. It is not the respondents' case that this has ever been required to be done by the respondents as far as the refinery gas and LSHS is concerned. 18. According to the Collector the question was whether the refinery was dependent on the existing of the other two units. He goes on to say "had it been so two other units also would have been considered as a part of the refinery". That was not at all the question which was required to be determined by the Collector. The question was not whether the Xylene and polyester staple fibre units were parts of the refinery but whether the three units formed one factory. 19. The operative word is inter-dependent. In distinguishing the cases cited by the petitioner, the Collector has said in some cases they have referred to units and in other cases to 'plant' and therefore were not applicable. This distinction would have same meaning had the Collector defined as to what was a unit, what was a plant and what was the distinction between a factory, a unit and a plant. 20. In my view the reasoning of the Collector appears to be riddled with logical and legal loopholes. 21. However, the Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 129E of the Customs Act, 1962 which is equivalent to Section 35F of the Act. The Court held that the Tribunal had not correctly appreciated the various relevant factors. The question was whether the petitioner had a prima facie case for consideration on merits. The learned Judge considered the case and found that the petitioner had indeed a prima facie case for consideration on merits. It was found that the petitioner did not have sufficient liquid resources to enable payment of the amount directed to be paid. In that view of the matter the Tribunal was directed to dispose of the appeal expeditiously on merits without insisting on deposit of the duty or penalty under Section 129E of the Customs Act. 26. In J.N. Chemical (P) Ltd. v. CEGAT - 1991 (53) E.L.T. 543 a Division Bench of this Court construed Section 35F of the Act. The Tribunal had not considered that another Bench of the Tribunal had already taken the view that a manufacturer similarly circumstanced as the writ petitioner in that case was entitled to the benefit of the exemption of the notification. The Court held that in that background it was impossible for the Tribunal to arrive at the conclusion that it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Keeping in view the mandate that a discretionary power must be exercised in favour of the assessee unless there was good reasons to the contrary, no reason has been disclosed by the Collector for refusing to exercise his discretion in favour of the petitioner particularly when the revenue's interest was not said to be un-safeguarded. It is to be remembered that this Court, while remanding the matter back to the Collector had directed the petitioner to give an undertaking to this court that it would not deal with or dispose of any of its assets except in the usual course of business or with the leave of the court. This undertaking is still subsisting. The Collector did not reject this safeguard as inadequate. The demand relates to a period for the clearance had already been made. There is no question of the petitioner recovering the amount from its customers. 32. In my view the situation is clearly covered by the decision of the House of Lords in Julius. Lord Bishop of Oxford (1880) 5 Appeal Cases 214 to the effect that the discretion of the Collector under the proviso to Section 35F to waive pre-deposit was in the circumstances of this case coupled with the duty to do so. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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