Customs, Excise and Gold Tribunal - Calcutta
Cosboard Industries Ltd. vs Commissioner Of Central Excise on 20 December, 2002
Equivalent citations: 2002ECR286(TRI.KOLKATA), 2003(154)ELT701(TRI-KOLKATA)
ORDER S.S. Sekhon, Member (T)
1. The appellants are a Public Limited Company and are having factory at New Industrial Estate, Jagatpur, Cuttack, Orissa, where they are engaged in the manufacture of paper and paper board. While paper board is manufactured in what they called as their old factory, paper was manufactured, as per their statement, in the new factory, paper and paper board, were exempt from payment of excise duty in respect of first clearances of 3500 MT in a year in terms of Notfn. No. 6/2000 dt. 1-3-2000 entry No. 77 read with condition of No. 15. During the financial year 2000-2001, the period of dispute in this appeal, the appellants said to have claimed and cleared 3500 MT, without payment of duty, in respect of each of the two factories and in excess of 3500 MT they were to pay the duty.
2. The department launched proceedings by issue of a show cause notice dt. 6-11-2001 alleging inter alia as follows :-
a. they had already established a factory for manufacture of paperhoard. b. They have, in September 2000 artificially bifurcated the existing factory land by constructing a wall. c. The new factory after bifurcation of the factory land, manufactures kraft paper. e. The existing registration certificate, was modified to indicate unit I. f. The new factory has also been granted a new excise registration indicating unit II. This registration was allegedly obtained by them under deception. g. Notification No. 6/2000, dt. 1st March 2001 entitles them to a duty concession up to a clearance of 3500 MTs in a year. h. This concession should be applied jointly for the clearances of both the factories, because (1) The facility of using the boiler earmarked for a particular plant by the other plant, is sufficient for treating both plants as part of the same factory. (2) The raw materials are common. (3) The electricity supply is common. (4) The administration and management is common. (5) The sales tax registration and assessment is common. (6) Income tax assessment is common. (7) The two plants i.e. Board Plant and Paper Plant of the same factory i.e. Cosboard have been treated by Cosboard themselves as one factory right from the establishment of the plants and the premises which existed continuous to be the same even today except construction of a wall. (8) The two plants belong to the same company i.e. Cosboard Industries Limited situated on common plot of land i e. plot no. 7.
Apart from the above, it appears that application for separate registration on the ground of separate premises for separate plants were made and simultaneously registration from the Chief Inspector of Factories was obtained separately for the two plants only when the aggregate value of clearances of the parent factory was about to exceed the limit of quantity based exemption granted by Notification No. 6/2000 C.E., dt. 1-3-2000 (i.e. 3349 MTs up to 30-9-2000, the limit being 3500 MT).
i. They have adopted the concessional clearances for both the factories separately.
j. Thus they are unlawfully availing the benefit of Notification No. 6/2000 dt. 1-3-2001 for an additional 3500 MTs.
k. Accordingly duty liability @ 16% is attracted in respect of 1766.494 MTs of kraft paper valued at Rs. 2,58,38,496.74 cleared by the newly constituted paper unit II. Duty liability for the period October 2000 to March 2001 works out to Rs. 41,34,159.48.
l. Clearances of paper during October 2000 to March 2001, by the existing board unit I have escaped assessment such paper weighing 1497.485 valued at Rs. 2,50,92,783.34 attracts duty @ 16%, an amount of Rs. 40,14,845.00.
m. Accordingly, after considering duty payment of Rs. 1, 21,900.00 by the paper unit II during 14-3-2001 to 31-3-2001, they have incurred a duty liability of Rs. 80,27,104/-.
3. The said show cause notice was contested by the appellants. However, Commissioner adjudicated the case and ordered in effect is as follows :-
a. The two factories are separately entitled to the quantity-based exemption w.e.f. 15-10-2000.
b. Clearances of the new unit-II i.e. Paper mill are exempt since their clearances did not exceed 3500 MTs from October 2000 to March 2001.
c. Accordingly, clearances of paper effected during October 2000 to March 2001, by the existing board unit - I have escaped assessment. Such paper weighing 1497.485 valued at Rs. 2,50,92,783.34 attracts duty, @ 16%, an amount of Rs. 40,14,845.00. After giving credit for Rs. 1,21,000/- paid by them, the demand is reduced to Rs. 38,92,945/-.
d. Penalty of Rs. 1,00,000/- is confirmed.
4. The dispute in short in this question concerns the interpretation of notification 6/2000 entry No. 77 as per condition No. 15 while the appellants are contesting the clearance from two mills separately during the financial year, the ld. Commissioner has come to a conclusion that up to September 2000, the clearances were effected from only one mill, as the second mill came into existence thereafter, as the central excise registration for the second mill was issued only in late September 2000. Thereafter the issues to be determined in this case is -
(I) Whether the notification in question exempts the factory only after it obtains registration ?
(II) Whether in the facts in this case penalty could be imposed?
5. The appellants have contended that the ld. Commissioner has appreciated that the issue concerns interpretation of the word 'factory' in the Notification No. 6/2000. He has also reproduced the relevant part of the notification on page 12, 13 & 14 of the impugned order. Accordingly, having agreed that the benefit of the notification is available to a factory, separately, he has ordered separate accountal of clearances from the date of the separate registration. He has however failed to appreciate that the notification, nowhere speaks about registration or eligibility of registered factory to the exemption or extension of the benefit from the date of registration. On pages 18 & 19 of the impugned order, the learned Commissioner has observed, quoting from a CBEC manual, the separate registration is required for separate premises. He has also observed that a factory would be considered separate if there were no inter-linkages in the processes of the two units. He has accordingly appreciated that, registration is concerned with premises, while existence of a factory is independent of registration. In other words, registration does not bring about or create a factory. On pages 25 & 26 of the impugned order, the learned Commissioner has observed that, Orissa sales tax authorities have commonly assessed our company, but they have separately recorded the sales figures of the two factories. Accordingly, he agrees that, since 1996-97, the factories have existed as separate unit. However, on pages 31 & 32, the learned Commissioner has placed importance upon construction of a boundary wall to separate the two factories, and thereby create two separate premises, suitable for separate registration. In short, while the exemption is available to a factory, which is sought with effect from April 2000, the learned Commissioner has granted the benefit with reference to registration only with effect from October 2000.
6. We have given our careful thought to the proposition and find that "registration" given to the second mill has been granted under the Central Excise Rule. How it has been considered as a separate factory, is doubtful, since it is not separated by any public road passage etc. Board had issued instructions on the subject of licencing units as separate or consolidated, when they are in the same municipal area etc. to be having a single Licence, even when separated by a public road passages etc. Therefore to our minds the registration of the 2 mill, as a separate factory, manufacturing excisable goods does not appear to be in order. However, we do not find any appeal on this ground by Revenue. Therefore, reluctantly, we admit the 'registration' of this new factory w.e.f. the date of a separate registration having been granted to it w.e.f 25-9-2000. The original registration continued for the factory which was clearing goods up to September & the existence of two separate factories.
7. A new factory under the excise law would have to be recognised from the date of 'registration' thereof and there can be no two opinions about the issue. Even if the units were considered by other authorities as one unit or separate unit notwithstanding. The factory has been defined under the Central Excise Act and a factory needs registration and that definition and Rules would prevail over the concepts under the other law for a separate factory.
8. Since a 'registration' has been granted w.e.f. 25-9-2000, to the new unit, hived out of earlier existing unit, we cannot find any objection of 3500 MTs to this new unit, recognised by such 'registration' effected under the Central Excise Law, when that is not under challenge before us.
9. As regards the earlier unit, we find, no case for the appellants to contest the findings as arrived at by the ld. Commissioner for charging them duty from the date as per the impugned order. The earlier unit clearances up to September 2000, as per RT 12 returns made, are for paper and paper board together and will have to be reckoned for the clearances till the recognition of the new unit and working out the eligibility under the notification 6/2000.
10. When the department itself has allowed the 'registration' and recognised the two units, we cannot find any case for imposition of penalty as arrived at by the ld. Commissioner in the impugned order. The same is therefore required to be set aside.
11. Since we find that the order of the Commissioner as regards determination of the 3500 MTs exemption limits cannot be found fault with, duty demands as determined in the order impugned cannot be interfered on the grounds made before us.
12. In view of our findings the appeal is partially allowed in above terms.