ORDER
P.K. Kapoor, Member (T)
1. This appeal and the Cross Objection arise out of the order dated 3-6-1988 passed by the Collector of Central Excise (Appeals) New Delhi. The appellants are engaged in the manufacture of cement. Their clinker unit is located at Narsingarh, District Damoh, whereas the grinding unit is located at village Imlai at the distance of 15 Kms. from the clinker unit. The clinker is transported to the grinding unit by trucks. The appellants filed a classification list under Rule 173B on 13-5-1987 claiming the benefit of Notification No. 124/87-CE dated 29-4-1987 which prescribed a concessional rate of duty on cement manufactured out of clinker produced in the same factory. The appellants’ claim for concessional duty on cement was rejected by the Assistant Collector by his order dated 21-9-1987 on the grounds that the clinkering unit and the grinding unit being separate, the condition of the notification that cement should be manufactured out of clinker produced within the same factory, was not satisfied. Being aggrieved by the order passed by the Assistant Collector, the appellants filed an appeal before the Collector (Appeals) who by the impugned order confirmed the order passed by the Assistant Collector.
2. On behalf of the appellants, Shri N. Khaitan, the learned Advocate, appeared before us. He stated that the Collector (Appeals) had failed to appreciate that the clinker and grinding units although located at a distance of 15 Kilometres from each other were in fact a part of the same composite cement plant. He added that the Collector (Appeals) had further failed to appreciate that both the units were owned and controlled by M/s. Mysore Cements and were being run under a common management. He stated that under the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961, the Competent Authority had passed an order treating the factories complex of the appellants at Narsingarh and Imlai, District Damoh and Administrative offices as a single ‘Establishment’. Shri Khaitan referred to the Certificate of Eligibility for Deferment of Payment of Sales Tax issued by the Director of Industries, Madhya Pradesh and stated for the purposes of Sales Tax, the units at Narsingarh and Imlai had been treated as a part of the same factory. He submitted that even though separate Central Excise Licences had been obtained in respect of the two units, a common RT-5 Return in respect of consumption of raw materials was being filed. He stated that the Collector (Appeals) had also ignored the clarification issued to M/s. Narbada Cement Co. Ltd. by the Ministry of Industry stating that clinker produced by the same party should not be treated as clinker brought from outside. He added that the exemption under Notification No. 124/87-CE dated 29-4-1987 could not be denied to the appellants since the intention of the Government to extend the benefit of the concessional rate of duty even when the clinker and grinding units of the same manufacturer were separately located was made clear by the amending Notification No. 221/87. In support of his submissions Shri Khaitan cit2d the following case law :-
(1) Produce Exchange Corporation Ltd. v. Commissioner of Income-tax (Central) Calcutta – (1990) 77 I.T.R. 739 (SC);
(2) Commissioner of Income-tax, Gujarat II v. Alembic Glass Industries Ltd. – (1976) 103 I.T.R. 715 (Guj.);
(3) Cothas K. Prakash and Ors. v. Collector of Central Excise, Bangalore -1987 (32) E.L.T. 790 (Trib.).
3. On behalf of the respondents, Shri Somesh Arora, the learned JDR submitted that in respect of the appellants clinker and grinding units separate licences under the Central Excise law and the Factory Act had been issued. He contended that under these circumstances and having regard to the provisions of Section 2(e) of the Central Excises and Salt Act, 1944, the two units which were separated by a distance of about 15 Kms. had to be treated as independent factories. He stated that there was no force at all in the appellants’ contention that the benefit of the exemption under Notification No. 124/87 has to be extended to them in view of the amending Notification No. 221/87. He submitted that an exemption notification has to be interpreted strictly according to its wordings and contended that the appellants were not eligible for the exemption under Notification No. 124/87 since they did not satisfy the condition of the notification which required that cement should have been manufactured out of clinker produced in the same factory. He stated that the decisions relating to Income Tax cited on behalf of the appellants were not relevant. In support of his contentions, he cited the following decisions :-
(1) Steel Authority of India Ltd. v. Collector of Central Excise, Bhubaneswar -1987 (29) E.L.T. 597 (Trib.);
(2) Collector of Central Excise v. Birla jute & Industries Ltd. -1990 (46) E.L.T. 569 (Trib.);
(3) Swadeshi Dyeing & Bleaching Mills (P) Ltd. v. Union of India – 1989 (41) E.L.T. 224 (Bom.).
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether for the purpose of exemption under Notification No. 124/87, cement manufactured in one factory of the appellants could be deemed to have been produced out of clinker manufactured in the same factory even when the clinker was actually produced in another factory of the appellants situated at a distance of about 15 Kms. from first factory to which it is transported by trucks for grinding.
5. In order to appreciate the rival contentions we refer to the Notification No. 124/87, which is reproduced below :-
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6. The appellants’ case is that the factory for the production of clinker was set up at Narsingarh because of the availability of lime stone but the factory for grinding the clinker into cement had to be set up at Imlai the nearest place at which railway siding was available for despatch of finished cement to the markets. They have contended that they were eligible for the exemption in terms of Notification 124/87 since the two factories even though separated by a distance of about 15 Kms. were units of a composite plant owned and controlled by M/s. Mysore Cement Ltd. The appellants have also contended that for the purposes of Sales Tax and the Madhya Pradesh Employment (Standing Orders) Act, 1961 the concerned authorities had treated the two units as parts of the same industrial undertaking. In this regard reliance has also been placed on the clarification issued by the Ministry of Industry in the case of M/s. Narbada Cements to the effect that clinker produced by the same party should not be treated as clinker brought from outside. The appellants have also claimed that in respect of the two factories they were submitting certain common returns to the Central Excise authorities.
7. It is seen that the expression ‘factory’ is defined in Section 2(e) of the Central Excises and Salt Act as :
“any premises, including the precincts thereof, wherein or any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on”
We find that in the case of Bongaigaon Refinery and Petro Chemical Ltd. v. Collector of Central Excise reported in 1992 (57) E.L.T. 383, the Hon’ble Calcutta High Court while examining the question whether Low Sulphur Heavy Stock (LSHS) manufactured in the Refinery Unit and utilised as fuel in Xylene Unit could be deemed as having been used in the same factory for the purpose of exemption under Notification No. 28/89-CE dated 1-3-1989 had examined the scope of the expression “factory” which is defined in Section 2(e) of the Act. The Court had held that “factory” includes the whole of the premises in a part of which such goods are manufactured. The Court inter alia referred to the Hon’ble Delhi High Court judgment in the case of Delhi Cloth and General Mills Co. Ltd. v. Joint Secretary, Govt. of India reported in 1978 (2) E.L.T. 0.121). Para 7 (4) of the said judgment being relevant is reproduced below :-
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On a plain reading of the extract from the Calcutta and Delhi High Court judgment reproduced above it follows that a “factory” includes only the premises and the precincts thereof wherein any excisable goods are manufactured and would not include any plant which is not situated in the same premises or the precincts thereof.
8. In this regard we find that in the case of Collector of Central Excise v. Birla Jute and Industries Ltd. reported in 1990 (46) E.L.T. 569, the Tribunal has held that in terms of Section 6 of the Central Excises and Salt Act read with Rule 174 of the Central Excise Rules, 1944 licence is to be issued to a factory and even if two factories are connected by a conveyor belt it would not suggest that they are dependant on each other. Paras 14 to 16 of the said judgment being relevant are reproduced below :-
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9. From the judgment of the Andhra Pradesh High Court in the case of Assistant Collector, Central Excise v. Nizam Sugar Factory Ltd., Hyderabad reported in 1978 (2) E.L.T. (J 489) it follows that two factories belonging to the same manufacturer having separate places of business have to be treated as distinct and separate licence for each of them are required to be granted. Relevant extracts of the said judgment are reproduced below (Para 3):
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10. From the above discussion, it follows that the question whether two plants can be treated as part of the same composite factory has to be decided having regard only to the definition of ‘factory’ in Section 2(e) and the other relevant provisions of the Central Excises and Salt Act. Since the two units of the appellants were separated by a distance of about 15 Kms. and were not in the same premises or the precincts thereof and separate Central Excise Licences under Rule 174 of the Central Excise Rules had been issued for the two units, on the ratio of the judgments quoted above, we hold that they have to be treated as independent factories. For this reason in our view the decisions of the concerned authorities under the State Sales Tax Law and Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 which have been referred to by the appellants, cannot be of any assistance to them. For the same reasons, the clarification issued by the Ministry of Industry in the case of Narbada Cements can also not be of any assistance to the appellants.
11. The Learned Counsel for the appellants has relied upon the decision of the Tribunal in the case of Cotltas K. Prakash and Ors. v. Collector of Central Excise, Bangalore reported in 1987 (32) E.L.T. 790. In this case, the question that came up for examination was whether blending of Coffee and Chicory was an excisable activity attracting Item 68 of the Central Excise Tariff. In terms of the provisions of the Act and the relevant notification, manufacturing activity of goods falling under Item 68, CET was to be treated as an excisable activity, if the same was carried out in a factory as defined in Section 2(m) of the Factories Act according to which “factory” is any premises, including the precincts thereof, wherein 10 or more workers were working on any day of the preceding twelve months and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily carried out. The Tribunal while examining whether two premises separated from each other would constitute a ‘factory’ under the provisions of Section 2(m) of Factories Act, held on the basis of the principle laid down by the Hon’ble Madras High Court in the case of N.V. Radhiah and Bros. v. E.S.I. Corporation (AIR 1967 Madras 111), that a factory would normally be in one premises, including the precincts, or in different places within the compound, but there may be cases where the owner may run the factory in units located at different buildings at different places provided the work carried out in all these different buildings at different places is interconnected. Thus, in this case the Tribunal had examined the scope of the term “factory” within the meaning of Section 2(m) of the Factories Act. As observed by us earlier for the purpose of determining the eligibility to exemption under a notification issued under the Central Excise Rules, the question whether two factories owned or controlled by a manufacturer could be deemed as a single or composite factory will have to be decided only with reference to the provisions of Section 2(e) and other relevant provisions of the Central Excises and Salt Act, 1944. Hence, in our view, the decision of the Tribunal relied upon by the appellants can also not be of any assistance of them.
12. In view of the above discussion, we hold that the two factories of the appellants being separate and distinct and ‘clinker’ used for the production of cement was not being manufactured in the same factory and therefore they were not eligible for exemption in terms of Notification No. 124/87.
13. In view of the foregoing the appeal is rejected. The Cross Objection is also disposed of accordingly.