ORDER
P.G. Chacko, Member (J)
1. These are six appeals of the Revenue before us. Appeal No. E/344/2001 is against an order of the Commissioner (Appeals), while the remaining appeals are against similar orders passed by the Commissioner (adjudicating authority).
2. The facts of Appeal No. E/344/2001 are as Follows : –
The respondents were engaged in the manufacture of paper falling under Chapter 48 of the First Schedule to the CETA, 1985 and were following the Self Removal Procedure under the Central Excise Rules, 1944 in respect of the said product. Upto July/August, 2000, they had only one manufacturing unit holding Central Excise Registration No. 7/97 for manufacture of paper and having installed capacity of two paper making machinery lines, viz., MF Paper Machine for manufacture of printing and writing paper (falling under heading 48.02 of the CETA Schedule) and MG Paper Machine for manufacture of kraft paper (48.05). They were also availing the benefit of exemption for the first clearance of 3,500 M.Ts. of paper under Notification No. 6/2000-C.E., dated 1-3-2000 as amended by Notification No. 36/2000-C.E., dated 4-5-2000. While so, on 14-7-2000, they submitted an application under Rule 174 for deleting the MG paper-making portion of the factory from its existing ground plan and for separate registration of that portion in the name of M/s. Rajalakshmi Paper Mills Limited – Unit II. The Assistant Commissioner of Central Excise rejected the application, holding that the request for bifurcation of the factory and separate registration of Unit II under Rule 174 had been made with the mala fide intention to take undue advantage of the exemption benefit under Notification No. 6/2000-C.E., (as amended). Against this decision of the original authority. Unit II of M/s. Rajalakshmi Paper Mills Ltd. (present respondents) preferred an appeal to the Commissioner (Appeals) and the latter allowed the appeal. Hence the present appeal of the Revenue.
3. The essential facts are similar in the remaining appeals also. Each of the respondent-companies was engaged in the manufacture of paper of all sorts falling under Chapter 48 of the CETA Schedule. Sometime in the year 2000, they bifurcated the factory into two separate units through a division of the installed machinery and unit II thereof applied to the Central Excise Range Officer for separate registration for the manufacture of paper. Separate registration certificate was issued to Unit II. Thereafter, Unit II started clearance of their product without payment of duty upto the first clearances of 3500 M.Ts. by availing the benefit of exemption under the Notification No. 6/2000-C.E. (as amended). Later on, after investigations, it appeared to the department that the bifurcation of the parent unit into two separate units and issuance of separate registration certificate to Unit II by the Range Officer were not in order. It was felt that Units I and II, even after bifurcation, were inter-dependent for administrative, technical and other purpose and, therefore, they were bound to function as a single unit under a single registration. Consequently, it appeared to the department. Unit II of the company was not separately entitled to the benefit of duty-free clearance of 3,500 M.Ts. of paper in terms of Notification No. 6/2000-C.E. (as amended) and, therefore, they were liable to pay duty on the first clearance of 3,500 M.Ts. of paper effected in the financial year. Accordingly, the department issued a show-cause notice to Unit II demanding duty and proposing penalty. The notice also proposed to revoke the registration certificate issued to Unit II. The allegations in the show-cause notice were denied and the demands resisted. In adjudication of the notice, the jurisdictional Commissioner found that there was nothing wrong in the grant of separate registration to Unit II, and, further held that Unit II was eligible for the benefit of Notification No. 6/2000-CE. (as amended). Accordingly, the adjudicating authority dropped the proceedings against the party. The separate but similar orders passed by the adjudicating authority in favour of Unit IIs of the respondent-companies are under challenge by the Revenue in these five appeals.
4. Heard both sides. Ld. Joint CDR for the appellant-Revenue challenged the impugned orders mainly on the strength of the following decisions :-
(i) Grauer & Weil (India) v. C.C.E., 1994 (74) E.L.T. 481 (S.C.)
(ii) Bongaigaon Refinery & Petro Chem. Ltd. v. C.C.E., Calcutta, 1994 (69) E.L.T. 193 (Cal.)
(iii) Rollatainers Ltd. v. C.C.E., Delhi, 2002 (150) E.L.T. 383 (Tri. – Del).
It was submitted that, in view of the above case law, the finding of the Commissioner (adjudicating authority) that the Notification was factory-based was not correct. The question whether the two manufacturing units of each company were to be treated as one factory or not should be examined with reference to the definition of “factory” under the Factories Act as in the case of Grauer & Weil (India) Ltd. (supra). The two units of each company was working on a common plot of land, using common utilities such as water supply, steam, power etc. They were under a common administration and were maintaining a common Bank account. Common fund was used for the purchase of raw materials and capital goods. In view of these commonalities, the units should have been treated as a single factory, argued Id. JCDR. He stressed the applicability of the definition of “factory” under Section 2 (m) of the Factories Act to the case on hand, by submitting that the said provision was substantially similar to Section 2(e) of the Central Excise Act defining “factory”. It was, therefore, argued that the lower authorities had erred in treating the two units as separate factories for the purpose of Notification No. 6/2000-C.E. (as amended).
5. Ld. Counsel Shri V.M. Doiphode representing the respondents in Appeal No. E/368/02 and Id. Counsel Shri Aravind Datar representing the respondents in the remaining appeals submitted that all the clearances in question were effected by Unit IIs of the respondents-companies only after such units obtained separate Central Excise registration from the department for manufacture of paper. The demand of duty was raised for a period for which the units were individual factories with separate Central Excise registration. As long as the separate registration granted by the proper officer of Central Excise subsisted, the units had the status of individual factory authorised to manufacture paper falling under Chapter 48 of the CETA Schedule and were not to be treated as part of the parent factory. The Notification (as amended) granted exemption from payment of duty in respect of the first clearance of 3,500 M.Ts. of paper cleared for home consumption from “a factory”. The Notification did not say that such exemption shall apply to paper and paper board cleared for home consumption, by a manufacturer from one or more factories. Counsel argued that the exemption under the Notification was factory-based and not manufacturer-based as rightly held by the Commissioner (adjudicating authority) in his orders impugned in five of these appeals. Relying on case law, Counsel argued that the exemption Notification should be strictly construed. The appellant intended to import into the Notification a meaning which was not discernible from the words used therein. The appellant did not dispute that Unit II had the facility of manufacturing paper starting from the stage of pulp and that such pulp contained not less than 75% by weight of pulp made from materials other than bamboo, hard woods, soft woods, reeds (other than sarkanda) or rags. Final products of this description, falling under Chapter 48 of the CETA Schedule, were eligible for exemption from payment of duty in terms of SI. No. 77 of the Table annexed to the above Notification. The exemption was subject only to one condition, which was mentioned as condition No. 15 in the Annexure to the Notification. This condition exclusively laid down that the exemption shall apply only to the paper and paper board cleared for home consumption from a “factory” on or after the first day of April, 2000 upto first clearances of an aggregate quantity not exceeding 3,500 M.Ts. Counsel pointed out that it was clear from the above wording of Condition No. 15 that the exemption in terms of SI. No. 77 of the Table annexed to Notification No. 6/2000-C.E. (as amended), was available to paper cleared for home consumption from a factory. Unit II was a factory with separate Central Excise registration during the period of dispute and, therefore, its first clearances upto 3,500 M.Ts. in the financial year 2000-01 were to be exempted from payment of duty.
6. A further argument advanced by Shri V.M. Doiphode was that, though Rule 174 authorised the proper officer of Central Excise to grant separate registration to two or more units of the same manufacturer, the Rule did not expressly authorise revocation of such registration. Relying on the Hon’ble Madras High Court’s ruling in India Pistons Ltd. v. Asst. Collector [2000 (117) E.L.T. 545 (Mad.)], Id. Counsel submitted that the very proposal for withdrawing the registration of Unit II was without jurisdiction as there was no provision in the Central Excise Act or in the Central Excise Rules authorising such withdrawal. It was further argued that the grant of separate registration to Unit II under Rule 174, being quasi-judicial in nature, was not liable to be reviewed by the authority without specific powers having been conferred on it by the statute. In this connection, reliance was placed on the Hon’ble Allahabad High Court’s ruling in Khazanchi Paper & Board Mill v. Supdt. of C. Ex., Kanpur [1977 (1) E.L.T. (J 144)].
7. We have carefully considered the submissions. In Appeal No. E/344/01, the short question which arises for consideration is whether Unit II of M/S. Rajalakshmi Paper Mills Ltd. was eligible for separate registration under Rule 174. The application of the company for deleting MG paper-making machinery from the ground plan of the parent unit and for separate registration for the portion so deleted, for manufacturing paper products, in terms of Rule 174 was rejected by the Assistant Commissioner on the ground that the machinery had not been physically transferred or shifted from the parent unit and on the further ground that the bifurcation of the parent unit had been done with mala fide intention of availing the benefit of duty-free clearance of additional quantities of paper products under Notification No. 6/2000-C.E. (as amended). Before the first appellate authority, the party relied on the Andhra Pradesh High Court’s ruling in the case of Modi RJR Ltd. reported in 1999 (111) E.L.T. 348 (A.P) and submitted that the registering authority had no jurisdiction to decline Registration, It was also pointed out that the Commissioner of Central Excise, Madurai had already permitted bifurcation of four paper Units in the jurisdiction of Palani Range and accordingly the Range Officer had issued separate registration certificates. The Commissioner (Appeals) noted that sub-rule (9) of Rule 174 had only authorised the proper officer of Central Excise to issue certificate of registration and had not empowered the officer to decline registration to the applicant. It was further noted by the Commissioner (Appeals) that separate registration certificates had been issued to the two units by the Government of Tamil Nadu. He directed the lower authority to issue new registration certificate in respect of Unit II after verification of the particulars furnished by the company. In the Revenue’s appeal against the decision of the Commissioner (Appeals), the main ground of challenge is that the Commissioner (Appeals) had failed to appreciate the ‘colourable device’ of bifurcating the parent unit with intent to avail undue benefit of exemption under Notification No. 6/2000-C.E. (as amended). With regard to this ground, we find that the company had resolved to bifurcate their manufacturing unit into (Units I and II) as early as on 7-2-2000 as evidenced by a certified copy of the relevant resolution of the Company’s Board Meeting, available on record. This Resolution of the Company was prior to the issuance of the subject Notification. Hence it will be incorrect to presume that the decision to bifurcate the manufacturing unit was taken with mala fide intention of availing undue benefit under the Notification. The correspondence between the Company and the Assistant Commissioner of Central Excise indicates that it was categorically stated by them that upon bifurcation, each unit would have separate machinery lines from the pulp stage to the final product stage of paper and would function independently from 29-8-2000. It was further claimed by them that it was necessary to have two units with separate registration for having effective control over the production of various types of paper. Before the Assistant Commissioner, the party also relied on the Andhra Pradesh High Court’s decision in Modi RJR Ltd. (supra) and argued that the registering authority could not decline registration under Rule 174. It was also pointed out to the Assistant Commissioner that four other companies working under the same Range had been granted separate registration in respect of their second Units created by bifurcation. These submissions of the party were not properly considered by the original authority. This infirmity in the decision of the original authority was rightly detected by the Commissioner (Appeals) and, therefore, the latter directed the former to grant registration to the party after verification of the particulars furnished by them. We do not see any reason to interfere with the order of the lower authority; Accordingly, the Appeal No. E/344/01 is rejected.
8. In the remaining appeals, the issue to be considered is whether the second Units of the respondent-companies were eligible for exemption in respect of first clearances of 3500 M.Ts. of paper for 2000 – 2001 in terms of Notification No. 6/2000-C.E. (as amended). The adjudicating authority allowed this benefit to the party and vacated the following demands of duty:
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Sl. No. Appeal No. Duty demand vacated by Period
the original authority (Rs.)
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1. E/360/02 3,71,91,941/- June to Oct. 2000
2. E/361/02 1,27,95,715/- June to Dec. 2000
3. E/367/02 99,54,381/- Oct. 2000 to Feb. 2001
4. E7368/02 1,84,24,893/- July to Oct. 2000
5. E/369/02 2,73,36,137/- May to Aug. 2000
All the above periods of dispute are within the financial year 2000-01 during which Notification No. 6/2000-C.E. (as amended by Notification No. 36/2000-C.E., dated 4-5-2000) was in force. The Notification (as amended) granted exemption to paper and paperboard or articles made therefrom (falling under Chapter 48 of the CETA Schedule) in terms of SI. No. 77 in the Table annexed to the Notification. This entry reads as :-
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77 48 Paper and paperboard or articles made therefrom Nil - 15
manufactured, starting from the stage of pulp,
in a factory, and such pulp contains not less
than 75% by weight of pulp made from materials
other than bamboo, hard woods, soft, woods,
reeds (other than sarkanda) or rags.
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The exemption was subject to condition No. 15 which reads as under : -
"15. (1) This exemption shall apply only to the paper and paperboard cleared for home consumption from a factory -
(a) during the period from 1st March, 2000 to 31st March, 2000, upto first clearances of an aggregate quantity not exceeding 210 Metric Tonnes; and
(b) on or after the 1st day of April, 2000, in any subsequent financial year upto first clearances of an aggregate quantity not exceeding 3500 M.Ts. vide Notification No. 36/2000, dated 4-5-2000."
(Emphasis added)
According to the above condition, the exemption was applicable to paper and paperboard cleared for home consumption from a factory on or after the first day of April, 2000 upto first clearances of an aggregate quantity not exceeding 3500 M.Ts. The language of the text of the above provision is clear and unambiguous and, accordingly, the exemption was factory-based as held by the adjudicating authority. It has been argued by Id. JCDR that ‘factory’ should be understood as defined under the Factories Act. In this connection, he has relied on the Supreme Court’s decision in Grauer & Weil (supra). In the case considered by the apex Court, the question was whether the goods manufactured by one unit of the company and removed to another unit of the same company to be used as input by the latter unit could be said to have been captively consumed. This question was answered in the negative on the basis of a finding that the two units were to be treated as one ‘factory’ within the meaning of this term under Section 2 (m) of the Factories Act, 1948. We find that the decision of the apex Court in the cited case does not help the Revenue inasmuch as Notification No. 46/81-C.E., dated 1-3-81 whereunder the company had claimed exemption in respect of the above goods contained an ‘Explanation” which reads thus :-
“In this Notification the expression “factory” has the meaning assigned to it in Clause (m) of Section 2 of the Factories Act, 1948 (63/1948).”
This kind of a provision was conspicuously absent in Notification No. 6/2000-C.E. (as amended) and, therefore, the expression “factory” had to be understood as defined under Section 2(e) of the Central Excise Act. Even the appellant has no case that the goods manufactured and cleared by Unit II of each of the respondent-Companies during the relevant period did not conform to the description of “goods” at SI. No. 77 in the Table annexed to the subject Notification. The only grievance of the appellant is that Units I and II of each of the respondent-companies were interdependent and hence not treatable as separate factories for the purpose of the Notification. We do not think that this grievance has any basis. Admittedly, Unit II of each of the respondent-companies was recognised as “factory” within the meaning of this expression under Section 2(e) of the Central Excise Act, by the proper officer of Central Excise, who issued separate registration certificate to the unit. Such registration certificates were in force during the relevant periods of dispute. The relevant demands of duty were raised in respect of periods during which the registration certificates were in operation. Hence the Revenue cannot be heard to contend that the respondent-Units were not separate factories during the period of dispute. The case law relied on by the JCDR does not seem to support the Revenue’s case. We have already distinguished the case of Grauer & Weill (supra) by observing that, in that case, the exemption Notification which was considered by the apex Court expressly required that the expression “factory” had to be understood as defined under Section 2 (m) of the Factories Act. The Calcutta High Court’s order in Bongaigaon Refinery & Petrochem Ltd. v. CCE. [1994 (69) E.L.T. 193 (Cal.)], relied on by the JCDR, was only a remand order and we have not found any binding precedent therein. In the case of Rollatainers Ltd. (supra), this Tribunal considered Notification No. 6/2000-C.E. (as amended), and examined the question whether the benefit of the Notification was available to separate divisions 6f the company. It was found that both the divisions were situated in the same premises and, therefore, they could not be treated as different factories. The instant case is factually different inasmuch as units I and II were having separate registration during the material period, whereas, in the case of Rollatainers Ltd., the two divisions did not have separate registration. In any case, the Revenue can make no useful reliance on the Tribunal’s decision in Rollatainers as it has been set aside by he apex Court vide 2004 (170) E.L.T. 257 (S.C.). None of the decisions cited by the JCDR has advanced the Revenue’s case. Therefore, we hold that, during the subsistence of the separate registration certificate issued to Unit II by the proper officer of Central Excise, it was not open to the department to treat Units I and II as a single factory and deny Unit II the benefit of Notification No. 6/2000-C.E. (as amended). The demands of duty raised on the respondent-Units are, therefore, unsustainable. Ld. Commissioner was right in vacating the proposal for demanding duty from and imposing penalty on, the respondent-Units.
9. We find no good reason to interfere with the Commissioner’s decision on Registration Certificate either. As a matter of fact, the relevant findings of the Commissioner have not been effectively challenged in these appeals. In Order-in-Original No. 6/2002 (impugned in Appeal No. 368), the Commissioner found thus :-
“……As rightly argued, the production facilities owned by the two units are independent of each other and they do not get mixed up with each other at any point of time during the stream of production. In fact, each factory had a separate work force and separate stockyards to store raw materials. The power consumption was separate (except pump house) and each unit was provided with a transformer. Mere common managerial control cannot be held against them……….”
Similar findings were recorded in the other orders also. In the absence of effective challenge to these findings, we have to uphold the Commissioner’s order justifying the grant of separate registration to the second Units of the respondent-companies .
10. In the result, the impugned orders are only to be affirmed and we do so. The appeals are rejected.