JUDGMENT
S.L. Peeran, Member (J)
1. The Hon’ble High Court of Judicature at Madras have directed this Tribunal in Reference Case Petition No. 12/97 dated 11.4.2000 to draw up statement of facts and refer the matter alongwith material documents required for deciding the following question:
“Whether in the facts and circumstances of the case, the Tribunal was right in interpreting the team “remained closed” occurring in the Notification No. 283/82-CE as not applicable to the present case when there were in fact clearances during a period when activity relating to manufacture was not carried on in the factory?”
2. Revenue has filed a set of documents relevant for the purpose of deciding the question and in terms of the same, the following statement of facts is drawn up:
STATEMENT OF FACTS
3. M/s. Kothari Industrial Corporation Limited, Madras-34, were permitted to take credit of an amount of Rs.14,94,135.09 being the incentive on clearances of Caustic Soda made in excess of the base clearance in terms of the provisions contained in Notification No. 116/84-CE dt. 11.5.94 issued under Rule 56 AA of the Central Excise Rules, 1944. The above credit was authorized on the strength of information furnished in their application submitted through their letter dated 29.5.85. As per the information furnished against SI. No. 7 of the application from the number of days that the factory remained closed for more than 15 days was shown as Nil.
4. The Superintendent of Central Excise, Range II F, Madras III Division while verifying the incentive claim for Hydrochloric Acid filed by the company had found that M/s. Kothari Industrial Corporation Ltd. Madras-68 were closed for more than 15 days at one time i.e. from 27.12.83 to 13.1.83 and 1.2.83 to 23.2.83 due to 100% power cut imposed by the Tamil Nadu Electricity Board. The stoppage of the plant was inlimated by the assessee to the Range Officer by letters dated 22.12.82, 13.1.83 and 23.2.83.
5. Based on the above facts there appeared to be no reason to think that there was no closure of the factory in respect of which incentive was granted for Caustic Soda. Taking into account the above period of 40 days and treating them as closure, there appeared to be an excess sanction to the extent of Rs. 3,71,028.43 under BED and Rs.18,551.14 under SED as per the details given in the work sheet annexed to the Order-in-Original.
6. From the above it appeared that the respondent-assessee having wilfully suppressed the fact of closure of the factory and obtained an excess credit of the amount specified above.
7. The respondent-assessee were, therefore, required to show cause to the Assistant Collector of Central Excise, Madras III Division, as to why the excess amount of Rs. 3,71,028.43 under BED and Rs. 18,551.41 under SED should not be demanded from them under Section 11A of the C. E. Act, 1944.
8. M/s. Kothari Industrial Corporation Ltd., respondent-assessee herein, have submitted their reply by their letter dated 10.2.86. They have enclosed an extract of their RG I Register for caustic soda lye/flakes, liquid chlorine and hydrochloric acid on 27.6.86 at the time of personal hearing. Further at the time of personal hearing again on 8.7.87 they have stated that their factory consist of caustic soda plant, chlorine plant, hydrochloric acid plant etc. that if production is stopped in any one plant or in all plants due to some reason or other does not mean that their factory is closed and they referred to the RG I register extract of the commodities manufactured by them filed alongwith the submission dated 27.6.87 at the time of previous personal hearing.
9. The original authority after the due consideration rejected the assessee’s pleas as above and confirmed duty demand of Rs. 3,89,579.84 as demanded in the show cause notice. On an appeal, the Commissioner (Appeals) agreed with the pleas raised by the assessee and granted the benefits consequentially, by holding in the finding portion as follows:
“I have carefully considered the submissions made by the learned consultant. Under Central Excises & Salt Act, Section 2(e), factory means any premises, including the precincts thereof wherein or in 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”. This definition does not mean that in every nook and corner of the factory, process of production must be carried on. It means that in the entire factory including precincts thereof, in any part of the same manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on. The words ‘ordinarily carried on is of special importance. It is nobody’s case that in the factory of the appellants, production is not ordinarily carried on. Therefore, though during any particular period, the production was not carried on, but other activities such as clearance of the goods for home consumption were carried on, the factory denotes the entire factory including the precincts thereof as per the definition given above. Therefore, if the entire factory was not closed and clearances were continued, in spite of production being stopped in any part of the factory, it cannot be said that the entire factory was closed. Shri C, Chidambaram also referred to the decision in the case of Collector of Central Excise, Madras v. Indian Organic Chemical Ltd., Madras by CEGAT, South Regional Bench 1985 (22) ELT 945 wherein it has been clearly stated that it is clearance upon which excess production is payable though the scheme may be called production incentive rebate. I find that this is substantially correct. Presuming that during the incentive year, actual production was less than the earlier rebate year, which is base period but clearances effected during the former year was more than the base period there is nothing in the notification to deny incentive rebate. Therefore, I view of the fact that incentive is related to the clearance of the goods from the factory and not to the actual quantities produced during any rebate year and the fact that the entire factory was not closed for a period of more than 15 days in the year which is taken as base period, the contentions of the appellants are correct when read in the light of CEGAT’s decision mentioned above. As such the appeal is allowed with consequential benefits.
10. Aggrieved with the above, the Revenue had filed an appeal before the Tribunal. The Tribunal by their Final Order No. 649/1996 dated 23.4.96 did not find force in the revenue’s appeal and rejected the same by following their earlier order rendered in the case of Indian Organics Chemicals Ltd. 1985 (22) ELT 945. The findings recorded by the Tribunal in para-4 is as follows:
“4. We have considered the submissions made by both the sides, in the grounds of appeal in para 3, the appellant-Commissioner has urged that the department has filed a reference application against the decision of the Tribunal in the case of Indian Organics Chemicals Ltd., relied upon by the CCE (Appeals) and the reference application has been allowed by the Tribunal. The mere fact that the reference application has been allowed by the Tribunal does not tantamount to reversal of the decision of the Tribunal. Unless this reference is allowed by the Hon’ble High Court, the question of not following the decision of the Tribunal does not arise. It is admitted fact that the present case is covered in favour of the assessee by the said decision as could be seen from para 3 of the said decision and the Collector (Appeals) has rightly followed the said decision. We, therefore, do not see any reason for interfering with the order passed by the CCE (A). Therefore, following the ratio of our earlier decision. We find no force in the plea of the Revenue and accordingly we dismiss the appeal,”
11. Aggrieved with the said rejection of appeal, the revenue filed a reference application in E/Ref/214/96 to refer several questions to Hon’ble High Court under Section 35G (1) of the Act. The Tribunal did not find the questions to be referable and rejected the application. On such rejection, the Commissioner of Central Excise filed a petition under Section 35G (3) of the Central Excise Act before the Hon’ble High Court of Judicature at Madras to call for a statement of the case from the Tribunal to decide the question as already extracted above. The High Court has been pleased to direct the Tribunal to draw up a statement of the case and refer the matter with the material documents for answering the question. The same has been drawn up and the Registry is directed to remit this statement of the case and the documents to the Registrar of Hon’ble High Court of Judicature at Madras to place it before the appropriate bench for answering the question.