[Order per : H.K. Thakur, Member (T)]. - These stay/miscellaneous applications and appeals have been filed by the appellants M/s. Garden Silk Mills Ltd. (GSML for short), M/s. Bhilosa Industries Pvt. Ltd. (BIPL for short) and M/s. Well known Synthetic Pvt. Ltd. (WSPL for short). The issues involved in all these applications/appeals is that the appellants are availing the benefit of Nil rate of duty as per Sr. No. 6 of Notification No. 30/2004-C.E., dated 9-7-2004, as amended. All the three appellants have the facilities of manufacturing Partially Oriented Yarn (POY for short) in their other units and are also undertaking the processes like texturising/draw twisting etc. on POY in another factory of the appellants where benefit of Notification No. 30/2009-C.E., is availed i.e. the activities of manufacturing POY and its subsequent processing are done in different factories or the appellants. It is the case of Revenue in these proceedings that the appellants are not entitled to the benefit of exemption under Sr. No. 6 of Notification No. 30/2004-C.E., as all these appellants are having the facilities of manufacturing POY in factory/factories situated elsewhere. Shri M. Chandrasekharan (Sr. Advocate), Shri Willingdon Christian (Advocate) and Shri S. Sunil (Advocate) appeared on behalf of the appeals related to GSML; Shri V. Sridharan (Sr. Advocate), Shri Anand Nainawati (Advocate) and Shri Mahesh Raichandani (Advocate) appeared on behalf of the Stay/Misc. applications and appeals related to BIPL; and Shri Prakash Shah (Advocate) and Shri D.H. Mehta (Advocate) appeared on behalf of the stay applications/appeals related to WSPL.
2. Shri M. Chandrasekharan (Sr. Advocate) appearing on behalf of his clients argued that GSML have got 3 factories situated at Jolwa and Vareli. That factories of GSML situated at Jolwa are separately manufacturing POY and draw twisted Polyester Filament Yarn (PFY for short) and the third factory situated at Vareli is manufacturing, inter alia, draw wrap yarn. That all the 3 factories were earlier registered separately with the Central Excise Department. That subsequently, all the three separately registered factories were given a common registration as requested by his appellant and it was ordered by the Revenue that GSML will maintain separate records of production and clearance of excisable goods from the respective factories and that a single consolidated CENVAT/PLA account will be maintained for the purpose of discharging duty payments. That subsequently GSML requested for separate registration which was not allowed by the lower authorities but the order of lower authorities was appealed against and by an order dated 12-4-2005, Commissioner (Appeals) set aside the order passed by the Deputy Commissioner holding that GSML will be eligible for separate registrations for the 3 factories situated at different locations. That Revenue filed appeal against the Commissioner (Appeals)’s order before CESTAT Ahmedabad, who vide its order upheld the order passed by the first appellate authority regarding separate registration to each factory. That Revenue filed a Tax Appeal No. 1665/2009 against the order of CESTAT Ahmedabad which was dismissed by Gujarat High Court by order dated 10-9-2009. That Revenue did not accept the order passed by Gujarat High Court and agitated the issue before the Apex Court by moving a SLP which was dismissed by the Apex Court on 15-3-2010. That Revenue was not acting upon the order dated 2-5-2008 passed by CESTAT Ahmedabad and on an application of GSML in a subsequent order dated 19-6-2009, CESTAT directed the Revenue to implement the earlier order of CESTAT and provide separate registrations within a period of one month. That only on a specific order passed by CESTAT, for granting separate registration to 3 factories and reporting compliance by 24-9-2009, that Revenue granted them separate registrations to his clients as 3 separate factories. Regarding the admissibility of Notification No. 30/2004-C.E., dated 9-7-2004, ld. Advocate argued that the words “his factory” mentioned in Sr. No. 6 of Notification No. 30/2004-C.E. will only mean as ‘the same factory’ where exempted processes are being carried out on POY manufactured by GSML. It was his case that when the intention of legislature is to mean any other factory/factories of the manufacturer, then specific words are so used to give specific expression as given in notifications like Notification No. 24/95-C.E. and Notification No. 8/2003-C.E., where the expressions “no proprietary interest in any factory” or “from one or more factories of the manufacturer” have been used. That in the case of Notification No. 30/2004-C.E. such words are not used, therefore, the words “his factory” in Notification No. 30/2004-C.E. have to be only read as the “same factory” where the exempted processes are being undertaken. It was also argued by ld. Advocate that it has been wrongly interpreted by the adjudicating authority that the concept of ‘Singular’ includes ‘Plural’ of the General Clauses Act, 1987 will be applicable to the words “his factory” used in Notification No. 30/2004-C.E. It was also argued by the ld. Advocate that the word ‘manufacturer’ has not been defined under Section 2(f) of Central Excise Act, 1944 but has to be construed in the context of the word ‘manufacture’ in common parlance as defined under Section 2(f) of the Central Excise Act, 1944. That the word ‘factory’ as defined in Section 2(e) of Central Excise Act, 1944 has to be read along with the definition of ‘manufacture’ given in Section 2(f) of the Central Excise Act and will mean only ‘the same factory’ of the manufacturer. That in the case of this appellant, all the units were treated as different factories as per the proceedings which terminated in the Apex Court. With respect to time bar nature of the demand and imposition of penalty it was argued by the ld. Advocate that appellant was earlier availing the benefit of Notification No. 6/2000-C.E. where rate of duty on the same activities carried out by this appellant was fixed at rate of Rs. 2.5 per kg and Notification No. 6/2000-C.E. was also using the words “his factory” and an ‘independent texturiser’. That as this appellant was availing the benefit of similarly worded exemption notification, therefore, there was a bona fide belief that the words “his factory” used in Notification No. 30/2004-C.E. only meant the “same factory” where the exempted processes are being done. That the fact of availing Notification No. 6/2000-C.E. was also shown by his appellant in the periodical returns filed with the Revenue. It was argued that the extended period of limitation cannot be invoked in these proceedings and no penalties can be imposed on any of the appellants related to the GSML appeals as no intention to evade any Central Excise duty can be attributed to his appellants. As an alternative submission it was argued that by ld. Advocate that in case the exemption of Sr. No. 6 of exemption Notification No. 30/2004-C.E. is held to be not admissible then his clients will be entitled to taking of Cenvat credit of duty paid on POY used in the manufacture of texturised/draw twisting yarn etc. cleared under exemption Notification No. 30/2004-C.E.
3. Shri V. Sridharan (Sr. Advocate) appearing on behalf of his clients during hearing and also under written submissions filed, argued that his appellants are having 5 factories situated geographically at different places in village Rakholi (Silvassa). That exemption under Sr. No. 6 of Notification No. 30/2004-C.E., dated 9-7-2004 is available to those factories where only Polyester Texturised Yarn (PTY for short), is being manufactured. That in those factories, where texturised yarn is being manufactured, no facility for manufacturing of POY is available. That is to say where the exemption is claimed, those units/factories do not have the facility or machinery for manufacture of POY. It was argued by ld. Sr. Advocate that the language of Sr. No. 6 of Notification No. 30/2004-C.E. is identical to the wordings used in Sr. No. 114 of Notification No. 6/2000-C.E., dated 1-3-2000, which was being availed by his clients earlier and no objection was raised by the Revenue. It was also his case that the words “his factory” used in Sr. No. 6 of Notification No. 30/2004-C.E. has to be considered as the same factory where exempted processes are being undertaken. That as per Para 4.8.1 of Circular No. 334/3/2004-TRU, dated 8-7-2004 also, it has been clarified by C.B.E. & C. that when the duty is paid on fibres and filament yarns then such duty paid yarn when further subjected to any process in a unit, which does not have the facility of making basic filament yarn (including texturised yarn), will also have an option to avail exemption. That the word “unit” used in the circular could only refer to the same factory where exempted processes are being undertaken. He relies upon the case law of Allahabad High Court in the case of Shahnaz Ayurvedics v. CCE, Noida [ (All.)] to argue his point that circulars issued by C.B.E. & C. are binding on the Revenue officers. Ld. Sr. Advocate also relies, inter alia, on the judgment of Mumbai High Court in the case of Raymond Ltd. v. UOI [ (Bom.)] to argue that Notification No. 30/2004-C.E. has to be read in view of the circulars issued by Joint Secretary TRU and the speech of the Finance Minister. It was strongly argued by ld. Sr. Advocate that the words “all filament yarns procured from outside subject to any process by the manufacturer, who does not have the facilities in his factory (including plant and equipments) for the manufacture of filament yarn of Chapter 54, need not be on purchase basis as word procurement is much wider than purchase of goods.” That the words ‘his factory’ used in Notification No. 30/2004-C.E. thus denotes the same factory where exempted manufacturing activity is being undertaken. Shri V. Sridharan (Sr. Advocate) made the Bench go through the ordinance dated 24-11-1979, Notification No. 297/97/79-C.E., dated 24-11-1979, Budget proposal of 1995-1996, C.B.E. & C. Circulars of 1995/1996 to drive home the point that certain specific expressions like “within the same factory/factories” or “no proprietary interest in any factory” are used in a notification to specify the intention of the legislature where it has to be made clear that the manufacturer having more than one factory is not eligible to a particular exemption notification. That no such words are used in exemption Notification No. 30/2004-C.E., therefore, the words “his factory” has to be interpreted as the same factory for the purpose of exemption. Ld. Sr. Advocate made the Bench go through Sr. No. 89 of exemption Notification No. 6/2000-C.E., dated 1-3-2000 and argued that the explanation given in this serial number convey availability of exemption to an ‘independent processor’ of fabric who is a manufacturer engaged exclusively in the processing of fabric and who has no proprietary interest in any factory engaged in spinning of yarn or weaving of fabrics. With respect to the findings of the adjudicating authority; that for the interpretation of the words “his factory” definition of ‘Singular’ includes ‘Plural’ as given in Section 13(2) of General Clauses Act, 1987; it was argued that the same is not applicable to the facts and circumstances of these appeals. Ld. Advocate relied upon the judgment in the case of CCE, Mumbai-II v. Kanjur Bleaching Co. Pvt. Ltd. [ (Tri.-Del.)] and argued that exemption under Notification No. 30/2004-C.E. is for a factory and the act of manufacturer and not to the manufacturer as a ‘legal entity’, therefore, exemption under Notification No. 30/2004 has been correctly availed.
3.1 As an alternative submission, learned Sr. Advocate argued that if the benefit of Sr. No. 6 of Notification No. 30/2004-C.E. is held to be not admissible then his client should be granted benefit of Cenvat credit of duty paid on the inputs like POY and input services used in the manufacture of PTY etc. That in view of the following case laws Cenvat credit has been held to be admissible in respect of even clandestinely removed goods :-
(i) T.T.K. Pharma Ltd. v. CCE, Chennai [ (Tri.-Che.)]
(ii) Arvind Agarwal v. CCE, Delhi [ (Tri.-Del.)]
(iii) DSM Anti-Infective India (P) Ltd. v. CCE, Chandigarh [ (Tri. - Del.)]
(iv) Sitham Fluid Seals Pvt. Ltd. v. CCE, Coimbatore [ (Tri. - Che.)]
(v) Merinoply & Chemicals Ltd. v. CCE, Shillong [ (Tri. - Kolkata)]
(vi) Dalmia Industries Ltd. v. Collr. C.E., New Delhi [ (Tri. - Del.)]
(vii) V.P. Packaging v. CCE, Calcutta-I [ (Tri. -Kolkata)]
(viii) Reckitt Benckiser (India) Ltd. v. CCE, Bolpur [ (Tri. - Kolkata)]
(ix) Goenka Wollen Mills Ltd. v. CCE, Shillong [ (Tri. - Kolkata)]
3.2 Second alternative submission made by the ld. Advocate was that his clients were earlier availing the benefit of Notification No. 6/2000-C.E. where similar words “his factory” were used and concessional rate of duty was being availed. That appellant was under the bona fide belief that the words “his factory” meant the same factory where exempted processes are being undertaken. That Revenue was well aware of the captive consumption of POY and the valuation done by his client as evident from the audit reports of audit of the appellant done from time to time. It was, therefore, argued by the Sr. Advocate that extended period of limitation is not applicable in these proceedings and no penalties under any of the provisions of Central Excise law are applicable to his clients, as his clients were under a bona fide belief that the words “his factory” means “the same factory” where exempted processes are undertaken.
4. Shri Prakash Shah (Advocate) appearing on behalf of the appellant in appeals relating to WSPL argued that WSPL is having 5 units situated at geographically different locations. That exemption is being availed with respect to only those units/factories in which there is no facility for manufacturing POY. He borrowed the arguments made by ld. Sr. Advocate Shri V. Sridharan appearing on behalf of BIPL. It was also argued that the processes of manufacture and clearing the goods from various factories for captive consumption were known to the Department and his client were filing periodical returns/valuation declarations and Revenue was well aware of the activities being undertaken in different factories. Secondly, it was argued that the Revenue itself has given separate registrations for each manufacturing activity to be undertaken in each factory. That when separate registrations are given by Revenue regarding type of goods manufactured, then extended period cannot be invoked and penalties are not attracted on his clients in these proceedings. It was also his case that where two interpretations of an exemption notification are possible then that interpretation going in favour of the assessees should be adopted.
5. Shri P.R.V. Ramanan, ld. Special Counsel appeared on behalf of the Revenue in all these Stay/Misc. applications and appeals. It was argued on behalf of the Revenue during hearing and through written submissions that the benefit of Notification No. 30/2004-C.E. is not dependent upon the fact whether a manufacturer is having separate registrations for each factory or not. That the words “his factory” used in Sr. No. 6 of Notification No. 30/2004-C.E., dated 9-7-2004 should mean any of the factories of the a manufacturer as a ‘legal entity’. It was strongly argued by Special Counsel that exemption is not only to a manufacturer but also with respect to availability of facility for manufacture of POY in any of the factories of a manufacturer. Learned Special Counsel strongly defended the reliance of the adjudicating authority upon Section 13 of General Clauses Act, 1987 with respect to the expression “his factory” used in Notification No. 30/2004-C.E. as ‘Singular’ includes ‘Plural’. He also relied upon Para 3 of Budgetary changes made in Budget 2000-2001 wherein a rate of duty of Rs. 2.5 per kg was prescribed for texturised polyester yarn manufactured by independent texturiser under Notification No. 6/2000-C.E., as amended. It was his case that this notification only granted partial exemption to independent texturisers subject to the condition that this exemption was only meant for those manufacturers of texturised yarn who do not have the facility of manufacturing partially oriented yarn. That this exemption is admissible to a manufacturer as a legal entity who purchases yarn from outside and does not have facilities to make POY in any of his factories. It was strongly argued by the Special Counsel that interpretation of Notification No. 30/2004-C.E. will have to be interpreted in the light of legislative intention and history of a manufactured product (texturised filament yarn) along with Finance Minister’s speech in the Budget as well as budgetary clarifications issued by C.B.E. & C. Ld. Special Counsel made the Bench go through the Budgetary changes, C.B.E. & C. Circulars and speeches of Finance Minister issued from time to time, to support his arguments and legislative intention behind Notification No. 30/2004-C.E. That as per the legislative history only independent texturisers having no facility for the manufacture of base filament yarn have been exempted from payment of duty under Notification No. 6/2000-C.E. and Notification No. 30/2004-C.E. Ld. Special Counsel, therefore, strongly defended the orders passed by the adjudicating authority, including invocation of extended period and imposition of penalty, on the grounds that the appellants have not given any specific information that they were having facility to manufacture POY in their other factory/factories. Appellants also filed written submissions which were received upto 9-9-2014.
6. Heard both sides and perused the case records as well as the written submissions made by the appellants. As the issue involved in all these stay applications and the appeals is same, therefore, the same are being taken up together under this common order. All these appeals have also been listed for regular hearing, therefore, after allowing Stay/E.H. applications, wherever filed, all these appeals are taken up for disposal.
7. There are mainly three issues required to be deliberated in these appeals :-
(i) Whether the appellants are eligible to the benefit of exemption under Sr. No. 6 of the Notification No. 30/2004-C.E., dated 9-7-2004, as amended, when the appellants are having more than one factories and also have the facilities of manufacturing POY in a factory other than the factory of the appellants where the benefit of Notification No. 30/2004-C.E., dated 9-7-2004 is being availed?
(ii) Whether extended period is invokable in these proceedings in view of facts & circumstances available on record?
(iii) Whether penalties are required to be imposed upon the appellants in these proceedings?
8. So far as admissibility of benefit of notification to the appellants, under Sr. No. 6 of Notification No. 30/2004-C.E. is concerned Shri V. Sridharan, ld. Sr. Advocate appearing on behalf of the appellant M/s. Bhilosa Industries Pvt. Ltd., argued that the words “his factory” used in the exemption Notification No. 30/2004-C.E. have to be interpreted as the ‘same factory’ where exempted processes are being carried out and cannot be considered as any other factory of the manufacturer. It was his case that if the intention of the legislature was to consider all the factories of the manufacturer then the wordings used in the notification should have been “his factory/factories” or ‘a manufacturer who does not have the facility of manufacturing POY anywhere else’ or “has no proprietary interest in any other factory/factories” etc. He relied upon the Finance Bill dated 14-5-1979, read with Notification No. 297/1979-C.E., dated 24-11-1979, Notification No. 253/1982-C.E., dated 8-11-1982, Notification No. 6/2000-C.E., dated 1-3-2000, C.B.E. & C. circulars issued by Ministry for the years 1996, 2003, 2004 & Finance Minister’s Speech while making Budget changes during the years 2003 & 2004. Advocates appearing on behalf of the other appellants also made similar arguments. The main thrust of the arguments made by the appellants is that if at one stage, Excise duty is paid then no further duty payment is required by the unit as per Para 4.8.1 of the D.O.F. No. 334/3/2004-TRU, dated 8-7-2004 written by Joint Secretary (TRU) Ministry of Finance.
8.1 For better appreciation of this issue, the original text of relevant Sr. No. 6 of the table annexed to Notification No. 30/2004-C.E., dated 9-7-2004 is reproduced below :-
| S. No. | Chapter or Heading No. or Sub-Heading No. | Description of Goods |
| 6. | 54.02, 54.03 | Yarns procured from outside and subjected to any process other than texturising, by a manufacturer who does not have the facilities in his factory (including plant and equipment) for manufacture of yarns or textured yarn (including draw twisted and draw wound yarn) of Heading 54.02 or 54.03. Explanation, - For the purposes of this explanation, manufacture of yarns means manufacture of filaments of organic polymers produced by processes, either : (a)by polymerization of organic monomers, such as polyamides, polyesters, polyurethanes, or polyvinyl derivatives; or (b)by chemical transformation of natural organic polymers (for example cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates. |
9. From a perusal of the above entry under the ‘description of the goods’ of Notification No. 30/2004-C.E., it is observed that the exemption was first available to a manufacturer for carrying out the processes (other than texturising) on yarn procured from outside who, does not have the facility in ‘his factory’ for the manufacture of yarn or texturised yarn of Heading 54.02 or 54.03. This entry was further amended by Notification No. 10/2005, dated 1-3-2005 and the amended description of the goods eligible for exemption read as under :-
| S. No. | Chapter or Heading No. or Sub-Heading No. | Description of Goods |
| 6. | 54 | All filament yarns procured from outside and subjected to any process by a manufacturer who does not have the facilities in his factory (including plant and equipment) for manufacture of filament yarns of Chapter 54. Explanation, - For the purposes of this explanation, manufacture of yarns means manufacture of filaments of organic polymers produced by - (a)by polymerization of organic monomers, such as polyamides, polyesters, polyurethanes, or polyvinyl derivatives; or (b)by chemical transformation of natural organic polymers (cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates. |
9.1 Under this amendment dated 1-3-2005, all filament yarns procured from outside when subjected to any process (including texturising) by a manufacturer were exempted if the manufacturer does not have facility “in his factory” for manufacturing the filament yarn of Chapter 54. By this amendment even texturised yarn was also brought within the ambit of exemption under Sr. No. 6 of Notification No. 32/2004-C.E. In the absence of any definition of words “his factory”, used in this notification, a clear picture is not emerging whether the words “his factory” mean the same factory where exempted processes are undertaken or will also include all the factories owned by the manufacturer because the words like “in the same factory” or “his factory/factories” or “manufacturer not having the proprietary rights in any other factory” etc. have been used by legislative in other exemption notifications. Shri V. Sridharan (Sr. Advocate) in his arguments, inter alia, also relied upon Sr. No. 10 of the same exemption notification to argue that similar words ‘his factory’ have been used in Sr. No. 10 but no demands are raised by the Revenue with respect to processes like carding, combining etc. done by those manufacturers having facilities for producing goods of Headings 55.01, 55.02, 55.03 & 55.04.
9.2 It is observed from the case records that following expressions have been used in the description column of Table to Notification No. 30/2004-C.E. as amended, against Sr. No. 6
(a) ‘Yarns procured from outside’
(b) ‘Subjected to any process by the manufacturer’
(c) ‘Who does not have the facilities in his factory for the manufacture of filament yarns of Chapter 54’
All the above three expressions used in Notification No. 30/2004-C.E. have been interpreted differently by the Revenue and the appellants. According to Revenue, the yarns should be purchased by the manufacturer from outside. Further, revenue is also of the view that the word ‘manufacturer’ used in Notification No. 30/2004-C.E. should be interpreted ‘manufacturer as a ‘legal entity’ and that the words ‘in his factory’ should include all the factories of the manufacturer as a legal entity. Appellants on the other hand argued that words ‘procured from outside’ used in the notification means that the yarn should have been obtained (whether purchased or not) from outside and the word ‘manufacture’ should be the same factory/assessee to whom demand is issued. That accordingly the expression ‘in his factory’ should be treated as ‘the same factory’.
9.3 It is observed from the wording of Notification No. 30/2004-C.E., as amended, that the same is an exemption notification issued under Section 5A(1) of the Central Excise Act, 1944. As per this Section Central Government may exempt excisable goods of specified description with respect to certain manufacturing activities. The exemption under Sr. No. 6 of this notification is to all filament yarns of Chapter 54 of the Central Excise Tariff Act, 1985. The second requirement is that the same is subject to any process by a ‘manufacturer’ who does not have the facilities in his factory for the manufacture of filament yarns of Chapter 54. In this regard it is also observed that the words ‘manufacture’ and ‘in his factory’ have not been defined in Notification No. 30/2004-C.E. At the same time it is an undisputed fact that the activities of making filament yarn (POY) and its subsequent processing pertaining to existing demands are carried out in different factories. As the word ‘manufacturer’ has also not been defined specifically in exemption Notification No. 30/2004-C.E. or Central Excise Tariff Act, 1985, therefore, the meaning of the same has to be understood from Section-2(f) of the Central Excise Act, 1944 :
“SECTION 2. Definitions. - In this Act, unless there is anything repugnant in the subject or context, -
(a) ....
(b) ....
(c) ....
(d) ....
(e) ....
(f) “manufacture” includes any process, -
(i) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word “manufacturer” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account”.
9.4 Under the Central Excise Taxation duty of Central Excise is levied on the ‘act of manufacture’ as defined in Section 2(f) of the Central Excise Act, 1944 and the person who carries out the ‘act of manufacture’ is the ‘manufacturer’. A ‘manufacturer’ who is liable to pay duty becomes an ‘assessee’ by virtue of Rule 2(c) and has to take out a Registration as per the provisions of Rule 9 of the Central Excise Rules, 2002. From the above basic elements of Central Excise law a ‘manufacturer’ is the person who carries out the ‘act of manufacture’.
9.5 In the present proceedings the ‘act of manufacture’ is being undertaken by the appellants factory to whom demand show cause notices are issued and each factory will make the person carrying out the activity of manufacture as the ‘manufacturer’. There is nothing in the definition of Section 2(f) to indicate that a ‘legal entity’ only has to be considered as a ‘manufacturer’. Rather each ‘assessee’ has to be treated as a manufacturer and not the entire group of companies as claimed by the Revenue. In the present proceedings also even the demands have been issued by the Revenue to the individual assessee carrying out the exempted processes and not to the head offices of the group companies as a legal entity. Therefore, we are of the considered view that the word ‘manufacturer’ used in Sr. No. 6 of the Notification No. 30/2004-C.E. has to be interpreted as a unit where the ‘act of manufacture’ is being undertaken which is the individual factory and not all the factories of a group of companies.
9.6 From the above analysis when the definitions of ‘manufacture’, ‘manufacturer’ and ‘factory’; as given in Section 2(f) and Section 2(e) of the Central Excise Act, 1944; are collectively read then our mind the expression ‘in his factory’ will mean the factory of the ‘manufacturer’ and that factory will mean ‘the same factory’ where manufacturing activity is being undertaken and the word ‘manufacturer’ will not mean a legal entity or all group companies taken together. If any contrary interpretation is made then demands under Section 11A of the Central Excise Act, 1944 could be raised against any of the registered units of a group of companies undertaking manufacturing activities at different locations.
9.7 The above view taken is also fortified by the following facts available on record. Before exemption under Notification No. 30/2004-C.E. texturised yarn (including draw twisted and draw wound yarn) of polyesters; manufactured by ‘independent texturiser’, who does not have the facilities ‘in his factory’ for producing POY; was exempted from duty in excess of Rs. 2.50 per kg under Notification No. 6/2000-C.E., dated 1-3-2000 as amended (Sr. No. 114). The words used in this notification were ‘independent texturiser’ and ‘in his factory’. Both the words were singular and meant one person doing the act of texturising in his factory. Appellants were availing the benefit of this exemption and no objection was ever raised by Revenue that if appellants had more than one factories, having facilities of producing POY elsewhere, then exemption under Notification No. 6/2000-C.E. will not be admissible. Further the words ‘independent texturiser’ was not defined in Notification No. 6/2000-C.E. but the words ‘independent processor’ was defined as an Explanation in Sr. No. 89 of the same notification as follows :-
| 89. | 51.10 or | Fabrics woven on handlooms, namely :- | Nil | - | - |
| | 51.11 | (a)certified as khadi by the Khadi & Village Industries Commission; or | | | |
| | | (b)processed without the aid of power or steam; | | | |
| | | (c)processed with the aid of power by a factory owned by a registered handloom co-operative society or any organization set up or approved by Government for the purpose of development of handlooms; or | | | |
| | | (d)processed by an independent processor approved in this behalf by the Government of India on the recommendation of the Development Commissioner for Handlooms. | | | |
| | | Explanation. - In this entry, for the purposes of the fabrics woven on handlooms, independent processor means a manufacturer who is engaged exclusively in the processing of fabrics with the aid of power and who has no proprietary interest in any factory engaged in the spinning of yarn of wool or weaving of woolen fabrics. | | | |
9.8 From the above expression “No proprietary interest in any factory engaged in …..”, used in Sr. No. 89 of Notification No. 6/2000-C.E., it is clear that legislature has the vision and skill to express as to what could be the intention of the words ‘his factory’. If the intention of legislature to interpret the words ‘in his factory’ was also to include any other factory of the appellants, then legislature in the notifications has used the words like ‘in any factory/factories’ of the assessee’ or ‘no proprietary interest in any other factory’ or ‘one or more factories’ etc. A view that the words “in his factory” means the same factory also gets fortified by Para 4.8.1 of DOF No. 334/3/2004-TRU, dated 8-7-2004 issued by JS(TRU), Ministry of Finance, which uses the word ‘unit’ which can be only the manufacturing unit or a factory and not the all inclusive ‘legal entity’ of a group of companies as claimed by the Revenue.
9.9 In the light of the above observations the words ‘in his factory’ used in Sr. No. 6 of Notification No. 30/2004-C.E. will mean the ‘same factory’ and appellants will be entitled to the exemption under Notification No. 30/2004-C.E. Appeals filed by the appellants are required to be allowed, on this ground alone.
10. Appellants have also made an alternative argument that the demands issued for the period beyond one year will also be time barred as they were earlier availing the benefit of Notification No. 6/2000-C.E., dated 1-3-2000, as amended and were paying duty @ Rs. 2.50 per kg on texturised yarn (including draw twisted and draw wound yarn) where same words ‘in his factory’ were used in Sr. No. 114 of this notification. On verification of case records, we find it so as appellants were filing periodical ER-1 returns claiming exemption under Notification No. 6/2000-C.E. As the words used in both the Notification No. 30/2004-CE and Notification No. 6/2000-C.E. are ‘in his factory’, therefore, appellants could have entertained a bona fide belief that words ‘in his factory’ used in Notification No. 30/2004-C.E. means the ‘same factory’ and thus cannot be fastened with the tag of ‘with intent to evade duty’ for invoking extended period. Appellants obtained separate registrations for the manufacturing activity in each factory and were paying duty on POY which will definitely involve captive consumption valuation, under Rule 8/9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, while sending POY from the factory manufacturing POY to factory undertaking texturising/draw twisting etc. In view of the above observations demands raised beyond a period of one year are also time barred.
11. We are not expressing our opinion on the admissibility of Cenvat credit on duty paid on POY as on merits it is held that appellants are eligible to exemption under Notification No. 30/2004-C.E., dated 9-7-2004 as amended.
12. So far as point mentioned at Para 7(iii) above is concerned there is no justification in imposing any penalties upon the appellants as on merits and time bar the issue has been decided in favour of the appellants.
13. Appeals filed by appellants are allowed for the reasons recorded hereinabove.
(Pronounced in Court on 27-10-2014)