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CASE NO.: Appeal (civil)  6581 of 2002

PETITIONER: M/s.Rollatainers Limited

RESPONDENT: Commissioner of Central Excise,Delhi-III.

DATE OF JUDGMENT: 29/07/2004

BENCH: N.SANTOSH HEGDE & A.K.MATHUR.

JUDGMENT: J U D G M E N T

W I T H

(CIVIL APPEAL NO.6635 OF 2002)

A.K.MATHUR,J.

Both these appeals arise out of the common order of the Customs Excise and  Gold (Control) Appellate Tribunal (hereinafter referred to as the ’Tribunal’) dated  June 7,2002.     Therefore, they are disposed of by this common order.                                                                                                           

Brief facts which are necessary for the disposal of both appeals are as under.  M/s.Rollatainers Limited (hereinafter referred to as the ’appellant’), is a limited  company registered under the Companies Act, 1956. The appellant is engaged  in  manufacture of various products in seven of its factories situated in different  premises, each of them duly and separately registered with the Central Excise  Department. Out of the seven factories, two factories which are relevant for the  purpose of these appeals are: (i) Paper Board Factory and (ii) Specialty Paper  Factory. The paper board division is situated in Shed No.1, Narela Road, Kundli  and engaged in manufacture of duplex board independently with its own set of  plant and machinery, staff and workers, raw material and utilities like electricity,  water etc. Specialty Paper Factory is situated in Shed No.3, Narela Road, Kundli  and engaged in manufacture of paper independently with its own set of plant and  machinery, staff and workers, raw material and utilities like electricity, water etc.  Prior to May, 1998, the Specialty Paper Factory was situated at Dharuhera with  accumulated stock of finished goods. The appellant decided to transfer such  finished stock of specialty paper factory to paper board factory and dispose of the  accumulated stock of finished goods under the Central Excise registration issued to  paper board factory. The ground     plan   of  the paper board factory prior to May,  1998, showed shed no.3 as a godown for storage of its raw material, namely waste  paper. Thereafter, the ground plan was amended in May, 1998, to show   the      specialty    paper  factory   in   shed  no.3 for   storing    the finished goods  manufactured at Dharuhera and clearing them on payment of duty. Accordingly,  classification list was also filed for the purpose of clearing the stock manufactured  at Dharuhera. Subsequent to erection of the plant and machinery of specialty paper  factory shifted from Dharuhera to shed no.3, Narela Road, Kundli and manufacture  of paper in such separate premises by separate staff and workers who were earlier  employed at Dharuhera, were engaged and the appellant applied for Central Excise  registration as provided under Rule 174(3) of the Central Excise Rules, 1944. No   portion of the manufacturing process of paper board factory was ever carried on in  shed no.3 wherein exclusively specialty paper factory operations were carried out.  The registrations issued to the paper board factory and the specialty paper factory  were premises specific as stipulated under Rule 174(3) which reads as under: " Every registration certificate granted shall be in  the specified form and shall be valid only for the

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premises specified in such certificate."

The registration carried out certain conditions also like, that it is valid only  for the premises and purposes specified in the schedule and for no other purposes  and premises; it is not transferable and no correction will be admissible in the  certificate unless  attested by the Superintendent, Central Excise and the certificate  shall remain valid till the holder carries on the activity for which the certificate has  been issued or surrenders the same.  Therefore, both the factories were granted  separate registration. It was also pointed out that no manufacturing processes  pertaining to the manufacture of paper board was carried on in the shed no.3 for  which specialty paper factory was granted registration. Only manufacturing  processes for manufacture of paper were carried on in shed no.3. It was also stated  that both the factories had their separate entrances and are separated by a clear  passage of 10 ft. The Central Excise Department issued a notification being Notification  6/2000- Central Excise dated March 1,2000 and as per serial No.77 of the aforesaid  notification, paper and paperboard or articles made therefrom in a factory is  chargeable to ’nil’ rate of duty subject to condition no.15 of the notification that  paper and paperboard or articles made therefrom 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 and it was specifically mentioned that the exemption shall  apply only to the paper and paperboard cleared for home consumption from a  factory. Therefore, the aforesaid exemption was availed of by the appellant’s  factories. But the trouble started on March 19, 2001 when individual show cause  notice was issued to the factories of the appellant objecting to the availing of the  aforesaid concession by each of the factories. The basis of issuance of the show  cause    notice  was on the ground that both the factories are in the common  premises and common balance-sheet is maintained and owned by the same  company. The issue was adjudicated by the Commissioner, Central Excise, Delhi- III and duty was claimed in sum of Rs.50,25,117.00 under Section 11A(1) of the  Central Excise Act, 1944 and penalty of Rs.5 lacs. Aggrieved against this order,  two appeals were preferred before the Tribunal and the Tribunal affirmed the  order. Hence, the present appeals by way of special leave. The question that arises for consideration in both these appeals is whether  both these factories are one or they are separate. The Tribunal by its order dated  June 7, 2002, affirmed the order of the lower authority and came to the conclusion  that they are one and accordingly, affirmed the duty as well as the penalty. There is no two opinion that both the factories are near to each other and it is  owned by the same owner and the common balance-sheet is maintained. But, by  this can it be said that both the factories are one and the same ? The definition of  the ’factory’ as defined in Section 2(e) of the Central Excise Act, 1944, reads as  under : " (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;"

Simply because both the factories are in the same premises that does not lead  to the inference that both the factories are one and the same. In the present case,  from the facts it is apparent that there is no commonality of the purpose, both the  factories have a separate entrance, there is a passage in between and they are not  complimentary to each  nor they are subsidiary to each other. The end product is  also different, one manufactures duplex board and the other manufactures paper.  They are separately registered with the Central Excise Department. The staff is  separate, their management is separate. It is also not the case of revenue that end  product of one factory is raw material for the other factory. From the above facts it  is apparent that there is no commonality between the two factories, both are  separate establishments run by separate managers though at the apex level it is  maintained by the appellant company. There are separate staff, separate finished  goods. Simply because both the factories may have common boundaries that will

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not make it one factory. Accordingly, we are of the opinion that the view taken by  the Tribunal does not appear to be well-founded and likewise, the view taken by  the Commissioner, Central Excise. Accordingly, we allow both these appeals, set  aside the order of the Tribunal passed on June 7,2002 as well as the order passed  by the Commissioner, Central Excise, New Delhi-III on September 28,2001 in  both the appeals. No order as to costs.