1. The issue for decision in this matter is whether a Central Excise license, already licensed for manufacture of goods, which are liable to duty, can be compelled to include in ground plans for his A.L. 4 premises his adjoining factory producing exempted excisable goods, thereby availing of only one licence for both premises. .
2. Shri D.N. Mehta, Advocate, appearing on behalf of the appellants, stated that the appellants, for the last many years, have been manufacturing sheets/circles of copper and copper alloys, apart from manufacturing billets from scrap or duty-paid virgin metal. The billets fall under (Item 26A(1) of the Central Excise Tariff and are fully exempt under Government of India Notification No. 119/66-C.E. dated 16th July, 1966, as amended. Exempted billets are stored in the relevant premises along with old scrap and duty paid metal received from Government agencies as well as cuttings of duty paid sheets and circles. Duty paid un-cut sheets and circles received from the adjoining premises after payment of duty and against duty paying documents, are also kept here. The duty paid un-cut sheets and circles are later cut according to customer's requirement and supplied as such.
The remnant cuttings are re-cycled with old scrap and virgin metal in the manufacture of billets.
3. In the Rolling Milk of the appellants, the billets manufactured in the adjoining premises are received and accounted for as raw material and sub sequently rolled into sheets/circles.
4. Shri D.N. Mehta pointed out that the appellants had been holding Central Excise Licence since 1961. The Licence had been renewed from time to time up to December, 1979. When the Excise authorities raised the point that the existing ground plan in Form L. 4 covered only the Rolling Mill Section whereas it' should also include the adjoining premises where the appellants are manufacturing copper billets. Shri Mehta stated that since the inception of Excise Duty under Tariff Item 26A, duty has been collected only on the final products, namely, sheets and circles. In view of the duty exemption in respect of the billets, they were also exempt from taking out Central Excise Licence for the premises in which these billets were manufactured under a Notification of the Government of India.
5. It was further contended on behalf of the appellants that the segregation of the billets manufacturing section from the Rolling Mill section by erection of a wall and the removal of the linking gate and the licensing of only the Rolling Mill had been duly approved by the Excise authorities at the higher level of Shri B.N. Banerji, then Member, Central Board of Excise and Customs, who accompanied by the then Collector of Central Excise, Shri S.C. Mathur, had also visited the factory. Later on, it was claimed that the factory was also visited by the then Collector of Central Excise, Shri B.D. Deshmukh, who was satisfied with the segregation of the premises. The issue, once having been settled and having become the established practice over long years, should not have been re-opened in 1979. In fact, when the matter went up in appeal to the Central Board of Excise and Customs, the CBEC had remanded the matter back to the Collector of Central Excise, directing that the fact that the appellants had enjoyed the facility over such a long time could not be lightly brushed 2. aside and that there was no indication as to why there was a change in approach of the local Excise authorities. The Collector was asked to re-examine the matter and to give detailed reasons for his decision in the matter.
6. In his de now adjudication order, the Collector confirmed the earlier' decision asking the appellants to apply for a Central Excise Licence for both the premises together on the grounds that both the units are dependant on each other and hence these cannot be treated as separate units, that since the units are engaged in the manufacture of billets as well as the rolling of sheets and circles in the same premises under the same name and with common partners, they are to be treated as a composite mill and should be covered by one ground plan and licence as provided in Rule 44 of Central Excise Rules, 1944; that the two sections are also not separately registered under the Factories' Act, even though segregated by a wall; and further that the appellants could not produce any documentary evidence that they had the approval of the then Member, Board, or of the former Collectors of Central Excise, Allahabad. Holding that the billets can be treated as raw materials only for those rolling mills which are purchasing them from the open market, the Collector held that in the case of the appellants, in view of the composite nature of their production, the raw materials would be those which are received for the production of billets also.
7.Dealing with the above arguments, on behalf of the appellants, Shri Mehta stated that the Collector's observation that both the units are dependant on each other and hence cannot be treated as separate units is erroneous in law. In the unit manufacturing billets, the product is 'exempted under NotificationNo. 119/66 dated 16-7-1966. Under Government of India Notification No. 31/76 dated 28-2-1976, fully exempted copper and alloy units were wholly exempted from licensing control. There was also a general exemption under Notification No.111/78 dated 9th May, 1978, duly exempting units manufactur ing exempted goods from licensing control. It has been pointed out by Shri Mehta that the Collector's contention that the two manufacturing units were not separately registered under the Factories' Act or that these were construct-, ed in a common area with common partners was not relevant for Excise purposes. This view is supported by the decision of the Hon'ble High Court of Andhra Pradesh in Assistant Collector, Central Excise v. Nizam Sugar Factory Ltd., Hyderabad (Writ Appeal No.538/1969 decided on 26th December, 1969) 11978 E.L.T. (J 489) (A.P.)] Further, it has been said on behalf of the appellants that there is no warrant for the Collector's observation that there is any intent on their part to evade correlation of in-puts with final products in the rolling mills and that, ever since the levy of Excise Duty, no case of evasion on the part of the appellants has ever been established.
8. Shri D.N. Mehta has further urged before us that the Collector's observation, that billets can be treated as raw materials only for those rolling mills which are using them after purchasing them from the open market and not in respect of those which are manufactured by them in another unit oftheir own, is not supported by any departmental instructions.
9. It is also urged on behalf of the appellants that, in terms of Delhi High Court's decision in Sulekh Ram's case-1978 E.L.T. J 525-Excisable goods become non-excisable after exemption, within the meaning of Section 2(d) of the Act and that, therefore, the premises where non-excisable goods are manufactured would not require a Central Excise Licence. Under Rule 44(1), a manufacturer is required to submit ground plan only in respect of the premises wherein excisable goods are manufactured.
10. It is further stated that the Collector's view that there is no documentary evidence in support of the appellants' contention that the existing arrangement as regards licensing had the approval of the then Member, Board or of the two former Collectors is not maintainable, since this fact has not been denied by the Excise authorities.
11. Shri K.C. Sachar, JDR, has re-iterated before us the views expressed by the Collector. He has also pointed out that the appellants cannot rely on the judgment of the Hon'ble Delhi High Court in Sulekh Ram & Sons v. Union of India, as this judgment has been over-ruled by the Hon'ble Delhi High Court themselves in their decision in Vishal Andhra Industries (1983 E.L.T. 2265). He has added that a clear distinction has to be made between manufacture of non-dutiable goods and non-excisable goods and that as long as a manufacturer is producing excisable goods, he is liable to take out a Central Excise Licence.
Shri Sachar also referred to the decision of the Hon'ble Andhra Pradesh High Court in Venus Rubber Industries v. Union of India and Ors.-Writ Petition No. 3257/1969, decided on 8th September, 1969 (1978 E.L.T. J 490), according to which manufacturers of wholly exempted excisable goods are liable to take out Central Excise Licence.
12. We have carefully considered the arguments on both sides. It is not denied that the appellants are having two adjoining units, separated by a common wall, in one of which they are manufacturing billets and in the other they are manufacturing sheets and circles. These products are liable to duty under separate sub-items of the Central Excise Tariff.
By notification, billets have been exempted from duty. Also by notification, a unit which is manufacturing these exempted products is also exempted from the requirements of licensing. As long, therefore, as it can be argued that these are two separate units, there can be no question of asking the unit, which is manufacturing billets, to take out a Central Excise Licence. The Department has, however, taken the view that the two units should be considered as a composite rolling mill undertaking the manufacture of billets as well as sheets and circles, and that a licence should be taken out for the entire composite unit. What has weighed with the Collector in taking this view is the fact that the two units are having common partners, that both the "Sections" are located in the "same remises" and that billets manufactured in one unit are used in the other rolling unit and that, therefore, the two units are "dependant on each other". Besides, these two "Sections" it is stated are not separately registered under the Factories' Act. We are unable to concur with these views. As these two units are separated completely by a wall, it cannot be argued that they are operating in the "same premises". Furthermore, if the products of one units i.e. billets are subsequently consumed by the rolling section, this cannot convert the two units into a composite mill by virtue of the arguments of "dependance" of one unit on the other. In the case of Assistant Collector, Central Excise, v. Nizam Sugar Factory Ltd., Hyderabad, [1978 E.L.T. (J 489) (A.P.)], the Hon'ble High Court of Andhra Pradesh held that two factories belonging to the same manufacturer, even if situated in the same area enclosed by a single compound wall with common exit gate and even one common profit and loss account, were entitled to be treated as separate factories since they had separate identities and were treated as such for a number of years and, therefore, entitled to separate Central Excise Licences. It has also been held by the Hon'ble High Court of Bombay, in Jenson and Nicholson (India) Ltd. v. Union of India end others, Civil Application No. 2883 of 1974, decided on 6th July, 1979 (1981 E.L.T. 128 Bom.) that since under Rule 175, if the manufacturer carries on business in more than one capacity, he must make a separate application, therefore, it follows that if the same manufacturer carries oa business at more than one place, he must have separate licence for each factory. We agree with this view of the matter and feel that as long as a manufacturer is undertaking his 11. manufacturing activities in separate premises-in this case he is manufacturing excisable goods classifiable under separate sub-items of the Central Excise Tariff in premises clearly separated by a boundary-wall-he would be within his rights to request for separate licences for, the two premises. In this particular case, the goods that are being manufactured in one of the units, namely, billets, are wholly exempt from Excise Duty. Also, there is a separate notification exempting such units from licensing control. In the circumstances, the action of the Department in asking the appellants to take out a licence for this unit either separately or as a part of the adjoining premises is not maintainable in law. This action cannot be supported by bringing in arguments either of "dependance" of the two units on each other or that the raw material for the manufacture of sheets and circles would be not the billets from which sheets and circles are manufactured but the material from which the billets or gullies are manufactured in the adjoining premises, or that the two units are not separately registered under the Factories' Act. The view expressed by the Collector in his adjudication order that the party's stand in the matter could be on account of its "intention to evade correlation between their in-puts and their final products" is also in the nature of an un-warranted and unsubstantiated allegation which, even if it were true, cannot nullify the exemption accorded under the law to the billet manufacturing unit.