Holding

The unit at Amingaon is a "new industrial unit" and is eligible for exemption from central excise duty under the 1999 Exemption Notification.

Summary

The North‑Eastern Tobacco Co. Ltd, after closing its earlier cigarette unit at Bangagarh under a disinvestment agreement, set up a new manufacturing unit at the Export Promotion Industrial Park in Amingaon in 1999 and sought exemption from central excise duty under the Exemption Notification dated 08‑07‑1999. The Central Excise Department contended that the Amingaon unit was not a "new industrial unit" because the company had applied to have its existing industrial licence endorsed for the new location, arguing that the notification should be read in light of the Industries (Development & Regulation) Act. The Tribunal held that the unit qualified as a new industrial unit and was entitled to the exemption. On appeal, the Supreme Court examined the language of the notification, noting that it does not define "new industrial unit" nor exclude units shifted from one location to another, and that a liberal construction is appropriate. Finding no evidence that machinery or workforce was transferred from the closed Bangagarh unit, the Court concluded that the Amingaon unit is a new industrial unit for the purpose of the notification and upheld the Tribunal’s decision. Consequently, the appeals of the Commissioner of Central Excise were dismissed.

Issues considered

Whether the unit established by North‑Eastern Tobacco Co. Ltd at Amingaon qualifies as a "new industrial unit" within the meaning of clause 3(a) of the Exemption Notification dated 08‑07‑1999.
Whether the request to endorse the existing industrial licence for the new location precludes the unit from claiming the exemption.

Legislation cited

Additional Duties of Excise (Goods of Special Importance) Act, 1957s. 3
Central Excise Act, 1944s. 5A, s. 5A(1)
Central Excise Rules, 1944s. 173, s. 9

Subjects

exemptionnew industrial unitcentral exciseindustrial licencedisinvestmentinterpretation of notificationliberal constructionNorth Eastern Statestobacco industry

Judgment

COMMISSIONER OF CENTRAL EXCISE, SHILLONG A
v.
NORTH-EASTERN TOBACCO CO. LTD.

NOVEMBER 28, 2002

[M.B. SHAH AND D.M. DHARMADH!KAR!, JJ.] B

Central Excises and Salt Act, 1944:

Exemption Notification dated 08.07.99, clause 3 sub-clause (a)-Claim
for exemption from payment of duty-Entitlement of-Held: If the industrial C
unit established answers the description of 'new industrial unit' within the
meaning of sub-clause 3 of the Exemption Notification, it is entitled to claim
exemption from payment of duty under the Notification-On facts there is no
material to establish that unit of company at one place closed was shifted to
new location and also that the sa1ne machinery, accessories or components D
used by the company in its unit at one place have been shifted for its unit at
another place-Thus the unit at that place is a 'new industrial unit' and is
entitled to exemption under the Notification.

Interpretation of Statutes:
E
Exemption Notification-Construction of-Held: liberal interpretation
should be imparted to the language as far as possible, provided no violence
is done to the language employed

Respondent-company was granted industrial licence for setting up
cigarette manufacturing unit at place S. However, the unit was set up at F
place B. This was a joint venture with one Industrial Development
Corporation and as a result of Disinvestment Agreement the unit was
closed. Later on an Exemption Notification was issued. Company decided
to start a new unit at place A for availing exemption from payment of
duty. It also made an application for grant of a licence requesting that
the industrial licence, which it possessed, be endorsed for the new location. G
Tribunal held that respondent-company is entitled to claim exemption
from payment of duty under the Notification. Hence the present appeals.

Central Excise Department contended that the industrial unit set up
by the company at place A cannot claim the status of a 'new industrial H
373
374 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A unit' within the meaning and intent of the Exemption Notification; that
the contents of the application for grant of industrial licence made by the
company shows that the company sought change of location of its
industrial unit at place A and, therefore, the unit is not a new unit; and
that the Exemption Notification does not define the expression 'new
industrial unit' and, therefore, it has to be understood on the basis of
B provisions of the industrial law and particularly section 11 of the Industries
(Development & Regulation) Act.

Respondent~company contended that there is no material on record
produced by the Department to show that either the machinery or the
C work force was shifted from unit at B to the unit at A; that merely because
a request was made to the concerned authorities that the same industrial
licence be endorsed for new location, it cannot be contended by the
Department that the unit was a transferred or shifted unit and not a 'new
unit'; and that the Exemption Notification does not define new unit and
it has fo be given a meaning as understood in common industrial parlance.
D
Dismissing the appeals, the Court

HELD: 1.1. In the instant case there was no material before the
Department that pursuant to the Disinvestment Agreement with IDC, the
unit of the company at B which was closed in 1994 was shifted to the new
E location at A. Also there is no material to establish that the same
machinery, accessories or components used by the company in its unit at
8 have been shifted for its unit at A. The unit at A has to be considered
as a 'new unit' for the purposes of the Notification to avail exemption.
Therefore, there is no ground to interfere with the decision of the Tribunal.
[378-G, H; 380-F; 381-A, BJ
F
1.2. The submission that the words "new industry" in Exemption
Notification has to be construed in the light of the provisions of Industries
(Development & Regu~ation) Act and since the company itself asked for
use of same industrial licence by endorsement for the changed location,
·a the un~t at A was not a 'new unit' cannot be accepted. Merely because
the ~~.mpany has made an attempt to continue its industrial activities at
the new location on the basis of same industrial licence granted for its
earlier location; it cannot be denied the benefit of Exemption Notification.
Further the attempt of the company to obtain en.dorsement on the same
industrial licence for its industrial activity at the new location or
H requirement of grant of a fresh industrial licence to them at the new
COMMR. OF CENTRAL EXCISE 1·. NORTH-EASlERN TOBACCO CO.LTD. [DHARMADHIKARI, J .] J 75

location under the Industrial (Development & Regulation) Act, is a subject A
matter not directly connected with grant of benefit of the exemption
notification under the Act. (381-B-EJ

2. Exemption Notification dated 08.07.1999 nowhere defines the
words "new industrial units" and does not exclude from its ambit units
which are shifted or transferred from one location to another. The object B
of Exemption Notification is obvious. It intends to encourage capital
investment and establishment of industrial units in specified North-Eastern
States for the purpose of increasing production of goods, promoting
development of industry and employment in the said regions. Furthermore,
the principle of interpreting an Exemption Notification is that as far as C
possible liberal interpretation should be imparted to the language thereof,
provided no violence is done to the language employed.
(380-A, C, D, ff; 381-AJ

Hansraj Gordhandas v. H.H. Dave, Assistant Collector of Central Excise
& Customs, Surat and Ors., (1969) 2 SCR 253; Hindustan Aluminium Corp. D
ltd v. State of U.P. and Anr., (1981) 3 SCC 578; State Level Committee v.
Morgardshammar India ltd, (1996) I SCC 108 and Shri Baku/ Oil Industries
v, State of Gujarat, (1987) I SCC 31, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 200-201
of 2002. E
From the Judgment and Order dated 22.6.2001 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, Kolkata, in A. No. E/R-
19 to 20/2001 in F.O. No. A-429, 430/Kol/2001.

WITH F
C.A. No. 3137 of 2002

N.K. Bajpai, K. Swami, Heman! Sharma and B. Krishan Prasad for the
Appellant.
G
K.K Venugopal, Ms. Nisha Bagchi, O.P. Khaitan, A.T. Patra Nipun
Malhotra and Ms. lndu Malhotra for the Respondent.

The Judgment of the Court was delivered by:

DHARMADHIKARI, J. These appeals have been preferred by the H
376 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A Commissioner of Central Excise, Shillong representing the Department of
Central Excise to assail separate orders passed in appeals by the Customs
Excise and Gold (Control) Appellate Tribunal, Kolkata [hereinafter referred
to as 'CEGA T]. The CEGA T by the impugned orders has rejected the appeals
of the Department of Central Excise and held in favour of the respondent-
The North-Eastern Tobacco Company Ltd. [for short the company] that it is
B eligible for claiming exemption from payment of duty under the Central
Excise Notification No.32/99-CE dated 08.7.1999, issued under Sub-section
(1) of Section 5A of Central Excise Act of 1944 [hereinafter referred to as
the Act].

C The principal question raised by the learned counsel on behalf of the
Department of Central Excise is whether the unit or factory established by
the company in Export Promotion industrial Park [hereinafter referred to as
EPIP] at Amingaon in North-Eastern State of Assam can claim the status of
a 'new industrial unit 'within the meaning of sub-clause (a) of clause 3 of the
EXemption Notification dated 08.7.1999. It is not in dispute that all other
D conditions of the notification for claiming exemption from payment of duty
are fulfilled and the company would be entitled to avail the benefit of the
Exemption Notification, if the unit set up by it at Amingaon, answers the
description of 'new industrial unit'. The CEGA T by dismissing the appeals
of the Department of Central Excise .held. that the respondent/company is
E entitled to claim exemption from payment of duty under the Exemption
Notification and on that basis entitled to adjustment of duty already paid on
the cigarettes manufactured in its factory and is also entitled to refund of duty
for the period covered by the notification.

The facts not in disputes are as under:-
F
The respondent/company was granted industrial licence No CIL: 128
(75) dated 01.5.1975 for setting up cigarette manufacturing unit at Silpukhuri,
Guwahati in the State of Assam. Mis Assam industrial Development
Corporation [hereinafter referred to as AIDC] was the promoter and the
major shareholder in the company holding more than 51 % of the share capital.
G As per the industrial licence, the factory was to. be set up at Silpukhuri,
Guwahati. The unit was, however, set up on the industrial plot allotted by
AIDC at G.S. Road, Bangagarh, Dispur, Guwahati. On 04.3.1991. AIDC
entered into a Disinvestment Agreement which was duly approved by the
Government of India, Ministry of industry, Department of Industrial
H Development vide its letter No. I 0(7)/89-C l dated 26.10.1990. According to
COMMR. OF CENTRAL EXCISE 1· NORlH-EASTERN TOBACCO CO.LID. (DHARMADIDKARI, J.] J77

,, the terms of the Disinvestment Agreement, the existing industrial shed at A
Bangargarh was to be handed over to AIDC and the factory was to be relocated
at a new location anywhere in the State of Assam.

In accordance with the aforesaid Disinvestment Agreement duly
approved by the Government of India, the existing unit at Bangagarh was
closed with effect from 15.6.1994. Encouraged by the declared policy of the B
State in the Exemption Notification dated 08.7.1999, the company set up a
cigarette manufacturing unit in Export Promotion Industrial Park at Amingaon,
Guwahati in the year 1999 in which commercial production was commenced
from 15.12.1999.

After locating its manufacturing unit in the Export Promotion Industrial C
Park, Amingaon, the company made an application for grant of a licence
under the provision of the industries (Development and Regulation) Act,
1951. In its application for grant of industrial licence, the company made a
request that the industrial licence which it possessed for the unit in operation
in Bangagarh in joint collaboration with AIDC be endorsed for the new D

- location of the unit in the Export Promotion Industrial Park at Amingon. In
response to the letter dated 25.10.2000 of the company seeking endorsement
of the same industrial licence for the new location, the Joint Director of
Government of India in the Ministry of Commerce & Industry wrote a letter
dated 30.10.2000 to the company stating that the existing industrial licence
was for location at Silpukhuri, Guwahati and the location of the unit at E
Bangagarh was not valid. The letter, however, states that the request of the
company for change of location of the unit from Bangagarh to the Export
Promotion Industrial Park Aminagon will be decided on merits as per the
prescribed procedure.

It is on these undisputed facts that the learned counsel appearing for the F
Department of Central Excise very strenuously urged that the industrial unit
set up by the company at the Export Promotion industrial Park, Amingaon,
cannot claim the status of a 'new industrial unit' within the meaning and
intent of the Exemption Notification dated 08.7.1999. It is submitted that the
contents of the application for grant of industrial licence made by the company G
itself show that the company sought change of location of its industrial unit
at Bangagarh to Amingaon and therefore, the unit at Amingaon is not a new
unit. Learned counsel appearing for the Department argued that·the Exemption
Notification does not define the expression 'new industrial unit' and therefore,
it has to be understood on the basis of provisions of the industrial law and
particularly the Industries (Development & Regulation) Act, the provision H
378 SUPREME COURT REPORTS [2002) SUPP. 4 S.C.R.

A contained in Section 11 of which requires for obtaining of a licence or .....
pennission in the prescribed manner and form for setting up a ~ew industrial
undertaking. For the aforesaid reasons, on behalf of the Department, it is
submitted that the CEGA Twas in error in holding that the unit or the company
at Amingaon is entitled to the benefit of the Exemption Notification.

H The learned counsel appearing for the company in his reply submitted
that the unit at Bangagarh was a joint venture with AIDC and as a result of
Disinvestment Agreement; the unit was closed on 15.6.1994. After the
Exemption Notification dated 08. 7.1999 Was issued, the decision was taken
by the company to start a new unit in the year I 999 at the Export Promotion
C Industrial Park, Amingaon, Guwahati for availing the exemption from payment
of duty. It is submitted that there is no material on record produced by the
Department to show that either the machinery or the work force was shifted
from its unit at Bangagarh to the new unit located at Aminagon. It is argued
that merely because a request was made to the concerned authorities under
the Industries (Development & Regulation) Act that the same industrial licence
D be endorsed for new location, it cannot be contended by the Department that
the unit at Amingaon was a transferred or shifted unit and not a 'new unit'.
Learned counsel appearing for the company argued that the Exemption
Notification does not define new unit and it has to be given a meaning as
understood in common industrial parlance. It is submitted that when unit at
E place 'A' had been closed and without use of the machinery or transferring
the other properties of that unit of the labour force, another unit at place 'B'
has been started, the unit at location 'B' cannot be called the same old unit.
The unit started at Amingaon, Guwahati has to be treated as a new unit which ...
has been established with fresh investment, installation of new machinery
and employing Jabour force at the new location. Reliance is placed for the
F company on the decision in the case of Hansraj Gordhandas v. H.H Dave,
Assistant Collector of Central Excise & Customs, Surat and Ors., [1969] 2
SCR 253.

v./!i! have heard the learned counsel for the parties. We have examined
the contents of the Exemption Notification and the correspondence exchanged
G between the company and the concerned Department under the Industries
(Development & Regulation) Act. We do not find any ground to interfere
with the decision of the CEGAT and its conclusion that the unit of the
company at Amingaon is entitled to the benefit of the Exemption Notification.
The relevant part of the Exemption Notification, contained in Clause 3 reads
H as under:-
COMMR. OF CENTRAL EXCISE 1·. NORIB·EASTERN TOBACCO CO. LTD. [DHARMADHIKARI, J.] 379

"In exercise of the power conferred by sub-section (I) of Section SA A
of the Central Excise Act, 1944 (I of 1944), read with sub-section (3)
of the Additional Duties of Excise (Goods of special importance)
Act, 1957 (58 to 1957) and sub-section (3) of Section 3 of the
Additional Duties of Excise (Textile and Textile Articles) Act, 1978
(40 of 1978), the Central Government, being satisfied that it is B
necessary in the public interest so to do, hereby exempts the good
specified in the first schedule and the second schedule to the Central
Excise Tariff Act, 1985 (1 of 1986) and cleared from unit located in
the Growth Centre or integrated infrastructure Development Central
or Export Promotion Industrial Park or Industrial Estate or Industrial
Area or Commercial Estate, as the case may be specified in Annexure C
appended to this notification, from so much of the duty of excise or
additional duty of excise, as the case may be, leviable thereon under
any of the said Acts as is equivalent to the amount of duty paid by
the manufacturer of goods from the account current maintained under
rule 9 read with rule 173 G of the Central Excise Rules 1944.
D

E
The exemption contained in this notification shall apply only to the following
kind of units namely:-

(i) New Industrial units which have commenced their commercial
production on or after the 24th day of December, 1997.

- (ii) Industrial units existing before the 24th Day of December, 1997
but which have undertaken substantial expansion by way of
increase capacity by not less than twenty five per cent on or after
the 24th day of December, 1997.
F

The exemption contained in this notification shall apply to any of the G
said units. for a period not exceeding ten years from the date of
publication of this notification in the Official Gazette on from the
daie of commencement of Commercial production whichever is later".

[Underlying for inviting pointed attention]

The Exemption Notification nowhere defines the words "new industrial H
380 SUPREME COURT REPORTS [2002) SUPP. 4 S.C.R.

A units". The object of Exemption Notification is obvious. It intends to encourage
capital investment and establishment of industrial units in specified North-
Eastern States for the purpose of increasing production of goods, promoting
development of industry and employment in the said regions. In the case of
Hindustan Aluminium Corp. Ltd. v. State of U and Anrs. [1981] 3 SCC 578,
B this Court emphasised that the Notification issued under the Act, "should not
only be confined to its grammatical meaning or ordinary parlance but it
should also be construed in the light of the context". It was reiterated that the
"expression should be construed in a manner in which similar expressions
have been employed- by those who framed relevant notification." Therefore,
there is a "need to derive the intent from a contextual scheme".
c The another important principle of interpreting an Exemption
Notification is that as far as possible liberal interpretation should be imparted
to the language thereof, provided no violence is done to the language
employed. See State Level Committee v. Morgardshammar India Ltd., [ 1996]
1 sec 108.
D
In the case of Morgardshammar India Ltd., (Supra), Section 4(A) of
the U.P. Sales Tax Act contained definition of 'new unit' for availing
exemption from payment of sales tax. Explanation below Section 4(A) of
the U.P. Sales Tax Act defined 'new unit' to mean a 'factory or workshop
whether set up by a dealer already having an industrial unit manufacturing
E the same goods a:t any other place in the State or adjacent site' but excluded
"any factory or workshop using machinery, accessories or components already
used or acquired for use in any other factory or workshop in India". In the
present case, no such definition or explanation is to be found in the notification
and there is no material to establish that the same machinery, accessories or
p components used by the company in its unit at Bangagarh have been shifted
for its unit at Amingaon, Guwahati.

In the case of Shri Baku/ Oil Industries v. State ofGujqrat, [1987] 1
sec 31, the notification for exemption from sales tax under consideration
was issued under the provisions of Gujarat Sales Tax Act and in the notification
G 'new industry' was defined to mean and include an industry commissioned
during the period 1st April, 1970 to 31st March, 1975 But the exclusion
clause clearly read as : "but shall not include such industrial undertaking
established by transferring or shifting or dismantling an existing industrial
unit."

H In the case before us, the Exemption Notification does not define 'new
COMMR. OF CENlRAL EXCISE 1•. NORllI-EASTERN TOBACCO CO. LTO. [DHARMADIDKARI, J.] 381

industrial unit' to exclude from its ambit units which are shifted or transferred A
from one location to another.

In the present case as we have found above, there was no material
before the Department that pursuant to the Disinvestment Agreement with
AJDC, the unit of the company at Bangagarh which was closed in 1994 was
shifted to the new location at Amingaon, Guwahati. B
The .unit at Amingaon, therefore, has to be considered as a 'new unit'
for the purposes of the Notification to avail exemption. The other argument
advanced by the counsel on behalf of the Department does not impress us at
all that the words "new industry" in Exemption Notification has to be C
construed in the light of the provisions of Industries (Development &
Regulation) Act and since the company itself asked for use of same industrial
licence by endorsement for the changed location, the unit at Amingaon was
not a 'new unit'. In our considered opinion, merely because the company has
made an attempt to continue its industrial activities at the new location on the
basis of same industrial licence granted for its earlier location, it cannot be D
denied the benefit of Exemption Notification. The claim of the company of
the status of its factory at Amingaon as 'new unit' within the intent and
meaning of the exemption Notification has rightly been accepted. The attempt
of the company to obtain endorsement on the same industrial licence for its
industrial activity at the new location or requirement of grant of a fresh
industrial licence to them at the new lo.cation under the Industries E
(Develop111ent & Regulation) Act, is a subject matter not directly connected
with grant of benefit of the exemption notification under the Act.

For the aforesaid reasons, we find no error in the impugned order of the
CEGA T. Consequently, the appeals fail and are hereby dismissed but in the
circumstances without any order to costs.
F

N.J. Appeals dismissed.