A company relocating at a new place under the old industrial licence could be treated as a "new industrial unit" for claiming benefits under the central excise notification, the Supreme Court held last week.
"Merely because the company has made an attempt to continue its industrial activities at the new location on the basis of the same industrial licence granted for its earlier location, it cannot be denied the benefits of the exemption notification," the Bench headed by Justice M B Shah said.
It thus dismissed the appeal of the central excise department against the ruling of the Customs, Excise and Gold (Control) Appellate Tribunal (Cegat) in the case involving North-Eastern Tobacco Company.
The exemption notification issued in 1999 did not define what is a new industrial unit. The notification was aimed at encouraging investment and establishment of industrial units in specified north-eastern states for promoting development and employment in underdeveloped regions.
In this case, the company was given licence for setting up a cigarette manufacturing unit at Silpukhuri in Assam. But the unit was set up at Bangagarh with the Assam Industrial Development Corporation as the promoter holding more than 51 per cent of the share capital.
Later, the two partners entered into a disinvestment agreement with the approval of the central government.
According to the agreement, part of the assets were to be handed over to the corporation and the company was to move to a new location in Assam. The company closed the Bangagarh unit and set up an unit at the Amingaon export promotion industrial park near Guwahati and claimed excise benefits under the notification saying it was a new unit.
The revenue authorities denied it. The company moved Cegat which ruled in its favour. The revenue department then moved the apex court.
The company argued that the unit at Amingaon was operating under the old licence. But it was not transfer or shifting of the old unit to a new place. The Bangagarh unit was closed following the disinvestment agreement. The new unit was established with fresh investment. New machinery was installed and new labour force was employed.
The revenue department argued that the company had only sought for a change of location. The industrial licence was the same. Also the notification did not define the expression "new industrial unit".
The phrase should be interpreted according to the earlier judgments of the Supreme Court. The department cited several judgments to show that when a unit operated under the same industrial licence, it should be treated as an old unit.
But the judgment written by Justice D M Dharmadhikari rejected the excise authorities' contentions and granted the benefits to the cigarette unit. Justice Dharmadhikari said it was important while interpreting an exemption notification to give a liberal meaning to the language as far as possible, provided no violence to the language was employed.
While dealing with beneficial clauses, the court should not be confined only to the grammatical meaning but it should be given a meaning in the light of the context, it said.
