2008 (12) TMI 599 - AT - Central Excise

Summary

Issues:
Waiver of pre-deposit and stay of recovery of duty demands and penalties under Notification No. 50/03-C.E. for alleged failure to meet substantial expansion criteria.

Analysis:
The case involves applications for waiver of pre-deposit and stay of recovery of duty demands and penalties imposed on the Appellant company under Notification No. 50/03-C.E. The dispute revolves around whether the company was eligible for the hill area exemption under the notification due to substantial expansion by increasing installed capacity by 25% after 7-1-03. The Commissioner denied the exemption, confirming duty demands of significant amounts and imposing penalties on the company and its directors. The Appellants argued that they had indeed expanded their capacity, fulfilling the criteria for exemption, despite issues with documentation like non-entry of goods at the check post.

The Appellants contended that they had increased their capacity from 3 M.T. to 4 M.T. after 7-1-03, supported by a Capacity Certificate and other evidence. They argued that the non-entry of goods at the check post should not be a sole reason to deny the exemption, citing a Tribunal case where similar issues did not lead to denial of benefits. They emphasized a strong prima facie case for waiver of pre-deposit based on their expansion efforts and compliance with relevant laws.

On the other hand, the Departmental Representative reiterated the Commissioner's findings, emphasizing the lack of evidence linking the capacity increase to installation of additional plant and machinery. They argued that the denial of exemption was justified based on the non-entry of machinery items at the check post, indicating a lack of substantial expansion through proper means.

The Tribunal analyzed the provisions of Notification No. 50/03-C.E. and relevant circulars, defining substantial expansion as a 25% increase in installed capacity through additional plant and machinery. They noted the Appellant's capacity increase from 3 M.T. to 4 M.T., supported by certificates and verification. The Tribunal found merit in the Appellant's case, highlighting that the denial of exemption solely based on non-entry at the check post was not conclusive evidence of non-compliance, especially when no inquiry was made with the suppliers. Drawing parallels with a similar case, the Tribunal concluded that the Appellant had a prima facie case and granted waiver of pre-deposit and stay of recovery of duty demands and penalties pending appeal.

In conclusion, the Tribunal waived the pre-deposit requirement and stayed the recovery of duty demands and penalties until the appeal's disposal or six months from the order date, whichever is earlier, based on the Appellant's prima facie case for exemption under Notification No. 50/03-C.E.