2009 (8) TMI 1046 - AT - Central Excise

Area Based Exemption - N/N. 49/2003-C.E., dated 10-6-03 and N/N. 50/2003-C.E., dated 10-6-03 - substantial expansion in installed capacity - Interpretation of notification - The commercial production, pursuant to the installation of machinery for enhanced production from the unit, commenced from 15th January 2003. On 10th June, 2003, the Notification No. 49/2003 was issued consequent to which, the respondents sought to claim the benefit thereunder by referring to clause 2(b) of the said notification. Held that - There is no substance in the contentions sought to be canvassed on behalf of the respondents. Commissioner (Appeals) would have been justified in granting exemption benefit under Notification No. 49/2003 to the respondents in relation to the production if the same was as a result of the consequences of expansion in the production capacity pursuant to the expansion of the plant commenced on or after 7th January 2003. The exemption Notification No. 49/2003 would not apply to the industrial units existing on 7th January 2003 and which had already undertaken expansion programme prior to 7th day of January 2003. Undoubtedly, the facts in hand disclose that expansion programme of the respondents industrial unit and actual implementation thereof commenced much prior to 7th January 2003 and therefore, the respondents are not entitled to claim the benefit under notification in question and therefore, order of the original authority needs to be restored. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Interpretation of the term "have undertaken" in Notification No. 49/2003-C.E.
2. Applicability of the exemption under Notification No. 49/2003-C.E. for industrial units that commenced expansion before 7th January 2003.
3. Relationship between the Industrial Policy and the exemption notification.
4. Strict interpretation of exemption notifications.

Issue-wise Detailed Analysis:

1. Interpretation of the term "have undertaken" in Notification No. 49/2003-C.E.
The core issue revolves around the interpretation of the term "have undertaken" as used in clause 2(b) of Notification No. 49/2003-C.E. The Department argued that the term should be understood to mean activities commenced on or after 7th January 2003. The respondents contended that the term includes activities that commenced prior to but were completed after 7th January 2003. The Tribunal held that the plain reading of the notification indicates that the expansion must be undertaken on or after 7th January 2003. The term "have undertaken" implies that the activity must begin on or after the specified date.

2. Applicability of the exemption under Notification No. 49/2003-C.E. for industrial units that commenced expansion before 7th January 2003
The respondents' expansion program commenced before 7th January 2003, and they argued that they should still be eligible for the exemption because the commercial production began after this date. The Tribunal found that the notification clearly specifies that the expansion must be undertaken on or after 7th January 2003. Therefore, units that commenced expansion before this date are not eligible for the exemption. The Tribunal emphasized that the framers of the notification deliberately used the date 7th January 2003 to mark the beginning of the eligibility period for expansion activities.

3. Relationship between the Industrial Policy and the exemption notification
The respondents argued that the notification should be interpreted in light of the Industrial Policy framed by the Ministry of Commerce & Industry, which aimed to encourage industrial activities in Uttarakhand and Himachal Pradesh. They claimed that the policy did not restrict benefits to expansions commenced on or after 7th January 2003. The Tribunal noted that while the Industrial Policy provides guidelines, it does not grant exemptions from excise duty. The notification issued under the relevant statute must be interpreted based on its own language, not the policy. The Tribunal held that the policy cannot override the clear terms of the notification.

4. Strict interpretation of exemption notifications
The Tribunal reiterated the principle that exemption notifications should be interpreted strictly. The decision in Novapan India Ltd. v. C.C.E., Hyderabad was cited to support this view, stating that any ambiguity in a taxing statute should be resolved in favor of the state. The Tribunal concluded that the exemption under Notification No. 49/2003-C.E. applies strictly to expansions undertaken on or after 7th January 2003 and does not extend to those commenced before this date.

Conclusion:
The Tribunal allowed the appeal, setting aside the Commissioner (Appeals)'s order and restoring the Deputy Commissioner's order. It concluded that the respondents were not entitled to the benefit of exemption under Notification No. 49/2003-C.E. because their expansion program commenced before 7th January 2003. The execution of the original order was suspended for eight weeks.

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