2014 (6) TMI 935 - Commissioner - Central Excise

Area based exemption - new notification effect - Entitlement to avail area based exemption under the new notification by way of substantial expansion as already availing area based exemption under the old notification - Held that - As find that in terms of para 8 of the new notification all industrial units existing prior to 6-2-2010 are entitled to the area based exemption under the new notification either on undertaking substantial expansion by way of increase by not less than 25% in the value of fixed capital investment in plant and machinery or on having made new investment after 6-2-2010 which is directly attributable to generation of additional regular employment of not less than 25% over and above the base employment limit. Also find that legal provisions contained in para 8(b) of the new notification do not bar the admissibility of area based exemption to the existing industrial units which had earlier availed the area based exemption under the notification. Thus the existing Industrial units after having availed area based exemption under the notification are entitled to avail area based exemption under the new notification on fulfilment of required conditions of the new notification. Regarding admissibility of area based exemption to the appellants under the provisions of the new notification find that the same is admissible to the existing industrial units provided they fulfill either of the one condition stipulated at para 8(b) of the new notification. As regards the condition of substantial expansion by way of increase of not less than 25% in the value of fixed capital investment in plant and machinery hold that the appellants have fulfilled the condition of substantial expansion by way of increase of not less than 25% in the value of fixed capital investment in their plant & machinery as such they are eligible for area based exemption under the scheme of having undertaken substantial expansion by way of increase of over 25% in the value of fixed capital investment in plant & machinery before the substantial expansion in terms of the new notification. As regards admissibility of refund by way of self credit which the appellants have claimed and availed/utilized observe that though the appellants are entitled to refund of duty by way of self credit as they have fulfilled the conditions of substantial expansion contained in para 8(b) of the new notification However they are entitled to refund of duty in terms of the value addition norms contained in para 2 of the new notification. Since the amount of refund admissible to the appellants has not been quantified in the impugned orders therefore order that the adjudicating authority would quantify the amount of refund admissible to the appellants in accordance with para 2 of the new notification and convey the same to the appellants within 15 days of the receipt of this order. Also order that the refund over & above the admissible amount availed and utilized by the appellants is liable for recovery along with interest

Issues Involved:
1. Admissibility of area-based exemption under the new notification after availing exemption under the previous notification.
2. Entitlement to area-based exemption under the new notification.
3. Recovery of refund by way of self-credit along with interest.

Detailed Analysis:

1. Admissibility of Area-Based Exemption:
The primary issue was whether existing industrial units that had already availed area-based exemption under Notification No. 56/2002-C.E. could again avail exemption under Notification No. 01/2010-C.E. by way of substantial expansion. The judgment clarified that, as per para 8 of the new notification, industrial units existing before 6th February 2010 are entitled to the exemption if they undertake substantial expansion by increasing their fixed capital investment in plant and machinery by at least 25% or by making new investments that generate additional regular employment of at least 25% over the base employment limit. The legal provisions do not bar units that previously availed exemptions from claiming it again under the new notification. This interpretation was supported by Board's Circular No. 977/01/2014, which explicitly stated that units could avail the exemption again by way of substantial expansion.

2. Entitlement to Area-Based Exemption:
The appellants claimed substantial expansion through increased capital investment in plant and machinery. The adjudicating authority initially rejected this claim due to the absence of certification from the competent authority regarding the date of production post-expansion and the percentage increase in installed capacity. However, subsequent to the impugned orders, the appellants provided a certificate from the G.M., DIC, Jammu, confirming the date of production and the investment in plant and machinery. The appellants also provided certificates of fitness for power load and D.G. set, and their balance sheet showed an increase in plant and machinery investment by 32.75%. The judgment concluded that the appellants fulfilled the condition of substantial expansion by increasing their fixed capital investment by more than 25%, thereby making them eligible for the area-based exemption under the new notification.

Additionally, the appellants claimed exemption based on generating additional regular employment. The adjudicating authority had rejected this claim due to the lack of certification from the Labour Commissioner or G.M., DIC, Jammu. However, the appellants later provided the required certification, showing an increase in regular employment from 59 to 76, which represents a 28.81% increase. This certification, along with the appellants' provident fund returns, substantiated their claim of generating additional employment. Thus, the judgment held that the appellants also met the condition of generating additional regular employment, making them eligible for the exemption under this criterion as well.

3. Recovery of Refund by Way of Self-Credit:
The appellants claimed and utilized refunds by way of self-credit amounting to Rs. 1,79,43,260, while their total claim was Rs. 2,94,00,384. The adjudicating authority had ordered the recovery of these amounts along with interest. The judgment noted that the appellants were entitled to the refund as they fulfilled the conditions of substantial expansion. However, the refund must be in accordance with the value addition norms specified in para 2 of the new notification. Since the exact amount of admissible refund was not quantified in the impugned orders, the adjudicating authority was directed to quantify the refund amount within 15 days and convey it to the appellants. Any excess amount availed and utilized by the appellants would be recoverable along with interest.

Judgment:
1. Appeals on the issue of admissibility of area-based exemption under the new notification after availing exemption under the previous notification were allowed, and the impugned orders on this issue were set aside.
2. Appeals on the issue of having undertaken substantial expansion, making the appellants eligible for area-based exemption, were allowed, and the impugned orders on this issue were set aside.
3. Appeals on the issue of admissibility of refund under the new notification were partially allowed. The impugned orders were modified to allow refunds in accordance with para 2 of the notification. The adjudicating authority was directed to quantify the admissible refund amount within 15 days and convey it to the appellants. Any amount over and above the admissible refund that was availed and utilized by the appellants would be recovered along with interest.

The stay applications were disposed of accordingly.

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