2011 (5) TMI 137 - HC - Central Excise

Benefit of notification dated 10.6.2003 - The additional plant and machinery, referred to in notification dated 10.6.2003, was not confined only to more machinery to be added than what is in existence - It meant new plant and machinery to be installed for the purpose of increasing the capacity - If those new plants and machineries are in replacement of whole of the old plant and machinery, but the object of increasing 25 percent capacity is achieved, then in terms of the said circular itself, the industry achieving the same would come within the four corners of Notification dated 10.6.2003 - find no merit in the appeal and the same is dismissed against of assessee.

Summary

Issues: Interpretation of Industrial Policy for benefits under a notification dated 10.6.2003 regarding substantial expansion of industries.

Analysis:
The judgment deals with the interpretation of the Industrial Policy of the Government of India, specifically a notification dated 10.6.2003, applicable to the State of Uttarakhand. The notification provided benefits to industries already existing in notified areas upon increasing their installed capacity by 25 percent. The Central Excise Department contended that a respondent, who replaced existing plant and machinery with new ones while increasing capacity, was not entitled to the benefits of the notification. The Tribunal ruled against the Excise Department, leading to the appeal.

The Central Board of Excise and Customs issued a clarification on 21.1.2004 regarding the term 'substantial expansion' mentioned in the notification. The clarification emphasized that the increase in capacity by at least 25 percent should result from the installation of additional plant and machinery. It clarified that 'substantial expansion' was not defined based on the original or depreciated value of machinery but required an accretion in capacity with additional plant and machinery. The clarification explicitly stated that the new plant and machinery did not have to be in addition to existing ones but could replace them entirely to achieve the 25 percent capacity increase, thereby falling within the scope of the notification.

The court, after considering the arguments and the clarification, found no merit in the appeal filed by the Central Excise Department and dismissed it. The judgment upheld the interpretation that the replacement of old plant and machinery with new ones to achieve a 25 percent capacity increase qualified for the benefits under the notification dated 10.6.2003.