2010 (8) TMI 565 - AT - Central Excise

Waiver of pre-deposite - Area base exemption - under Notification No. 49/03-C.E., dated 10-6-2006 - Expansion carried out by way of increased installed capacity of 25% - In July, 2002, the appellants themselves had informed U.P. Financial Corporation that they had undertaken the project to improve the production capacity by approximately 25% and the same was in operation within 12 months and it could show the results - Further, on 18-1-2003, they had reported that modernization project was still in progress - They had nowhere stated that modernization had started on or after January, 2003, rather it was continuous process which had commenced prior to July, 2002 - The claim of the appellants of having procured machines from the firm after 7th January, 2003 - Even invoice in relation to one of the products which stated to be procured in relation to expansion programme of the appellants is dated 23-7-2002 -If the expansion programme had commenced on or after January, 2003, how and why the product in that regard could have been procured in July, 2002 in relation to such expansion programme - Obviously it was for the appellants to disclose that if they were interested to claim the benefit for which they had to satisfy that they had complied with the requirements of the conditions prescribed under the notification - Rejection of benefit found to be correct. Financial hardship - the appellants in the applications for stay have stated that due to fire in the factory on 15-11-2007, the appellants were unable to pay term loan instalment and interest and therefore the bankers had re-scheduled the payment of term loan for the period December, 2008 to December, 2010 - Even the chart discloses fall in the production percentage though the actual production shows constant increase year by year - The re-scheduling of the term loan was for the purpose of payment from 31st March, 2010 - They are already in August, 2010 - Financial hardship is to be considered as on the date of consideration of the matter - Hence, no case has been made out for total waiver of the entire amount demanded under the impugned order.

Issues Involved:

1. Duty demand and denial of exemption under Notification No. 49/03-C.E.
2. Financial hardship and request for stay of the impugned order.

Issue-wise Detailed Analysis:

1. Duty Demand and Denial of Exemption under Notification No. 49/03-C.E.:

The appellants challenged the order passed by the Commissioner on 10-12-2009, confirming a duty demand of Rs. 15,81,69,274/- on poster paper, kraft paper, and paper board cleared during January 2004 to March 2005, along with interest and an equal amount of penalty. Additionally, penalties of Rs. 50 lakhs against the CMD and Rs. 5 lakhs against the chartered engineer were imposed. The core issue was the denial of exemption under Notification No. 49/03-C.E., dated 10-6-2006, on the grounds that the expansion resulting in a 25% increase in installed capacity was not subsequent to 7th January 2003 but had commenced prior.

The appellants argued that the Commissioner failed to consider the year-wise variation in production capacity and ascertain whether the expansion led to an increase in production capacity post 7th January 2003. They contended that financial assistance for the expansion was obtained after 7th January 2003, and the expansion plan, although conceived earlier, was only executed after securing financial aid. However, the Department countered that documentary evidence, including letters and balance sheets, indicated the expansion program had started before 7th January 2003. The Commissioner considered various documents, including a letter dated 30-7-2002 from the CMD to the U.P. Financial Corporation, which stated that Rs. 200 lakhs had already been invested for the expansion project before July 2002.

The Tribunal noted that the Commissioner's findings were based on substantial documentary evidence, including balance sheets and correspondence, which suggested that the expansion program had indeed commenced before the stipulated date. The Tribunal found no merit in the appellants' claim that the Commissioner had a preconceived notion and concluded that the order was based on the materials presented.

2. Financial Hardship and Request for Stay of the Impugned Order:

The appellants sought a stay on the impugned order, citing financial hardship due to a fire in their factory in November 2007, which affected their financial position and led to the rescheduling of term loan payments. They argued that the Commissioner failed to consider relevant materials and that they had made a prima facie case for a stay without any pre-deposit.

The Tribunal, however, found that the appellants had not demonstrated substantial financial hardship that would justify a complete waiver of the pre-deposit. While acknowledging the fire incident and its impact, the Tribunal observed that the appellants had been able to increase their production capacity despite these challenges. The Tribunal noted that financial hardship should be assessed as of the date of consideration, and no additional material had been presented to establish current financial difficulty.

In conclusion, the Tribunal decided that a complete waiver was not warranted. Instead, they directed the appellants to deposit 60% of the duty amount within ten weeks, while waiving the interest and penalty until the disposal of the appeals. The Tribunal also stipulated that if the appeal was not resolved within three years, the appellants would be required to deposit the remaining 40% of the duty amount within ten weeks after the three-year period.

Summary:

The Tribunal upheld the Commissioner's order, confirming the duty demand and penalties, while granting partial relief by waiving interest and penalties and requiring a 60% pre-deposit of the duty amount. The Tribunal found no substantial evidence to support the appellants' claims of financial hardship or procedural bias by the Commissioner.

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