2015 (2) TMI 702 - AT - Central Excise

Area bases exemption - Compounded levy scheme for induction furnace units- Notification No. 50/03-CE- Held that- There is no dispute about the fact that the appellant s unit was in existence much before the issue of exemption Notification No. 50/03-CE and was in existence when the compounded levy scheme for induction furnace units had been notified under Section 3A of the Central Excise Act, 1944. From the findings of the Commissioner in para 4.2 of the order dated 20th August 2008 it is clear that during 1997, the capacity of the crucible of the appellant unit had been determined as 3 M.T. vide order No. 53/IFU/ACP/2000 dated 31/7/2000 and on this basis the Commissioner has given a finding in absence of any evidence documentary or otherwise, regarding expansion of installed capacity before 07/1/03, it can be presumed that the production capacity was 3 M.T. before the specified date i.e. before 07/1/03. The only basis for denial of the exemption benefit is that this production capacity has not been achieved by some additional machinery and in this regard the Commissioner has rejected the appellant s claim regarding purchase of some additional machinery and equipment on the ground that the claimed purchase of machinery/equipment by the appellant from outside the State of Uttaranchal is not recorded in the register maintained at the Commercial Tax Department check post. However, this finding of the Commissioner is contrary to the order dated 24/3/07 of the Deputy Commissioner, Uttaranchal Commercial Tax Department under Rule 41 (8)/Section 9 (2) of the Uttaranchal General Sales Tax Act. On going through this order, it is clear that the Commercial Tax Department has accepted the appellant s claim regarding purchase of components of furnace from outside the state and has decided to impose penalty only on the ground that the procedure prescribed in this regard was not followed. In this order, the Deputy Commissioner has clearly mentioned that the purchases of the assessee have been found recorded in their books of accounts. In view of this, the ground on which the Commissioner has rejected the appellant s claim regarding purchase of the induction furnace components is not correct. Moreover, it is also seen that the increase in the capacity had been achieved by increasing the height of the crucible and this fact has not been disputed. Once it is accepted that the increase in the capacity of crucible was achieved by increase in its height, in view of the judgment of Hon ble Uttarakhand High Court in the case of Uttaranchal Iron & Ispat Ltd. 2008 (5) TMI 91 - CESTAT NEW DELHI , the benefit of exemption under Notification No. 50/03-CE cannot be denied. Decided in favour of appellant.

Summary

Issues Involved:
1. Denial of exemption under Notification No. 50/03-CE for capacity expansion.
2. Disallowance of duty demand, interest, and penalties by the Commissioner.
3. Challenge to the findings of the Commissioner regarding machinery purchases and capacity expansion.
4. Dispute over the verification of purchased components for capacity expansion.
5. Interpretation of relevant legal provisions and precedents.

Issue 1: Denial of exemption under Notification No. 50/03-CE for capacity expansion:
The main appellant, a steel manufacturer, claimed exemption under Notification No. 50/03-CE for expanding their installed capacity from 3 M.T. to 4 M.T. The Commissioner initially disallowed the exemption, citing lack of evidence for the claimed expansion. The Tribunal remanded the matter for reconsideration. In the subsequent order, the Commissioner again confirmed the duty demand, interest, and penalties, leading to multiple appeals against these decisions.

Issue 2: Disallowance of duty demand, interest, and penalties by the Commissioner:
The Commissioner upheld the duty demands totaling &8377; 3,59,39,816/- for the period from December 2003 to December 2005, along with interest and penalties. Similar confirmations were made for subsequent periods, resulting in further duty demands and penalties against the appellant company and its directors/employees. The appeals were filed challenging these decisions.

Issue 3: Challenge to the findings of the Commissioner regarding machinery purchases and capacity expansion:
The appellant contested the Commissioner's findings that the capacity expansion was not substantiated by the addition of new machinery and that the claimed machinery purchases were not recorded in the register maintained by the Trade Tax Department. The appellant provided evidence, including certificates and invoices, to support their claims of capacity expansion through modifications and machinery additions.

Issue 4: Dispute over the verification of purchased components for capacity expansion:
The Commissioner questioned the authenticity of the appellant's claimed purchases of machinery components, citing discrepancies in the register maintained by the Commercial Tax Department. However, the appellant presented an order from the Commercial Tax Department acknowledging the purchases and recording them in their books of accounts. This discrepancy raised doubts about the Commissioner's findings regarding the machinery purchases.

Issue 5: Interpretation of relevant legal provisions and precedents:
The Tribunal analyzed the Commissioner's findings and the appellant's submissions in light of legal provisions and precedents. The Tribunal highlighted the importance of factual accuracy in determining capacity expansion and the relevance of supporting documentation. Reference was made to a judgment of the Hon'ble Uttarakhand High Court, emphasizing that even modernization leading to a 25% increase in installed capacity should be considered substantial expansion, warranting exemption benefits.

In conclusion, the Tribunal found discrepancies in the Commissioner's findings regarding the machinery purchases and capacity expansion, leading to the denial of exemption benefits. The Tribunal set aside the impugned orders, allowing the appeals and disposing of related applications. The judgment emphasized the significance of accurate documentation and legal interpretations in determining duty liabilities and exemption eligibility.