2015 (8) TMI 59 - AT - Central Excise

Area based exemption - commercial production before 31-3-2010 commenced or not - Denial of exemption under notification no.50/2003-CE dated 10.06.2003 - New industrial unit - Held that - Date of commencing of the commercial manufacture is the date of commissioning of plant when the newly commissioned plant had been run and some goods of the desired quality had been produced. However, once the plant is commissioned, it is not necessary that from the day one it must start manufacture at its full installed capacity, as the quantum of the goods produced would depend upon the supply orders which the manufacturer may have at that time or the quantity of the goods which the manufacturer expects to be sold at that time. - while on one hand, the Department alleges that there was no production of M.S. Ingots during the last week of March, 2010, on the other hand, the show cause notice issued to the appellant has also demanded duty of ₹ 90,805/- on 30.4 MTs. of M.S. Ingots cleared during March, 2010 and this duty demand is included in the duty demand of ₹ 5,27,66,984/- confirmed by the appellant in the impugned order. Thus, the Department s allegation that there was no production by the appellant unit during March, 2010 and that the appellant have made only bogus entries regarding production during March, 2010, in their records is not compatible with the Commissioner s order confirming duty demand of ₹ 90,805/- in respect of the clearance of 30.40 Mts. of M.S. Ingots during March, 2010. When the Department has not disputed the procurement of raw materials during March, 2010 and its consumption and there is no evidence to prove that the sale of about 30 MTs. of M.S. Ingots during the last week of March, 2010 was false and when the Commissioner has confirmed the duty demand on 30.4 MTs. of M.S. Ingots cleared during the month of March, 2010, and thereby accepting the appellant s claim of having commenced production during March, 2010, the Department, merely on the basis of its own interpretation of Electronic Load Survey Report for 30.03.2010 and 31.03.2010 cannot allege that the appellant unit had not commenced commercial production on or before 31.03.2010. - Even though, there is minor discrepancy, between the production recorded on 30.03.2010 & 31.03.2010 of about 29 MT and the goods sold upto 31.03.2010 - 30.40 M.T., the fact remains that on 30.03.2010, the furnace had been commissioned and looking to the power consumption, there was some production on these dates. In this regard, just because the production entry for 29.03.2010 was false, it cannot be presumed that the production entries for 30.03.2010 and 31.03.2010 were also false. Therefore, it has to be concluded that the manufacturing unit of the Appellant company had commenced commercial production on or before 31.03.2010 and is eligible for the exemption under notification no.50/03-CE. - impugned order is not sustainable. The same is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for duty exemption under notification no. 50/2003-CE.
2. Commencement of commercial production on or before 31.03.2010.
3. Validity of the production records and power consumption data.
4. Imposition of duty, interest, and penalty.

Issue-Wise Detailed Analysis:

1. Eligibility for Duty Exemption under Notification No. 50/2003-CE:
The appellant company, a manufacturer of M.S. Ingots, claimed duty exemption under notification no. 50/2003-CE, which exempts certain goods manufactured in specified areas from central excise duty. The exemption is applicable to new industrial units set up in specified areas that commenced commercial production on or after 07.01.2003 but not later than 31.03.2010. The appellant claimed to have commenced commercial production on 30.03.2010, thus qualifying for the exemption.

2. Commencement of Commercial Production on or before 31.03.2010:
The appellant argued that their unit commenced commercial production on 30.03.2010, supported by the installation and commissioning of the induction furnace by M/s. Inductotherm India Pvt. Ltd. (IIPL). The furnace was commissioned in two parts, with the first part completed on 30.03.2010. The appellant provided evidence of power consumption and production records for 30.03.2010 and 31.03.2010, showing significant power usage and production of M.S. Ingots. The department, however, disputed this claim, arguing that the production records were falsified and that the power consumption data did not support the claimed production levels.

3. Validity of the Production Records and Power Consumption Data:
The department's investigation revealed inconsistencies in the appellant's production records, particularly the entry for 29.03.2010, which showed production of 11.68 MT of M.S. Ingots with only 340 units of power consumption. The appellant later admitted this entry was incorrect. The department argued that the power consumption data for 30.03.2010 and 31.03.2010 did not support the claimed production levels, suggesting that the production was not genuine. However, the tribunal found that the power consumption of approximately 30,000 units on 31.03.2010 could result in the production of about 25 MT of M.S. Ingots, supporting the appellant's claim of commercial production.

4. Imposition of Duty, Interest, and Penalty:
The Commissioner of Central Excise confirmed a duty demand of Rs. 5,27,66,984/- along with interest and imposed a penalty of an equal amount under Section 11AC, based on the finding that the appellant had not commenced commercial production by 31.03.2010. The tribunal, however, found that the appellant had commenced commercial production on 30.03.2010, as evidenced by the commissioning of the furnace, power consumption data, and production records. The tribunal concluded that the appellant was eligible for the duty exemption under notification no. 50/2003-CE and set aside the impugned order, allowing the appeal and nullifying the duty demand, interest, and penalty.

Conclusion:
The tribunal held that the appellant had commenced commercial production on or before 31.03.2010 and was eligible for the duty exemption under notification no. 50/2003-CE. The impugned order was set aside, and the appeal was allowed, nullifying the duty demand, interest, and penalty imposed by the Commissioner of Central Excise.