2019 (8) TMI 1515 - AT - Central Excise

Area Based Exemption - benefit of N/N. 32/99-CE dated 8 July 1999 - crux of the argument of the department is that the new machine installed subsequent to the issuance of area based Notification did not result in the increase or expansion of the installed capacity inasmuch as the machines already installed were also capable of manufacturing single layer film - CBEC Circular No.912/02/2010-CX - HELD THAT - Either with the single layer machine or with the multi-layer machine, the product manufactured by the appellants is one and the same inasmuch as both fall under the same Tariff Heading of Central Excise Tariff Act i.e. under 3920.32. It is not the case of the department that the appellants have introduced a new product line and claimed the exemption Notification and also it is not the case of the department that the appellants have stopped using the old machines and have carried production with the help of new machine only so as to show the expansion only on paper. We find that the appellants have increased the production capacity of the polyester film they have been manufacturing by installing the machine as also corroborated by the certificates given by the other authorities. Though the learned Authorized Representative for the department has submitted that certificates in no case by no way confer a right to the appellants for the benefit of the Notification. The certificates though not an essential condition would suddenly throw light on the type of expansion undertaken by the appellants. On going through the certificates, it is found that annual production capacity of the films has increased and therefore we find that the appellants are eligible for the said exemption. The facts of the case are squarely covered by the Notification and Circular and therefore the appellants are eligible to avail the benefit under Notification No.32/99-CE dated 8 July 1999 - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Interpretation of Notification No.32/99-CE dated 8 July 1999 for eligibility of benefit - Expansion of installed capacity - Validity of eligibility certificate - Applicability of Circular No.912/02/2010-CX by CBEC - Determination of substantial expansion for specified goods.

Analysis:

The appeal was filed against the order of the Commissioner(Appeals) setting aside the extension of benefits under Notification No.32/99-CE dated 8 July 1999 to the appellants. The appellants, engaged in manufacturing polyethylene films, added a single-layer machine to their production lines after the issuance of the Notification. The Revenue alleged that the appellants could not manufacture single-layer films using the existing machines based on a report by the manufacturer of the machine. The department issued a show cause notice leading to the impugned order.

The appellants argued that various authorities had certified the expansion of the factory's capacity by about 50%. They contended that the new machine installation did increase the production capacity of the polyester films they were manufacturing, supported by certificates from other authorities. The Circular No.912/02/2010-CX by CBEC was cited to clarify the conditions for availing the benefit of the exemption Notification based on substantial expansion of installed capacity for specified goods.

The Tribunal found that the product manufactured by the appellants remained the same under the same Tariff Heading, indicating no introduction of a new product line. The certificates provided additional evidence of increased production capacity, making the appellants eligible for the exemption. The Tribunal also noted that the Circular clarified that substantial expansion should apply to specified goods only, supporting the appellants' case.

The Tribunal concluded that the appellants were eligible to avail the benefit under Notification No.32/99-CE dated 8 July 1999, as the facts of the case aligned with the Notification and Circular. The appeal was allowed, setting aside the impugned order with any consequential relief as per law.