2018 (12) TMI 1845 - AT - Central Excise

Grant of Erroneous Refund - benefit of N/N. 33/99-CE dated8/7/1999 - case of refund is that changes in working capacity would not lead to change in installed capacity of the factory and strongly argued that the installed capacity of the factory remained unchanged and hence the assessee was not eligible to the exemption for the purposes of Notification No. 32/99 dated-8/7/1999. - HELD THAT - Once the actual expansion of installed capacity is established, it cannot be denied merely on the ground that the alteration /addition was done without obtaining the prior approval of Chief Inspector of factories. It is also observed that the Refund Sanctioning Authority had taken into account the Verification Report dated 28/09/2006 of the Range Supdt. and had himself conducted spot verification alongwith the Divisional staff. In the order dated 28/09/2006, the Refund Sanctioning Authority has recorded itemwise /sectionwise increase/addition /alteration. The eligibility order itself states that there was no increase in Rolling/Dryer Section of Power loom. There was increase in Withering Section by 14.95% due to installation of Nine Troughs and 18.3% in CTC Section due to modification of CTC machine by installing Kaizem machines replacing old Master machines and 171% increase in Fermenting Section owing to increase in Floor area by 4547 sq. Ft. The Department s contention of production activity without obtaining the valid Industrial License has no merit - the substantial benefits can not be denied on extraneous grounds. There are no infirmity in the order impugned and the same is hereby sustained - appeal dismissed.

Summary

Issues:
Claim of eligibility under Notification No. 33/99-CE dated-08.07.1999 for exemption from Central Excise Duty based on expansion of factory's installed capacity.

Analysis:
1. The Respondent, M/s. Panitola Tea Estate, submitted a claim for exemption from Central Excise Duty based on the expansion of their factory's installed capacity. The Range Officer verified the claim and the Assistant Commissioner sanctioned a refund. However, a show cause notice was later issued alleging an erroneous refund.

2. The Department contended that changes in working capacity did not change the installed capacity of the factory, thus challenging the eligibility for exemption under Notification No. 33/99 dated-8/7/1999.

3. The respondent argued that there was a substantial increase in various sections of the Tea Estate, such as the Fermenting Section, supporting their claim of expanded installed capacity. The Range Superintendent's verification report also confirmed the expansion.

4. After hearing both sides and examining the appeal record, the Tribunal observed that the benefit under the notification was available to industrial units that had undertaken substantial expansion of installed capacity by at least 25%, regardless of prior approval.

5. The Tribunal noted the comparative statement of machinery and installation capacity before and after expansion, emphasizing that once actual expansion of installed capacity is established, it cannot be denied on grounds of lacking prior approval.

6. Referring to registration letters and circulars, the Tribunal clarified that an increase in installed capacity by 25% due to machinery additions in any section made the unit eligible for exemption. The Tribunal rejected the Department's argument regarding production activity without a valid industrial license.

7. Ultimately, the Tribunal found no infirmity in the impugned order, sustaining it and dismissing the appeal for lack of merit. The decision was based on the established expansion of installed capacity and the eligibility criteria under the relevant notification.