2008 (5) TMI 91 - AT - Central Excise

Area based exemption units in Uttarakhand and Himachal Pradesh - Appellants claimed the benefit of notification 50/2003 under condition (ii) on the ground that the appellants had undertaken substantial expansion by way of increase in installed capacity by not less than 25% on or after 7-1-2003 exemption cannot be denied mere for the fact that capacity was increased by modification/upgradation of existing machinery, not by any additional machinery

Summary

Issues Involved:
Interpretation of Notification No. 50/2003-C.E. for availing exemption benefits based on substantial expansion of industrial units.

Analysis:
The appellants, engaged in manufacturing M.S. Bars, appealed against the denial of benefits under Notification No. 50/2003-C.E. for not meeting the conditions of substantial expansion. The notification specified criteria for availing the exemption, including a 25% increase in installed capacity through substantial expansion. The dispute centered on whether the appellants had undertaken such expansion by installing additional plant and machinery. The appellants argued they had increased capacity by over 25%, supported by evidence from a Chartered Engineer's assessment, completion certificates, and purchase bills for new capital goods.

The Revenue contended that the appellants' modifications and upgrades did not constitute substantial expansion as they were done in parts of the existing unit without installing additional machinery. The Revenue relied on a Chartered Engineer's opinion that the capacity increase was due to modifications, not new installations. However, the Circular No. 772/5/2004-CX clarified that modernization or quality improvement leading to a 25% capacity increase could qualify as substantial expansion. The appellants' evidence, including invoices for new capital goods, supported their claim of meeting the 25% capacity increase requirement.

The Tribunal analyzed the evidence, noting the increase in furnace length, motor power, and other changes made by the appellants. It emphasized that the notification did not mandate an increase in every unit of the plant but an overall 25% capacity increase. Considering the Circular's clarification and the Chartered Engineer's acknowledgment of capacity enhancement, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeals.