2008 (6) TMI 86 - AT - Central Excise

Notification no. 33/99 giving area based exemption if expansion of installed capacity take place before the notified date what was date of substantial expansion - Director of Industries at the material time, was also a Nominee Director of Respondent Company - there was a conflict of interest in the two roles he played - Held that a fresh report is required to be called for from the Department of Industries - matter should be examined by a person who has no interest in the Respondent Company

Summary

Issues:
Appeal against Order-in-Original granting benefit of Notification No. 33/99 dated 8-7-99, Exemption under substantial expansion, Date of expansion crucial, Validity of certifications, Conflict of interest in reports, Cross-examination of witness, Proper verification required.

Analysis:
The appeal was filed against the Order-in-Original granting benefit of Notification No. 33/99 dated 8-7-99 to the Respondents by the Jurisdictional Commissioner. The issue revolved around the interpretation of the notification regarding exemption from excise duty for industrial units based on substantial expansion. The respondents claimed exemption under the provision for industrial units existing before 24th December 1997 but had undertaken substantial expansion post that date. The crucial point of contention was whether the increase in installed capacity from 100 TPD to 200 TPD had occurred before or after the crucial date of 24-12-97 to qualify for the exemption.

The Respondents argued that various government agencies had certified the expansion post the notified date and provided evidence to support their claim. They highlighted the cancellation of earlier communications and the genuine nature of their investments. The Department, however, contested this, pointing out discrepancies in the investments made before and after the notified date, raising doubts about the authenticity of the machinery purchase and the credibility of witness statements. They also questioned the impartiality of the Director of Industries' report due to his association with the Respondent Company.

After considering the arguments and examining the documents, the Tribunal found shortcomings in the Adjudicating Commissioner's decision-making process. The Commissioner had not provided detailed findings on crucial issues, allowed cross-examination of a key witness, or thoroughly examined important documents like the undated machinery supply agreement. Moreover, the conflict of interest in the Director of Industries' role raised concerns about the credibility of the certification provided. Therefore, the Tribunal ordered a fresh examination of the issues, calling for an unbiased report from the Department of Industries and directing proper consideration of collateral records related to income tax exemptions. The Tribunal emphasized the need for a fair hearing, including cross-examination of witnesses, before reaching a conclusion.

In conclusion, the Tribunal set aside the impugned Order and allowed the Department's Appeal by remanding the case for a fresh examination and decision in accordance with the observations made regarding proper verification, unbiased reporting, and fair hearing procedures.