2016 (8) TMI 841 - AT - Central Excise

Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - carrying out more than 25% expansion in the installed capacity of plywood production as prescribed in the exemption notification - no increase in the installed & licenced capacity in the old wood based industries of Nagaland after 30.10.2002 - Held that - in view of the clarification dated 15.10.2009 discussed by the Adjudicating authority it cannot be said that no expansion in the installed capacity could be enhanced by the Respondent. There could be various stages by which installed capacities could be enhanced by the appellant so long as it remains within the licenced capacity decided by State Forest department in the light of Supreme Court s judgement dated 15.01.1998. There is also no requirement under Notification No.32/99-CE dated 08.07.1999 that licensed capacity fixed by State forest department has to be taken into consideration while allowing expansion and that appellant should in one go install all machinery required to cater to the licensed capacity sanctioned. Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - Chartered Engineer vide his report dated 17.05.2005 has not taken veneer production into consideration while arriving at more than 25% expansion in installed capacity - Held that - Adjudicating Authority further justified the expansion by not only based on a Chartered Engineer s Certificate dated 17.05.2005, but also relied upon a report of National Institute of Technology Agartala (A Central Government Institute). Certification given by two experts cannot be brushed aside without taking any other opinion of an expert as held by various judicial pronouncements relied upon by the Respondent. No evidence has been brought on records in the review order that any other expert s opinion was taken by the Department to counter the expert opinions obtained by the Respondent. In the absence of any such expert opinion obtained by the department it cannot be appreciated that quantity of veneer production should also be taken into consideration while determining the expansion undertaken. CBEC also while issuing a clarification under F.No.354/08/98-TRU dated 09.07.1999 opined that in case of doubt the Central Excise Officers may consult department of Industries of State Govt. for the purpose of 25% expansion in installed capacity, etc. Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - Adjudicating authority has not enquired into the efficiency of the transformer and whether transformer of 1250 KVA will give 100% output - original ground plan showing list of plant & machineries before expansion carried out, could have been called by the Adjudicating authority - Held that - it has not been amplified by the department as to how these verifications could have helped in establishing that more than 25% expansion in installed capacity has not been done. At the same time these suspicions and a separate expert contrary opinion could have been raised by the department to review the order dated 07.06.2005 passed by the jurisdictional DC, CEx, Jorhat allowing the benefit of Notification No.32/99-CE dated 08.07.1999. In the absence of Review of order dated 07.06.2005 the same has become final on admissibility of this exemption to the Respondent. - Decided against the Revenue

Issues Involved:
1. Eligibility of the Respondent to the benefit of Notification No.32/99-CE dated 08.07.1999.
2. Determination of whether the Respondent carried out substantial expansion in the installed capacity.
3. Consideration of licensed capacity and installed capacity as per the Supreme Court’s judgment.
4. Validity of expert opinions and certifications regarding capacity expansion.
5. Applicability of extended period for issuing a show cause notice.
6. Review and finality of the DC, CE, Jorhat’s order dated 07.06.2005.

Issue-wise Detailed Analysis:

1. Eligibility to Notification No.32/99-CE:
The primary issue is whether the Respondent is eligible for the benefit under Notification No.32/99-CE dated 08.07.1999. The Adjudicating authority had previously held that the Respondent was eligible due to more than 25% expansion in the installed capacity of plywood production. The Revenue challenged this eligibility, arguing that the Respondent did not meet the required expansion criteria.

2. Substantial Expansion in Installed Capacity:
The Revenue contended that the Respondent did not achieve the necessary 25% expansion in installed capacity. They argued that the Chartered Engineer’s report only showed an increase in plywood production capacity from 4341 CUM to 6312 CUM, without considering veneer production. The combined expansion of veneer and plywood was calculated to be only 16.910%, which is below the required threshold.

3. Licensed Capacity and Supreme Court’s Judgment:
The Revenue referenced the Supreme Court’s restrictions on wood-based industries and the licensed capacity determined by the Nagaland State Forest Department. They argued that there was no increase in the installed and licensed capacity of the Respondent’s unit after 30.10.2002. However, the Adjudicating authority noted that the Principal Chief Conservator of Forests clarified that no permission was required for enhancement of installed capacity within the licensed capacity, as per a letter dated 15.10.2009.

4. Expert Opinions and Certifications:
The Respondent presented certifications from a Chartered Engineer and the National Institute of Technology, Agartala, confirming more than 25% expansion in installed capacity. The Adjudicating authority accepted these expert opinions, stating that they could not be dismissed without contrary evidence from the Revenue. The Adjudicating authority also referred to CBEC Circulars and judicial precedents supporting the validity of such expert certifications.

5. Extended Period for Show Cause Notice:
The Respondent argued that the demand was time-barred and that the extended period could not be invoked. The Adjudicating authority agreed, noting that the issue had already been settled by an order dated 07.06.2005, which was not reviewed by the department. Therefore, invoking the extended period was not justified.

6. Review and Finality of DC, CE, Jorhat’s Order:
The order dated 07.06.2005 by DC, CE, Jorhat, which allowed the benefit of Notification No.32/99-CE, was not reviewed by the department. The Adjudicating authority emphasized that once an issue is settled and not reviewed, it becomes final, and a second proceeding cannot be initiated on the same cause of action without new evidence or expert opinion.

Conclusion:
The Tribunal upheld the Order-in-Original dated 31.05.2011, dismissing the Revenue’s appeal. The Tribunal found no merit in the Revenue’s arguments and confirmed that the Respondent was eligible for the benefit under Notification No.32/99-CE, based on the substantial expansion in installed capacity as certified by experts. The Tribunal also held that the demand was time-barred and that the previous order by DC, CE, Jorhat, had attained finality.

Disposition:
The appeal filed by the Revenue was dismissed, and the cross-objection was disposed of. The judgment was pronounced in the open court on 12.08.2016.

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