2018 (4) TMI 1085 - AT - Central Excise

Area Based Exemption - N/N. 50/2003-CE - establishment of a new unit (Unit II) by appellant - denial on the ground that Greenply did not commence commercial production (in Unit II) on or before 31st March 2010 and hence not eligible for the exemption - Clause-a of Para-2 of the Notification. Held that - what is required in terms of Clause-a, is that the new industrial unit should have commenced commercial production not later than 31st day of March 2010 - all the produced documents are undisputed and part of the records of the court below, clearly establish that the Unit-II of the appellant for manufacture of MDF Board etc., had commenced commercial production before 31st of March 2010. The appellant is eligible for exemption for a period of 10 years for its Unit-II with effect from 30 March, 2010 - not only commercial production was commenced on 30 March, 2010, the appellant have also made clearances of MDF board on 31 March, 2010, to Raghuraji Agro Industries Pvt. Ltd. Further the stock of MDF boards with appellants brand were found at the premises of the said Raghuraji Agro Industries Pvt. Ltd. during follow-up investigation and drawl of Panchnama on 21 June, 2010. The verification report of the Superintendent of Central Excise Mr. A.K. Ashthana also supports the commencement of commercial production and that production was going on when he visited during the middle of April 2010 when semi-finished goods were being converted into finished goods - Further it is evident that the total power available with the appellant drawn from the electric company plus from the captive DG sets were sufficient for production in the new Unit-II from 30 March, 2010. Further, installation of plant and machinery have been completed much before 31 March, 2010 which is not disputed and supported by the intimations given to the Department in the month of March 2010 prior to commencement of commercial production. The learned Commissioner have selectively relied upon the evidence on record, thus his findings are vitiated - the appellant is entitled for exemption under the Notification No. 50/2003 CE for its new Unit II for a period of 10 years from 30 March, 2010 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of benefit under Notification No. 50/2003-CE for the period after 01.05.2016.
2. Confirmation of duty demands, interest, and imposition of penalties on the assessee and its officials.
3. Extension of the exemption benefit for the period up to 01.05.2016 based on CBEC Circulars.

Issue-wise Detailed Analysis:

1. Denial of Benefit under Notification No. 50/2003-CE for the Period After 01.05.2016:
The primary contention was whether Greenply Industries Ltd. (Greenply) commenced commercial production in its Unit-II on or before 31st March 2010 to avail the exemption under Notification No. 50/2003-CE. The Department argued that Greenply did not meet the necessary electricity load to carry out production in an automated mode by the cut-off date. However, Greenply provided substantial evidence, including certificates from various authorities, invoices, challans, and affidavits, to establish that commercial production began before the stipulated date. The Tribunal found that the production did commence on 30th March 2010, supported by multiple documents and verification reports, thus entitling Greenply to the exemption for ten years from 30th March 2010.

2. Confirmation of Duty Demands, Interest, and Imposition of Penalties:
The Commissioner had imposed penalties on Greenply's officials under Rule 26 of the CE Rules, 2002, based on the assumption that commercial production did not commence by the cut-off date. Greenply contested this, presenting evidence that the production had indeed started as required. The Tribunal noted that the Department's reliance on the state of affairs during their visits in mid-2010 was misplaced, as the relevant date for determining the commencement of commercial production was 31st March 2010. The Tribunal concluded that the penalties were unjustified, given that the production had commenced within the required timeframe.

3. Extension of Exemption Benefit for the Period Up to 01.05.2016 Based on CBEC Circulars:
The Commissioner had granted exemption to Greenply's Unit-II up to 01.05.2016, treating it as an expansion of Unit-I, based on CBEC Circulars dated 22.12.2010 and 17.02.2012. Greenply argued that Unit-II was a new independent unit and not an extension of Unit-I, despite using DG sets from Unit-I due to insufficient electric power load. The Tribunal agreed with Greenply, stating that using DG sets from Unit-I did not make Unit-II an extension of Unit-I. Consequently, the Tribunal held that Unit-II was eligible for the exemption as a new unit for ten years from 30th March 2010, dismissing the Revenue's appeal.

Conclusion:
The Tribunal allowed Greenply's appeal, setting aside the impugned order and confirming that Greenply's Unit-II was entitled to the exemption under Notification No. 50/2003-CE for ten years from 30th March 2010. The Tribunal dismissed the Revenue's appeal, granting consequential relief to the appellant-assessees in accordance with the law.