2019 (1) TMI 5 - AT - Central Excise

Area Based Exemption - N/N. 50/2003-CE dated 10.06.2003 - new products added by installing fresh plant machinery i.e. cosmetics and homeopathic drugs medicaments - exemption w.e.f. 04.05.2017 till 22.03.2020 allowed or not - denial of exemption on the ground that the appellant has established a new unit with new plant and machinery to manufacture totally different products - CBEC circular no. 939/29/2010 dated 22.12.2010 - no SCN was issued to the appellant to deny the exemption sought by the appellant. Held that - On going through the said circular, we find that the notification do no place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cutoff date and during the exemption period of ten years - Admittedly, the appellant has manufactured new products by addition of plant and machinery, therefore, the items sought to be added by the appellant in their exemption are covered by the CBEC Circular dated 22.12.2010 and the circular issued by the CBEC is binding upon the adjudicating authority. CBEC circular dated 22.12.2010 is binding on Ld. Commissioner and as per the said circular, the appellant is entitled to add new plant and machinery and he can manufacture of new products in terms of Notification No, 56/2003-CE dated 10.06.2003. The ld. Commissioner in the impugned order has observed that the appellant is having another unit and exemption to that unit has been expired on 30.04.2017, therefore, in the guise of addition of new items, the appellant sought addition of the new items - the said observation made by the ld. Commissioner is only assumptive and presumptive as the another unit of the appellant is still in existence. Although, the exemption has been expired but unit is still functionary, therefore, it cannot be said that the unit no. 1 has been transferred to the present unit i.e. Appellant and in the guise of the addition of new products, the appellant is seeking exemption for goods manufactured by the unit no. 1. Further, no show cause notice has been issued to the appellant to deny the exemption sought by the appellant, which would enable to file their counter to the allegation for denial of exemption to newly manufactured item - the order of denial of exemption to new products is bad in law. The appellant is entitled for all the new items namely cosmetics and homeopathic drugs medicaments for benefit of exemption Notification No. 50/2003-CE dated 10.06.2003 till 22.03.2020 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to exemption under Notification No. 50/2003-CE dated 10.06.2003 for new products.
2. Validity of the Commissioner’s grounds for denying exemption.
3. Applicability and binding nature of CBEC Circulars.
4. Jurisdiction and procedural compliance.

Issue-wise Detailed Analysis:

1. Entitlement to exemption under Notification No. 50/2003-CE dated 10.06.2003 for new products:
The appellant sought exemption for new products, namely cosmetics and homeopathic drugs, manufactured after installing fresh plant and machinery. The Tribunal found that the appellant’s unit was already eligible for exemption for existing products under the said notification. The Tribunal emphasized that the addition of new products did not constitute setting up a new unit but was merely an expansion of the existing unit. The Tribunal relied on CBEC Circular No. 939/29/2010 dated 22.12.2010, which clarifies that there is no bar on the addition of new products or modification of plant and machinery for eligible units during the exemption period.

2. Validity of the Commissioner’s grounds for denying exemption:
The Commissioner denied the exemption on the grounds that the unit did not have a license to manufacture the new products before the cutoff date, that new machinery was installed which was not part of the original unit, and that the existence of the previous unit (M/s RKS Industries) remained separate. The Tribunal refuted these grounds, stating that the addition of new machinery and products was permissible under the notification and circulars. The Tribunal also noted that there was no evidence of establishing a new unit, and the operations were conducted within the same premises.

3. Applicability and binding nature of CBEC Circulars:
The Tribunal highlighted that CBEC Circular No. 939/29/2010 and Circular No. 960/03/2012 are binding on the Commissioner. These circulars allow eligible units to add new products and machinery without losing the exemption benefit. The Tribunal cited several judicial precedents, including the Hon’ble Punjab and Haryana High Court’s decision in M/s Ambuja Cements Ltd. vs. Union of India, which affirmed the binding nature of such circulars on the Department.

4. Jurisdiction and procedural compliance:
The Tribunal found that the Commissioner acted without jurisdiction as no show cause notice was issued to the appellant before denying the exemption. This procedural lapse rendered the Commissioner’s order invalid. The Tribunal reiterated that the appellant had followed all necessary procedures and there was no violation of the conditions of the area-based exemption notification.

Conclusion:
The Tribunal concluded that the appellant is entitled to the benefit of exemption under Notification No. 50/2003-CE dated 10.06.2003 for the new products till 22.03.2020. The Commissioner’s order was set aside, and the appeal was allowed with consequential relief.