2015 (3) TMI 35 - AT - Central Excise

Area Bases Exemption - Notification No.50/03-CE - Assessee undertaken substantial expansion on or after 07.01.2003 by the way of increase in installed capacity of unit by not less than 25% - Held that - As per the documents on record, the officers of inspection team of Directorate of Industries inspected the factory before they started expansion work and also inspected their factory after completion of expansion work in December, 2003. - It is not the contention of the Revenue that the letter regarding inspection mentioned in the Directorate of Industries letter dated 02.01.2004 is false. When this letter dated 02.01.2004 acknowledging more than 25% increase in the installed capacity of semi corrugated paper and corrugated boxes was preceded by the inspection of the unit on 26/12/2003, in our view, it is absurd to doubt the correctness of this letter of the Directorate of Industries. As regards the Department s allegation that enhancement of capacity is only in respect of semi craft papers and corrugated sheets and there is no enhancement of capacity in the manufacture of corrugated boxes, the same is not correct, as the directorate of Industries letter dated 02.01.2004 also mentions enhancement of installed capacity for the manufacture of corrugated boxes from the earlier 1200 MT Per annum 1800 M.T. Per annum. Just because no additional machinery for manufacture of corrugated boxes was installed, it cannot be presumed that there was ho enhancement in the manufacturing unit s capacity to manufacture corrugated boxes. Moreover the Tribunal has held that for achievement of 25% or more enhancement in installed capacity for the purpose of exemption under notification No.50/2003-CE, it is not necessary that the expansion should be in each and every section of the manufacturing plant. - Decided against Revenue.

Summary

Issues:
Claim of exemption under Notification No.50/03-CE for substantial expansion by increasing installed capacity of unit by not less than 25%. Dispute regarding increase in installed capacity, grounds of appeal by Revenue, arguments by both sides, interpretation of Board's Circular, reliance on previous judgments, examination of Directorate of Industries' letter, consideration of expansion in different sections of plant.

Analysis:
The case involved a dispute over the claim of exemption under Notification No.50/03-CE by the respondent for substantial expansion by increasing the installed capacity of their unit by not less than 25%. The appellant argued that the increase in capacity was achieved through means other than installation of additional plant and machinery, which, according to Board's Circular, would not qualify for the exemption. The Revenue contended that the power load, number of workers, and capacity of the digester remained the same, casting doubt on the claimed increase in installed capacity.

The respondent, on the other hand, presented evidence to support their claim, including details of additional machinery installed and existing machinery replaced, as well as inspection reports by the Directorate of Industries. They argued that the increase in installed capacity was achieved by adding new machinery and replacing old digesters. Additionally, they cited previous judgments and a High Court case to support their position that capacity increase through modifications qualifies as substantial expansion.

The Tribunal examined the submissions from both sides and reviewed the records. They noted that the Directorate of Industries' letter dated 02.01.2004 acknowledged the increase in installed capacity for semi craft papers and corrugated boxes, supported by inspection reports. The Tribunal found no merit in the Revenue's appeal, highlighting that the Directorate of Industries' letter, preceded by inspections, confirmed the capacity increase. They also emphasized that expansion in each section of the manufacturing plant was not necessary for the exemption under the notification.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the respondent's claim of substantial expansion and the increase in installed capacity as per the provisions of Notification No.50/03-CE.