2016 (10) TMI 762 - AT - Central Excise

Area based exemption - Eligibility of benefit of N/N.50/2003-CE dated 10.6.2003 - whether the appellant did not commence commercial production on or before 31.3.2010 and benefit of notification can be denied to him? - Held that - construction activity in the factory was not in progress. It was found not fit even to keep the machines therein. This will indicate that whatever production shown to have happened on 30/31-3-2010 cannot be considered as commercial production as the machine was not fit enough for such operation. Even after 3 weeks of commencing commercial production, the physical condition of the manufacturing unit was found to be in incomplete status. The windows, walls, floor were in unfinished condition. This aspect is not contested by the appellant also. Such being the position even after three weeks of the cut off date, it will test the reason to conclude that commercial production and activity on the Three Layer Blow Film machine was in stream before 31.3.2010. The plant itself is of substantial size and is not in complete state . It is without roof and not apparently ready for commercial production with such new machinery. The appellant claim to have produced 750 kgs. of poly film on 31.3.2010, quarterly return for the period ending on 31.3.2010 indicated only production of 117 kgs. Such contradiction in the statutory records raised a serious doubts about authenticity of commercial production. The original authority recorded that three layer blow film plant was not at all even in functional stage as on 31.3.2010. The said plant had to be completely dismantled by the supplier later. Time bar - Held that - the claim made by the appellant about commercial production on 31.3.2010 was found to be on the basis of mis-represented facts. In such situation, notice issued to demand duty as a consequence of such mis-representation is to be issued within five years in terms of Section 11A(1) of the Act. Accordingly, no infirmity found on this ground. Appeal dismissed - benefit of notification denied - decided against appellant.

Summary

Issues:
- Eligibility for exemption under Notification No.50/2003-CE dated 10.6.2003
- Principles of natural justice violated by the original authority
- Time bar for issuing notice for duty demand
- Commercial production by the main appellant before 31.3.2010

Eligibility for exemption under Notification No.50/2003-CE dated 10.6.2003:
The case involved the main appellant, engaged in manufacturing Co-extruded Multi Layer Plastic Film, claiming exemption under Notification No.50/2003-CE. The dispute arose as the main appellant allegedly did not commence commercial production before 31.3.2010. The original authority confirmed duty demand of &8377; 4,51,15,678/- and imposed penalties. The appellant contested these findings, arguing against the reliance on uncorroborated statements and the denial of cross-examination. They also highlighted the production of excisable goods before 31.3.2010 based on documentary and physical evidence, challenging the time-barred notice issued by the Department.

Principles of natural justice violated by the original authority:
The appellant contended that the original authority violated principles of natural justice by heavily relying on a statement without allowing cross-examination. They argued that the termination of an individual was orchestrated to overcome the deposition made by him. The Tribunal found that the termination was suspicious, and the evidence collected from various sources corroborated the statement, indicating that the termination was an attempt to manipulate facts. The Tribunal concluded that the reliance on the terminated individual's statement was not a vital point affecting natural justice.

Time bar for issuing notice for duty demand:
Regarding the time bar issue, the appellant claimed that the notice for duty demand was time-barred as the investigation started on 23.4.2010, while the notice was issued on 17.3.2015. However, the Tribunal found that the duty demand notice was not time-barred as it was based on misrepresented facts about commercial production on 31.3.2010, falling within the five-year limitation period under Section 11A(1) of the Act.

Commercial production by the main appellant before 31.3.2010:
The Tribunal examined the evidence related to the alleged commercial production by the main appellant before 31.3.2010. It was found that the physical condition of the manufacturing unit was incomplete even three weeks after the claimed production date. Discrepancies in production records and incomplete status of the manufacturing unit raised doubts about the authenticity of commercial production. The Tribunal noted that the plant was not ready for commercial production with new machinery, and the appellant's claims were contradicted by the evidence collected by the Revenue.

In conclusion, the Tribunal upheld the original authority's findings after detailed examination of all evidence, dismissing the appeals due to lack of merit. The judgment highlighted the importance of factual examination, principles of natural justice, and adherence to statutory provisions in determining eligibility for exemptions and duty demands under the Central Excise Act, 1944.