2017 (4) TMI 89 - AT - Central Excise

Area based exemption - N/N. 32/99 dated 08.07.1999 - Revenue s case is that the appellant has wrongfully availed the benefit of the refund of the Central Excise duty under the said notification to the tune of ₹ 79,45,526/- only, by willful suppression of the fact - demand of duty with penalty - Held that - The spirit of the notification is to boost the growth of industries in the North East Region by way of expansion of the old units as well as to set up the new units. The intention of the legislation is very clear that the new unit should not be set up at the expenditure of old units. Needless to mention that the purpose of the area based exemption in the North East is to invest finance in the New Industrial Unit. That is why various tax exemption and facilities were provided to the investors for the period of 10 years - In the instant case, the total investment in the subsequent plant is of ₹ 34 lakhs as said above. Earlier parts and machineries were sold for ₹ 20 Lakhs. Thus the fresh investment is minimum for ₹ 14 lakhs only. So this is against the spirit of the notification. It is evident that appellant never started a new unit the appellant has used partly old machinery as stated above in the same premises/shed. Nature of the product is not meaningful to get the benefit of the notification. It is the investment in North East States to boost the economy - appeal dismissed - decided against appellant.

Summary

Issues:
1. Eligibility for benefit under Notification No.32/99 dated 08.07.1999.
2. Determination of whether the appellant can be considered a New Industrial Unit.
3. Alleged wrongful availment of Central Excise duty refund.
4. Compliance with the conditions of the notification.
5. Interpretation of the term "New Industrial Unit" in the context of the case.

Analysis:

Issue 1: Eligibility for benefit under Notification No.32/99 dated 08.07.1999
The appellant, engaged in manufacturing food items under Chapter 20 and 22 of Central Excise Tariff Act, 1985, enjoyed area-based exemption under the said notification. The Department alleged wrongful availment of the Central Excise duty refund, leading to the demand of duty and penalty. The Tribunal directed the Adjudicating Authority to reexamine the eligibility under the notification, specifically Clause-3(a), pertaining to new industrial units.

Issue 2: Determination of whether the appellant can be considered a New Industrial Unit
The Tribunal remanded the matter to ascertain if the appellant qualified as a New Industrial Unit. The appellant's factory, established before 24.12.1997, did not undergo substantial expansion as required by the notification. The appellant's collaboration with M/s. Hindustan Lever Ltd. resulted in the installation of additional plants, but these were removed without informing the Department. The appellant later switched to manufacturing synthetic food color and fragrances, claiming benefits under the notification.

Issue 3: Alleged wrongful availment of Central Excise duty refund
The Department contended that the appellant falsely claimed benefits under the notification by utilizing existing machinery for new products, contrary to the notification's intent. The Department argued that the appellant's actions did not align with the definition of a New Industrial Unit, citing precedents to support their position.

Issue 4: Compliance with the conditions of the notification
The Tribunal scrutinized the investments and activities of the appellant to determine compliance with the notification's requirements. The appellant's failure to disclose the removal of machinery and the utilization of old equipment for new products raised concerns about adherence to the notification's provisions.

Issue 5: Interpretation of the term "New Industrial Unit" in the context of the case
The Tribunal emphasized that the purpose of the notification was to promote industrial growth in specific regions without compromising existing units. The Tribunal concluded that the appellant's actions did not align with the spirit of the notification, as the investment in the new plant was minimal compared to the sale of old machinery. The Tribunal upheld the earlier decision that the appellant was not eligible for the exemption under the notification.

In conclusion, the Tribunal found no merit in the appeal, rejecting it based on the earlier order's reasoning. The application for additional grounds/documents was also dismissed.