2017 (12) TMI 505 - AT - Central Excise

Area Based Exemption - N/N. 32/99-CE dated 08.07.1999 amended vide N/N. 5/2002-CE dated 12.02.2002 - denial on the ground that claim that new factory was established at the cited address was found to be false in as much as the invoices under which it was claimed that various items of machineries were purchased, were found to be fake and fabricated - Held that - The N/N. 32/99-CE dated 08.07.1999 granting the area based exemption was amended vide N/N. 5/2002 dated 12.02.2002. After the said amendment, the site in which the appellant was situated was covered within the definition of industrial area and the appellant became eligible for such benefit. From the SCN as well as the impugned order we do not find that any verification of the machines actually installed and working in the unit has been carried out. Further, the entire case has been build up on the basis of the statements of the suppliers of plant and machineries. In the absence of any documentary corroboration as such the statements cannot be admitted as gospel truth. The evidence on record would not justify the withdrawal of the benefit which was extended only after careful consideration and inspection of the factory at the relevant time - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Original denying area-based exemption under Notification No.32/99-CE, based on alleged false claims of establishing a new factory and procuring new machineries.

Analysis:
1. The appellant, engaged in manufacturing PVC coated/Insulated Copper & Aluminum Wire, claimed area-based exemption under Notification No.32/99-CE after its amendment in 2002. The Deputy Commissioner approved the benefit w.e.f. 2002. However, an investigation revealed alleged false claims of setting up a new unit, based on fabricated invoices for machineries. The Adjudicating Authority ordered recovery of refund, leading to the appeal.

2. The department's investigation found that an industrial unit, M/s. Polyplast Products, operated at the same address before the appellant, manufacturing similar products until 2002. Verification showed invoices submitted by the appellant for machineries were false, except for two cases in 2003. The Revenue concluded no new unit was established, declaring the refund irregular.

3. The appellant challenged the impugned order on grounds that the Deputy Commissioner's approval was not challenged by the department, lack of tangible evidence for allegations regarding machineries, and absence of proof for using M/s. Polyplast Products' machineries. The appellant argued the order lacked substantiation.

4. The Revenue defended the order, asserting the appellant did not procure new machineries for the factory, thus not qualifying for the exemption. The investigations supported the claim of false establishment of a new unit, justifying recovery of refunds.

5. The Tribunal noted the amendment in the exemption notification covering the appellant's site, approved by the Deputy Commissioner in 2002. However, investigations revealed fabricated invoices for machineries procured before the exemption period. The Tribunal observed discrepancies in the investigation timeline and lack of verification before granting the exemption.

6. The Tribunal criticized the investigation for not verifying the machineries originally declared by the appellant and relying on subsequent lists. It highlighted the absence of evidence regarding machineries from the M/s. Polyplast Products era and reliance on uncorroborated supplier statements. The Tribunal concluded that doubts raised by the investigation did not justify withdrawing the exemption granted after thorough inspection.

7. Consequently, the Tribunal set aside the impugned order, allowing the appeal, emphasizing that the evidence did not support the withdrawal of the exemption granted after careful consideration and inspection.

This detailed analysis of the legal judgment highlights the issues involved, arguments presented by both parties, findings of the investigation, and the Tribunal's decision, providing a comprehensive understanding of the case.