2021 (10) TMI 320 - HC - Central Excise

Area Based exemption - substantial exemption - N/N. 1/2010 dated 06.02.2010 - HELD THAT - It appears that the petitioner has availed the Budgetary Support Scheme, which is now sought to be recovered by way of a Demand Notice dated 28.11.2019. The reason behind issuing the Demand Notice is stated to be a misunderstanding by the official respondents that the petitioner-unit was entitled to avail the benefits for a period of 10 years commencing from 2009 which period would end in 2019. Notice - List again on 18.11.2021.

Summary

Issues:
1. Change of line of production and entitlement to exemption benefits under Central Excise Department.
2. Implementation of Goods and Service Tax Act, 2017 and Budgetary Support Scheme.
3. Recovery of Budgetary Support Scheme availed by the petitioner.
4. Interpretation of the period for which exemption benefits are applicable.

Analysis:

1. The petitioner switched from manufacturing Zinc Oxide to PET Performs, resulting in a substantial expansion. Initially availing exemption benefits under a 2002 notification, the petitioner claimed entitlement to benefits under a 2010 notification due to the change. The petitioner contended that the benefit should be valid from the date of substantial expansion, not the initial production in 2009.

2. Following the implementation of the Goods and Service Tax Act in 2017, the Government introduced the Budgetary Support Scheme from 05.10.2017. This scheme aimed to extend benefits to units previously availing exemptions under the 2010 notification for the remaining period. The petitioner, having availed the Budgetary Support Scheme, received a Demand Notice in 2019 for recovery.

3. The Demand Notice was issued based on a misunderstanding by officials, assuming the petitioner's entitlement period started in 2009 and ended in 2019. The petitioner argued that the entitlement should be calculated from the date of substantial expansion. The court acknowledged a prima facie case in favor of the petitioner.

4. During the hearing, the petitioner's counsel emphasized the correct entitlement period, leading to the court ordering a stay on the operation of the Demand Notice until the next hearing date. The respondents waived notice, and the case was listed for further proceedings on 18.11.2021. The court's intervention aimed to clarify the correct period for which exemption benefits should apply, considering the change in production line and the Budgetary Support Scheme under the new tax regime.