2023 (9) TMI 515 - AT - Central Excise

Benefit of area based exemption under N/N. 50/2003-CE dated 10.06.2003 - denial of benefit on the ground that the commercial production could not be commenced before 31.03.2010 - HELD THAT - The invoice dated 31.03.2010 issued by the appellant for aluminium sections does not appear to be correct or pertain to products manufactured by it. Further, the industrial furnace acquired for manufacturing aluminium ingots from scrap itself was purchased by invoice dated 26.03.2010 and it crossed into the State of Uttarakhand on 29.03.2010 - It is found unthinkable that such an industrial furnace with accessories would have reached the factory on the same date and would have been installed, commissioned, tested, trials completed and commercial production also completed and the first invoice for commercially produced goods could have been raised on 31.03.2010 i.e. within two days. There are strong force in the argument of the learned Authorized Representative for the Revenue that under this invoice dated 31.03.2010 aluminium sections were sold which are extrusion products and there was no equipment for extrusion in the factory - In the absence of any contrary evidence Revenue s contention is accepted that it was impossible for appellant to have produced 430 kg. of sections by consuming 136 kg. of aluminium scrap. Therefore, on the facts of the case it is not convincing that any commercial production was commenced on or before 31.03.2010. It needs to be pointed out that the electricity consumption as per the electricity authorities was nil prior to April, 2010 and we find it hard to believe that the production could have taken place without any electricity at all. The appellant claimed that it had a diesel generator set for a few days, but was unable to provide any evidence to support its claim. The impugned order is correct and proper and calls for no interference - the impugned order is upheld and the appeal is dismissed.

Issues involved:
The issue in this case is whether the appellant was entitled to the benefit of area-based exemption under Notification No. 50/2003-CE dated 10.06.2003, considering the requirement of commencing "commercial production on or before 31.03.2010."

Summary of Judgment:

Grounds of Appeal by Appellant:
1. The appellant argued that the unit was established and functioning before the sunset date, as evidenced by the sale of aluminium sections on 31.03.2010, and thus, the exemption should not be denied.
2. The appellant contended that even before the main furnace was installed, they were manufacturing goods using smaller furnaces.
3. The appellant challenged the sustainability of the show cause notice issued after over 4 years of investigation.
4. The appellant disputed the demand of duty, interest, and penalty, seeking the appeal to be allowed and the impugned order to be set aside.

Submissions by Department's Authorized Representative:
1. The Department argued that the appellant had not commenced commercial production by 31.03.2010, as indicated in the intimation submitted on that date.
2. The Department highlighted the logistical challenges of installing and commissioning the industrial furnace within two days, as claimed by the appellant.
3. The Department pointed out discrepancies in the appellant's consumption of raw material, indicating insufficient production capacity.
4. The Department emphasized the technical requirements for manufacturing aluminium sections, questioning the appellant's infrastructure for extrusion.
5. The Department cited norms for aluminium scrap consumption, indicating a significant shortfall in the appellant's usage.
6. The Department raised doubts about the appellant's electricity consumption and the lack of evidence supporting the claim of using DG sets.

Court's Decision:
After reviewing the submissions and evidence, the court deliberated on whether the appellant had indeed commenced commercial production before 31.03.2010 to qualify for the exemption. The court found discrepancies in the appellant's claims, including the timeline for installing the industrial furnace, production capacity, and electricity usage. The court noted that the appellant's furnaces were not suitable for large-scale production of aluminium sections. Consequently, the court upheld the impugned order denying the exemption and confirming the demand of duty, interest, and penalty. The appeal was dismissed.

Conclusion:
The court found that the appellant failed to demonstrate the commencement of commercial production before the specified date, leading to the denial of the exemption and imposition of duties, interest, and penalties. The impugned order was upheld, and the appeal was dismissed.

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