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TMI Blog2022 (8) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... overy with interest and penalty. 2. Jayaz Electrical Motors filed a declaration dated 24.12.2008 under the aforesaid area based Exemption Notification dated 10.06.2003 for manufacture of electrical motors, torch, LED products, liquid detergent and toilet soap [the old products] stating that the commercial production had commenced on 02.12.2009. The appellant purchased Jayaz Electrical Motors on a slump sale basis and intimated this fact to the Department by a letter dated 31.03.2014. The appellant also stated that it will continue to avail exemption as per Exemption Notification. By a letter dated 24.03.2015, the appellant intimated the Department that the Unit was shifted from Khasra No. 85/4, Plot No. 5, Crestal Complex, EPIP Jharmajri, Baddi to Plot No. 87-A, EPIP Phase-I, Jharmajri, Baddi. The appellant started manufacturing certain other products namely, body wash, deo, face wash, glucovita bolts, hand and body lotion, liquid hand wash, shaving cream, talcum powder, fabric conditioner, MCB, socket, panel and switch [the new products] and intimated this fact to the Department by letters dated 12.08.2016, 30.03.2017 and 18.01.2018. 3. The dates on which the appellant started m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictional Assistant Commissioner at the time of opting for exemption subject to commencement of commercial production on or before the cut-off date i.e. 31.03.2010 and complying with other conditions appended therewith. Further, as per clarifications issued by the Board from time to time, an eligible unit, in order to meet its bonafide needs, could enhance or diversify its production capacity, however, installation of a new unit in the guise of enhancement or diversification of production capacity beyond the cut-off date is not allowed. ****** 26. In view of the above facts and discussion, I find that there is no bonafides in the addition of the new products as has been discussed above. I further find that the Noticee had devised a modus operandi in such a manner that a completely new unit was set up in the garb of diversification /expansion of the unit by adding new products to the existing products in order to fraudulently avail inadmissible benefit of duty exemption on the new products namely Liquid Hand Wash, Face Wash, Talcum Powder, Shaving Cream, Hand & Body Lotion, Deodorant, Body Wash, Glucovita Bolts, Body Wash, Fabric Conditioner, MCB, Socket, Panel & Switch in Unit- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. In the present case, there no dispute regarding the satisfaction of any of these three elements of the Notification; (ii) The appellant acted in accordance with the Circulars issued by Central Board of Excise and Customs [CBEC] . The appellant had set up additional plant and machinery to manufacture new products by relying on the Circular dated 22.12.2010. The Circular clarified that the Notification do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible Unit after the cut-off date and during the exemption period of ten years. In support of this contention reliance has been placed on the decisions of the Tribunal in: a) Richfeel Health and Beauty Pvt. Ltd. vs. CCE & ST [2019 (1) TMI 5 - CESTAT Chandigarh]; b) Khurana Oleo Chemicals vs. CCE, Chandigarh [2017 (348) E.L.T. 332 (Tri. Chan.)]; and c) Dharmpal Satyapal Ltd. vs. CCE. [2019 (12) TMI 788- CESTAT Kolkata] (iii) The Circulars issued by CBEC are binding on the Department; (iv) Reliance placed on the letter dated 09.05.2016 issued by the Board is incorrect; (v) Reliance placed on the order dated 11.12.2017 passed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing for the Department have been considered. 9. The issue that arises for consideration in this appeal is as to whether the appellant is entitled to avail the benefit of the area based Exemption Notification dated 10.06.2003. It would, therefore, be appropriate to reproduce the relevant portion of the said Notification and it as follows: "Notification No. 50 of 2003 dated 10.06.2003 Exemption to goods other than specified goods cleared from units located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area of Uttarakhand and Himachal Pradesh. - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant also stated that it will continue to avail the exemption under the said Notification. The appellant also intimated the Department, by a letter dated 24.03.2015, that it was shifting its Unit from Khasra No. 85/4, Plot No. 5, Crestal Complex, EPIP Jharmajri, Baddi to Plot No. 87-A, EPIP Phase-I, Jharmajri, Baddi. The appellant also started manufacturing new products in addition to the manufacture of old products and intimated this fact to the Department by letters dated 12.08.2016, 30.03.2017 and 18.01.2018. 12. The first issue that arises for consideration is as to whether the appellant has fulfilled the conditions of the Exemption Notification. 13. Regarding the conditions specified in the preamble to the Notification, the appellant satisfies the requirement that the goods should be specified in the two Schedules to the Tariff Act and they should not figure in Annexure 1 to the Notification. The requirement that the goods should be cleared from a Unit located in one of the industrial centres specified in the Annexure to the Notification is also satisfied. Thus, all the three requirements set out in the main portion of the Exemption Notification stands satisfied. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity of production. (iii) Where new dosage forms are manufactured after the cut-off date on the same line of production with the same machinery. (iv) Where a unit manufacturers a new product by installing fresh plant, machinery or capital goods after the cut-off date. 3. Board has examined the matter. Under the said notifications, any new unit set up or an existing unit which has undergone substantial expansion that commences commercial production before the cut-off date is entitled to excise duty exemption in respect of excisable goods (other than those appearing in the negative list) manufactured and cleared for a period of ten years from the date of commencement of commercial production. The provisions of these notifications do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date, and during the exemption period of ten years as per the notification. Therefore, it is clarified that in all the above situations, the benefit of the excise duty exemption under the notifications would continue to be available to eligible industrial units. However the period of exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery or on the production of new products by an eligible unit after the cutoff date and during the exemption period of ten years. Admittedly, the appellant has manufactured new products by addition of plant and machinery, therefore, the items sought to be added by the appellant in their exemption are covered by the CBEC Circular dated 22.12.2010 and the circular issued by the CBEC is binding upon the adjudicating authority in the light of the decision of Ambuja cements ltd. (Supra). ****** 14. In view of the above, we hold that the CBEC circular dated 22.12.2010 is binding on Ld. Commissioner and as per the said circular, the appellant is entitled to add new plant and machinery and he can manufacture of new products in terms of Notification No, 56/2003-CE dated 10.06.2003." 21. It needs to be stated that the Department filed an appeal before the Supreme Court against the aforesaid decision of the Tribunal in Richfell Health, being Civil Appeal No. 5931 of 2019, which is said to be pending. The adjudicating authority has, however, distinguished this decision on facts. 22. In Khurana Oleo Chemicals, a Division Bench of the Tribunal observed as follows: "We also note that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to sub-paragraph (iv) of paragraph 2 of the circular dated 22.12.2010 and sub-paragraph(c) of paragraph 2 of the circular dated 17.2.2012, which are reproduced below, for ease of reference. (i) "2.(iv): Where a unit manufacturers a new product by installing fresh plant, machinery or capital goods after the cut-off date." (ii) "2.(c): When a Unit availing of the exemption under an area-based Notification expands by acquiring a plot of land adjacent to its existing premises and installing new plant/machinery on such land." 2. These clarifications were issued to assist bonafide needs of an eligible unit to enhance or diversify its production capacity. Instances have come to notice where the clarifications referred to in the above two sub paras are being attempted to be availed individually or collectively, contrary to the purpose of the exemption notification. The notifications under reference do not allow installation of a new unit in the guise of enhancement or diversification of production capacity of an eligible unit beyond the cut-off date. Such an interpretation of the circular would go much beyond the conditions prescribed in the exemption noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing goods exclusively or capable of manufacturing goods independently. For this reason also, learned authorized representative submitted that two Units came into existence, one manufacturing the old products and the other manufacturing the new products. 27. It is not possible to accept the contentions advanced by the learned authorized representative appearing for the Department. 28. Reliance on the subsequent Circular dated 09.05.2016 is misconceived. The Circular dated 09.05.2016 merely clarifies that the earlier Circulars dated 22.12.2010 and 17.02.2012 were issued to assist bonafide needs of an eligible Unit to enhance or diversify its production capacity and that the Notification dated 10.06.2003 does not allow installation of a new Unit in the guise of enhancement or diversification of production capacity of an eligible Unit beyond the cut- off date. It would, therefore, be seen that the Circular dated 09.05.2016 only denies the benefit of the Exemption Notification dated 10.06.2003 if the new Unit is set up in the guise of enhancement or diversification of production capacity. 29. The appellant had not set up a new Unit and there was only a diversification of productio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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