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TMI Blog2023 (11) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... t such additional plant and machinery or the parts thereof, irrespective secondhand should be brought in due to which installed capacity of a manufacturing unit stands extended by more than 25%. The circular, makes it abundantly clear that the additional plant and machinery mentioned therein though may not be in addition to existing equipments but it should signify something new brought in the manufacture process, which in turn, increases the installed capacity more than 25%. Hon ble High Court of Uttarakhand in the case of COMMISSIONER OF CUS. C. EX. VERSUS UTTARANCHAL IRON ISPAT LTD. [ 2010 (12) TMI 491 - UTTARAKHAND HIGH COURT] , wherein it was held that by making the modification of already existing machinery if the installed capacity gets increased by more than 25%, the assessee shall be entitled to the benefits of Notification No.50/2003-CE dated 10.06.2003. This Tribunal in another decision in the case of ASSAM PETROCHEMICALS LIMITED VERSUS COMMISSIONER OF C. EX., SHILLONG [ 2004 (2) TMI 191 - CESTAT, KOLKATA] , held that in case of existing manufacturing units, the date on which the enhanced capacity of the unit is installed, should be the relevant date. Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be set aside. The findings in order under challenge that benefit of impugned notification could not be extended to the appellants as their unit is not located in an existing industrial area are not sustainable - The order under challenge is hereby set aside - Appeal allowed. - DR. RACHNA GUPTA, MEMBER (JUDICIAL) AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Jitin Singhal, Advocate for the Appellant Shri O.P. Bisht, Authorized Representative for the Respondent ORDER Present order disposes of two appeals, one filed by the firm and another by its proprietor for same set of facts and circumstances. The facts relevant for the purpose are as follows: 2. M/s. Rishabh Velveleen Ltd., one of the appellants was engaged in manufacture of flock fabrics. They submitted the declaration dated 10.09.2003 to the Deputy Commissioner, Central Excise, Division Dehradun with a copy to Jurisdictional Superintendent, Central Excise, intimating that after undertaking substantial expansion for their installed capacity by more than 25% they started availing benefit of exemption Notification No. 50/2003CE dated 10.06.2003 on the clearances of their products w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,22,995.00 2. 16300-306 dated 03.11.2004 October 2003 51,07,604.00 3. 17390-96 dated 30.11.2004 November 2003 41,41,275.00 4. 104-110 dated 06.01.2005 December 2003 37,51,671.00 5. 1464-70 dated 03.02.2005 January 2004 48,24,023.00 6. 1998-2004 dated 18.02.2005 February 2004 40,49,920.00 7. 2884-90 dated 09.03.2005 March 2004 46,42,790.00 8. 4305-11 dated 12.09.2005 April 2004 40,41,008.00 9. 5807-13 dated 30.05.2005 May 2004 51,46,016.00 10. 5967-73 dated 06.06.2005 June 2004 30,35,158.00 11. 7848-53 dated 21.07.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that said observation is contrary to law laid down by various courts as follows: (i) OCCE Vs. Uttaranchal Iron Ispat Ltd., reported in, 2011 (266) ELT 331 (Uttarakhand) (ii) CCE, Chandigarh Vs Bhandari Deepak Industries Pvt. Ltd., reported in, 2015 (318) ELT 677 (Tri-Del) (iii) CCE, Meerut Vs. Manorma Paper Mills Ltd., reported in, 2017 (358) ELT 1245 (Tri-Del.) 6.2 It is further submitted that the report of Shri D.K. Jain has considered the report of Shri Akhilesh Jain, and had not disputed the factual position in it but the report of Shri D.K. Jain has arrived at an unreasoned and unexplained conclusion. The said report is thus wrongly relied upon by the adjudicating authority. Thus, on this ground also, report of Shri D.K. Jain is alleged to have been wrongly considered. 6.3 It is submitted that report of IIT Roorkee also falsifies the report of Shri D.K. Jain. Professors of IIT Roorkee have corroborated the report of Shri Akhilesh Jain clearly establishing the case of the appellant that all the processes, namely the processes of flock fabric drying, flock fabric brushing and post finishing were commissioned in September, 2003, July, 2003 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts of few machines at different stages of the manufacturing were enhanced and not the plant and machinery as such. The Commissioner has wrongly held that no one has verified the installation and commissioning of the plants. To support his submissions, learned counsel has relied upon the following decisions and has prayed for the order under challenge to be set aside and appeals to be allowed. (i) Assam Petrochemicals Ltd. Vs. CCE, Shillong, reported in, 2004 (10) ELT 306 (ii) State of Andhra Pradesh Vs. Godawari Plywood Ltd, reported in, Sales Tax Cases Vol. 83 (1991) page 289. (iii) CCE Vs. North Eastern Tobacco, reported in, 2002 (146) 490 (SC) 7. While rebutting these submissions, learned DR has submitted that the report of IIT has rightly been rejected by the Commissioner of Custom Central Excise, Meerut-I as it is based on the data provided by the appellant about the date of procurement and date of installation/commissioning of the appellant s capacity. He submitted that the details of equipment added at each manufacturing stage along with the date of procurement were given by the appellant but not the dates of commissioning. It is mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal with respect to the impugned order under challenge dated 29.10.2010 remanding the dispute back to the adjudicating authority for de novoadjudication.In the said order, two aspects were directed to be considered: (i) Report of IIT Roorkee mentioning effective increase in the installed capacity is 33% and the increase in capacity has been effective in September, 2003 i.e. after the cutoff date in the notification i.e. 07.01.2003. (ii) That the Khasra no. on which the factory of respondent has been situated are included in Annexure-II of the notification. Pursuant to the said directions, the impugned order dated 29.10.2010 has been passed holding that neither the report from IIT Roorkee nor the subsequent Notification No. 27/2005 dated 19.05.2005 extend any benefit to the appellant s claim. Hence the appellant is again denied the benefit of Notification No. 50/2003. 9. We observe that the appellant is engaged in manufacture and sales of flock fabric having his place of manufacture at HardwarDelhi Road, Jawalapur, Hardwar, Uttaranchal. The appellant claimed exemption from payment of central excise duty for a period of 10 years w.e.f. 10.09.2003 under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent to the expansion in the factory premises of the appellants was also submitted along with the said certificate. (e) Appellants letter dated. 20.3.2004, wherein they have given certain clarification regarding receipt of Capital Goods prior to 7.1.2003. Vide the said letter appellants conveyed that capital goods procured on or before 07.01.2003 may be considered not amounting to substantial expansion as mentioned in the Notification No. 50/2003-CE dated 10.6.2003. 10. In the light of all above documents, submissions and relied upon case laws, we adjudicate both the aspects of the remand order as mentioned above as follows: A. First aspect of the remand order, the IIT Report: It relates to the first conclusion of Shri D.K. Jain s report. The question to be adjudicated for the purpose is as to whether the IIT report and report by Chartered Engineer of appellants prove that the appellants had increased the installed capacity of their plant and machinery by over 25% on or after 07.03.2003 or it was done prior the said date. 10.1 The adjudication authority below after perusing the aforesaid additional documents including the IIT Roorkee report, has held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of word substantial expansion need to be understood. We observe that the department itself vide the Circular No. 772/5/2004-CX. dated 21.01.2004 has clarified the terms substantial expansion as is used in Notification No. 50/2003-CE. It has been clarified as follows: (a) Increase in installed capacity of an existing unit by not less than 25% should be the result of installation of additional plant and machinery. Any increase in the installed capacity by means other than installation of additional plant and machinery would not qualify for the benefit of exemption under substantial expansion . (b) As substantial expansion is defined in terms of increase in installed capacity by 25% or more, value of investment in plant and machinery is not criteria to define substantial expansion. So long as additional installation of plant and machinery results into increase in installed capacity by not less than 25% quantum or value of investment in plant and machinery is not very material in deciding the criteria of substantial expansion. (c) There is no bar on use of second hand machinery for undertaking substantial expansion so long as it enhances the existing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit. The interpretation of the phrase Substantial Expansion in the judgment of the Hon ble Supreme relied upon by the Tribunal in the above case blends harmoniously with that given in Circular No. 772/5/2004-CX (F.No.354/122/2002-TRU dated 21.01.2004). While applying the said decision of Hon ble Supreme Court, this Tribunal, in an another case titled as Tata Steel Limited Vs. Commissioner Customs decided on 12.09.2006 has held that what is contemplated in 2(b) of Notification 50/2003-CE is the substantial expansion of a unit (the installed capacity thereof) and not the substantial expansion of production of a unit. Though the said production should have been commenced prior 30.03.2007 to avail the said benefit of the Notification 50/2003-CE. This Tribunal in another decision in the case of Assam Petrochemical Ltd. Vs CCE, Shillong reported as 2004 (170) ELT 306, held that in case of existing manufacturing units, the date on which the enhanced capacity of the unit is installed, should be the relevant date. Also Hon ble High Court of Andhra Pradesh in the case of Andhra Pradesh Vs Godawari Plywood s Ltd. dealt with the definition of the expression set up and held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of installation of additional plant and machinery. 10.6 We also observe that Deputy Commissioner, Central Excise, Dehradun got an independent enquiry conducted by their own nominated Chartered Engineer Shri D.K. Jain dated 13.09.2004 to check as to whether the appellant enhanced capacity before or after 07.01.2003 the cutoff date in the Notification No. 50/2003 and, as such, whether appellant is eligible for the benefit of exemption in terms of said notification. We observe that said report is subsequent to the report of Shri Akhilesh Jain still has not given any explanation to falsify the said prior report. It simply has relied upon the fact that procurement started prior 07.01.2003. It is already held that the relevant factor is the installed capacity and not the procured capacity. 10.7 The report from IIT, Roorkee is dated 01.12.2006. Though this report was available prior the order under challenge was passed but the adjudicating authority did not allow the same to be brought on record. From the perusal of Appraisal Report of IIT Roorkee, prepared by two professors of IIT Roorkee, it elaborated that there are several stages of manufacturing processes, one follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 16000 at 800 Meters/Day feed rate 33% Flock fabric drying a. drying (21 chambers) b. Boiler c. cooling 12000 at 600 Meters/ Hr feed rate 1. Harish Stenter 2. Dyring Range 3. Inter Lock machine 4. Trolleys 5. Fuel Pump 6. Ceramic Fir Bricks 7. Chimmi 8. Valves 9. Oil Thermia 10 Thermic Fluid Heater 11. Fluid Bed Furnace 12. Cooling Equipments 13. Air Cooled Compressor Water Softener Plant 06.07.2002 19.06.2003 17.05.2003 13.06.2002 26.09.2002 28.05.2003 01.06.2003 03.06.2003 14.04.2003 31.05.2003 28.06.2003 14.07.2003 12.07.2003 28.06.2003 28.06.2003 25.08.2002 21.02.2003 31.03.2003 28 chambers 16000 at 800 Meters/Day feed rate 33% Flock Fabric Brushing 01 12000 at 600 meters/ Hr feed rate 1. EPC Sensor 2. Electric Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in September, 2003. Therefore it is clear that the installed capacity of drying stage got completed in September, 2003, i.e. beyond the cutoff date of the impugned notification. Similarly at the Sieving stage, machines got added after 31-3-03 i.e. the entire capacity of sieving activity got enhanced after the requisite cutoff date. At the Coating stage, many machines were added during 5-5-02 to 8-6-03. Though some procurement was prior the cutoff date but those have been reported to be less than 25% enhancement of installed capacity. It is clearly reported that the post cutoff date installations have enhanced the capacity of coating stage machinery by more than 33%. As apparent from the percentage given in the IIT Roorkee report, it is clear that procurement post 07.01.2003 enhanced the installed capacity by more than 25%. 10.9 We observe that two professors of IIT Roorkee have prepared the said report observing that the expansion of installed capacity shall be dependent on the commissioning of the procured plant and machinery. The date of commissioning of boiler for flock fabric drying, brushes for fock fabric brushing and printer for post finishing are reported as Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify the said findings of IIT Roorkee report which are in very much corroboration to the earlier report of Shri Akhilesh Jain, the appellant s Chartered Engineer. The report of Shri D.K. Jain though is subsequent to the report of Shri Akhilesh Jain but is silent on all these aspect. The report relied upon by department has nothing to falsify the report of IIT Roorkee. 10.11 Moreover, the enhancement in capacity is not relevant, it is enhancement in such capacity which is installed and that it should have commenced production latest by 31.03.2010. There is no denial to the fact the appellants started production w.e.f. 10.09.2003 out of the said enhanced capacity. There is nothing in Shri D.K. Jain s report to falsify that enhanced capacity got installed much after 07.01.2003. Shri D.K. Jain s report nowhere falsifies the findings of IIT s report as tabulated above. 10.12 The report of IIT Roorkee is sufficiently proving that the procurement prior 07.01.2003 was too miniscule to bring more than 25% enhancement in capacity. Clause 2(b) of the Notification No. 50/2003, as quoted above, simply states that the enhancement in installed capacity on or after 07.01.2003 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than 25%. 10.14 The another finding in the order under challenge is that the IIT Professors had taken the project more than three years later than the relevant date. But this is also observed to be wrong finding as department s own assessor Shri D.K. Jain had also conducted the survey after one year of the expansion of installed capacity in the unit by the appellant. Above all once there is an admission of the department that there was a substantial expansion in the capacity, it was the burden of the department to prove that the capacity procured prior 07.01.2003 was substantially enough to increase the installed capacity by more than 25%. On the contrary, there is sufficient evidence produced by the appellant in the form of two separate reports from three prominent experts to show that the expansion after the relevant date i.e. 07.01.2003 is substantially enough to increase the installed capacity of appellants unit beyond 25%. 10.15 We also observe that Shri D.K. Jain report though has considered: Chartered Engineer Certificates a) 09.09.2003 (Certificate of installation of plant and machinery) b) 17.02.2004 (Certificate of increase in installed capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification No. 50/2003 is wrongly denied to the appellant. The findings in order under challenge are liable to be set aside with respect to this aspect. B. Second aspect of remand order, the inclusion of area (khasra) of appellant in the notifications: We observe that the notification extends exemption to such goods as notified in annexure - I thereof and cleared from such units as are located in Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or the scheme area as the case may be. The unit of appellant exist in Ranipur, Haridwar is admittedly included in annexure - II of the notification. It is also an admitted fact that Rawli, Mehdoodpur, Ranipur is an integrated industrial park. The adjudicating authority has relied upon a Government Order dated 02.04.2004 issued by State Industrial Development Corporation of Uttaranchal Limited (SIDCUL) wherein, the integrated industrial park consisting of Khasra Nos. 786, 787, 792/1 falling in Village Rawli, Mehdoodpur, Ranipur has been notified. The said fact has been accepted by the adjudicating authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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