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TMI Blog2024 (3) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable under the Notification. The Notification, as initially enacted, did not provide for any time period within which the commercial production had to commence, being the date relevant for reckoning the original value of investment in plant and machinery as also for reckoning the 5 year period for which the exemption was to be available. All that was required was that any civil construction work in the factory premises and any installation of plant and machinery therein commences only after 31st July 2001 but before the cut-off date. It is impermissible to read in any condition or word into an exemption notification, especially a benevolent one which has been issued with the objective of encouraging investment in the earthquake ravaged region of Kutch. In our view there is neither any legal basis nor rationale for reading in the word ALL in the exemption notification and with reference to the same construe that since some machinery was installed after the cut-off date, the benefit of the exemption would not be available, to goods manufactured using the said machinery. This Tribunal has also in the case of M/S WELSPUN LTD. VERSUS C.C.E. S.T. RAJKOT [ 2019 (1) TMI 371 - CESTAT AHME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to improve the quality of production and not with a view to increase the production, the benefit of exemption cannot be denied to goods manufactured using the second Splitting Column. The imposition of penalty on the Managing Director, Mr.Rustom Joshi is also not sustainable. The impugned order is set aside. The appeals are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... cation supra on goods manufactured from the second oil splitting unit. 1.3 On the basis of above fact the department was of the view that second splitting unit admittedly set up after cut-off dated of 31.12.2005, the exemption of 39/2001-CE dated 31.07.2001 is not admissible to the appellant. Accordingly, after detail investigation show cause notice dated 04.03.2015 was issued which was culminated into impugned order-in-original dated 04.03.2015 whereby the exemption Notification No. 39/2001-CE was denied and consequent demand of duty has been confirmed along with interest, penalties and fine. A personal penalty was also imposed on Shri Rustom G. Joshi, director of the appellant company. Therefore, the present appeals are filed by the appellants. 2. Shri Vipin Jain, learned counsel appearing on behalf of the appellants argued in detail during hearing on 07.12.2023. The learned counsel also filed a detailed written submission post hearing on 31.01.2024 which is taken on record and considered. 3. Shri Mihir Rayka, learned Additional Commissioner, appearing on behalf of the revenue also made his detail submissions on the line of the findings given by the Adjudicating Authority in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sides are at idem that Notification No.39/2001 dated 31.7.2001 was issued to boost economic development and to create new employment opportunities, consequent to a devastating earthquake which impacted the Kutch district in Gujarat on 26th January, 2001. The notification granted exemption from payment of so much of the central excise duty, as is equivalent to the amount of duty paid by the manufacturer other than the amount of duty paid by utilization of CENVAT credit. The exemption was subject to the condition that the manufacturer first utilizes the whole of CENVAT credit available with it and pays the balance amount in cash. Further the exemption was to be given effect to by way of refund of the duty paid in cash. 4. It is pertinent to note that the exemption under the Notification was limited to twice the value of the investment, for each year, in cases where the original value of the plant and machinery installed in the factory was below Rupees 20 crores on the date of commencement of the commercial production and in cases where the original value of investment in plant and machinery was in excess of 20 crores, there was no limitation with respect to the extent of the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paid other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2001, to the Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, by the 7th day of the next month in which the duty has been so paid (b) The Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be. after such verification, as he may deem necessary, shall refund the amount of duty paid other than the amount of duty paid by utilization of CENVAT credit during the month under consideration to the manufacturer by the 15th day of the next month (c) If there is likely to be any delay in such verification, the Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th day of the next month to the month under consideration, and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer 3. The exemption contained in this notification shall be subject to the following conditions, namely (i) It shall apply only to new industrial units, that is to say, units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ……………………………………………………….. Explanation: For the purpose of this notification, - (I) ……………………………………………………………………… (II) the expression "set up on or after the date of publication of this notification in the Official Gazette shall mean that any civil construction work on its factory premises and any installation of plant and machinery therein commences only on or after the date of publication of this notification in the Official Gazette. (III) …………………………………………………………… 6. To bring certainty with respect to the date by which the commercial production should commence, for reckoning the original value of Investment in plant and machinery as also for determining the 5 year period for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of commencement of commercial production, in each year. …………………………………………………… …………………………………………………… 3. The exemption contained in this notification shall be subject to the following conditions, namely (I) It shall apply only to new industrial units, that is to say, units which are set up on or after the date of publication of this notification in the Official Gazette but not later than the 31st day of December, 2005 (II) In order to avail of this exemption, the manufacturer shall produce a certificate from a Committee consisting of the Chief Commissioner of Central Excise. Ahmedabad and the Principal Secretary to the Government of Gujarat. Department of Industry, to the Jurisdictional Assistant Commissioner or the Deputy Commissioner of Central Excise as the case may be, that the unit in respect of which exemption is claimed is a new unit and has been set up during the time period specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tallation of plant and machinery therein commences only on or after the date of publication of this notification in the Official Gazette; and (b) the said civil construction work on its factory premises and installation of plant and machinery therein is completed, and the unit starts commercial production, not later than the 31st day of December, 2005 A reading of the notification keeping in mind the background in which it was issued and the purpose that it seeks to achieve, it appears that the Central Government has merely provided an entry point stipulation for an entity to qualify as a new industrial unit, being eligible to claim benefit of the exemption. There is no bar or any kind of restriction envisaged or provided for in the Notification with respect to addition of any further plant and machinery after the cut-off date. The only stipulation post 21 January, 2004 is that any civil construction work in the factory and installation of plant and machinery should have commenced after 31 July, 2001 and that the plant should have commenced commercial production not later than 31.12.2005. The date of commencement of commercial production being relevant for the purpose of determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From this, we are of the view that only condition is that civil construction and plant and machinery involving investment of more than 20 Crores should be completed and that commercial production in the said unit should start before 31.12.2005. As per the undisputed fact completion of construction and installation of plant and machinery involving investment more than 20 Crores completed and commercial production in such unit was started on 14.01.2005. After fulfilling such condition, the appellant was entitled for exemption for 5 years from the date of commencement of the commercial production. In the notification, there is no cap on the value or quantity of the final product to be cleared during the 5 years of exemption period, therefore, we do not see that the appellant have violated any condition of the Notification No. 39/2001-CE as held by Hon'ble Supreme court in the case of Tullow India Ltd (supra) and Compack Pvt. Ltd (Supra). it was clearly held that exemption Notification must be interpreted strictly and literally and nothing can be imported into the condition of the notification which does not exist in the notification........(emphasis supplied in bold) 13. We ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of computing the original value of plant and machinery, the value of plant and machinery installed on the date of commencement of commercial production only shall be considered." 14. From the above clarification it is clear that since assessee is required to make the declaration wherein a product on which the exemption is entitled to be availed must be declared. Any new product manufactured after 31.12.2005 shall not be eligible for exemption. In the facts of the present case, the appellant right from the beginning declared the final product i.e. bed sheets and terry towels they have not started production of any new product after 31.12.2005, therefore, as per the clarification of the Board given hereinabove the appellant cannot be denied the exemption on the product declared and the same were being manufactured throughout the period of exemption. We also find that in respect of the identical Exemption Notification which is area based bearing No. 49/2003-CE dated 10.06.2003 and Notification No 50/2003-CE dated 10.06.2003 in respect of units setup in the State of Uttarakhand and Himachal Pradesh, the clarification were sought from the Board on the availability of benefit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tripura High Court has in the case of UOI vs. Dharampal Satyapal Ltd as reported in 2021 (9) TMI 474 as also the CESTAT in the cases of Wipro Enterprises Ltd vs CCE reported in 2022 (8) TMI 1098 and MR Tubes Pvt. Ltd vs. CCE reported in 2022 (10) TMI 263, held that addition of plant and machinery after the cut-off date does not disentitle the unit from the benefit of area based exemption. 12. We also note that under the Notification, for a unit to be eligible to claim exemption it has to produce a certificate from a committee consisting of the Chief Commissioner of Central Excise and the Principal Secretary, Department of Industry, to the effect that the unit in respect of which exemption is being claimed is a new industrial unit and has been set up before the cut-off date. The Committee also has to certify the original value of investment in plant and machinery. It is not in dispute that the certification as envisaged under the notification were issued to the appellant and have not been revoked till date. To us it appears that the notification does not envisage revocation of the certificates and denial of exemption granted thereunder merely because some additional plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producing some new products after the cut-off date using plant and machinery installed up the said cut-off date and without any further addition to the plant and machinery. (ii) Where the installed capacity in a particular unit is upgraded after the cut-off date, so as to increase the efficiency of the machinery by installing aricillary machines or replacement of some parts etc. but in such a way that it does not lead to increase in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain safeguards like establishing through proper inventorisation and certification by a Chartered Engineer that the unit has relocated its plant, machinery, equipment, manpower etc. and relocation to areas specified in the relevant Notification only and not across States and/or Notifications. 5. In the context of expansion of a Unit by acquiring an adjacent plot of land and installing new plant and machinery on such land, attention is invited to Board's Circular No. 939/29/2010-CX., dated 22-12-2010 [2011 (263) ELT. T3] wherein it was, inter alia, clarified that any growth in the production/output of a unit by installing fresh plant and machinery would be eligible for exemption under these area-based Notifications. The situation of expansion of an eligible unit by acquiring an adjacent plot of land and installing new plant and machinery on such land, is akin to expansion by way of installing new plant and machinery inside the existing plot/premises. It is, therefore, clarified that in such cases, the exemption should continue to be available for the residual period of exemption Circular No.968/02/2013-CX dated 1.4.2013 2. Representations have been received from the Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by a cut-off date equally applies to the Kutch as also the Himachal/Uttarakhand exemption notification. We are therefore of the view that the clarification issued by the CBEC vide Circular No. 939/29/2010-CX dated 22.12.2010 to the effect that there is no 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, would apply equally in the context of the Kutch notification. 16. We find logic and rationale in the aforesaid clarification issued by the CBEC, as the objective of the exemption is to promote industralisation in regions which are industrially backward or have suffered on account of natural calamity. This objective would be achieved and furthered by providing for a cut-off date by which the units should commence commercial production, so that there is a finite and a definitive time line for the industrialisation to commence. However, limiting the addition of the plant and machinery after the cut-off date and suggesting that the unit should remain static and should not grow and develop, would be clearly contrary to the object and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case the clarification issued by the CBEC reflect the position of the Board and that the internal TRU communication, which on the face of it appears to be in variance and at odds with the subsequent CBEC clarification, cannot be countenanced. It is also relevant to note that the Hon'ble Delhi High Court has in the case of Association of Technical textile Manufacturers vs UOI reported in 2023 (11) TMI 666 held that a TRU letter has no sanctity in law and cannot be considered as a circular issued by the Board. 19. The adjudicating authority has also overlooked the settled principle of law that circulars issued by the Board can at times tone down the rigours of law and that the benefit under the notification could be extended through a circular. This position as enunciated by the Hon'ble Apex Court in the case of J K Lakshmi Cement Ltd vs Commercial tax Officer reported in 2018 (14) GSTL 497 has completely been ignored by the adjudicating authority. The relevant observations of the Apex Court read as under : The Commercial Tax Department, by a Circular, could have extended the benefit under a Notification and, therefore, principle of estoppel would apply, though there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on this count alone the case of the appellant was outside the scope of the clarification issued by the TRU in its letter dated 10.07.2008. For a resolution of this factual dispute it may be relevant to examine the appellant's manufacturing process, the facilities with which the project has been conceived, as is evident from the disclosures made to various authorities. The production achieved by the Appellant before and after addition of the second Splitting column also needs to be examined. 23. The Appellant had set-up the unit in question to manufacture crude fatty acid/split fatty acid, wherein glycerine arose as a by-product. The crude/split fatty acid manufactured by the Appellant was consumed by VVF (India) Ltd, captively at its other units at Sion and Taloja in Maharashtra. 24. The activity of obtaining crude/split fatty acid and glycenne from vegetable oil is technically known as "Splitting of oil or "Hydrolysis" process. This process is carried out in a "Splitting Column", where the oil is continuously fed into the Splitting Column from the bottom (at a temperature of around 80°C-90°C). Water is continuously fed from the top of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to splitting and thereafter distillation. 27. It appears to us that the quality of the crude/split fatty acid would depend upon the time period for which it is allowed to be processed in the splitting column. There appears to be merit in the submission of the appellant that a better degree of split would be achieved i.e. the quality of the output would be better if the oil is allowed to be processed in the splitting column for a longer duration. 28. It appears from the drawings first prepared in June, 2005 that the appellant's plant was conceived with two Splitting columns. Further while applying to the Chief Commissioner for grant of certificate envisaged in the notification, the appellant had in its letter dated 23.12.2005 categorically informed that its investment in plant and machinery were continuing even beyond the cut-off date. It is also an undisputed fact that some of the machines and infrastructure required for the functioning of the second Splitting column were in place prior to the cut-off date. It appears that the project of the appellant was conceived, with the understanding that there would be two splitting columns. 29. The Appellant have also explained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n annual basis. In none of the 12 months period after addition of the second Splitting columns did the production ever reach near the said figure or cross 177018.32 MTs. This clearly demonstrates that the installation of second splitting column was not to increase the production but apparently was with the objective of improving the quality. Month Production of Crude / Split fatty acid (MT) December 2005 911.260 January 2006 10698.149 February 2006 5847.711 March 2006 9724.624 Month Production of Crude / Split fatty acid (MT) April 2006 12430.443 May 2006 9837.997 June 2006 14751.561 July 2006 14401.234 August 2006 11074.070 September 2006 3621.380 October 2006 5095.084 November 2006 9775.950 December 2006 11636.369 January 2007 11831.132 February 2007 12102.252 March 2007 13285.474 F. Y. 2007-08 Month Production of Crude / Split fatty acid (MT) April 2007 12880.765 May 2007 14825.473 June 2007 17953.374 July 2007 16491.069 August 2007 18208.823 September 2007 12156.158 October 2007 15117.227 November 2007 10112.627 December 2007 11119.120 January 2008 12017.444 February 2008 11681.202 March 2008 14823.653 F. Y. 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less, as more splitting time was required and that installing the second Splitter obviously enhanced speed of the process and processing capacity of the appellant and it could get the desired quality of final product and process higher quantity of raw material thereby leading to higher production. The adjudicating authority has also held that each of the two Splitters had a capacity of 200 TPD and that he was not convinced that the output designed to be manufactured with two Splitters could have been manufactured by One Splitter of 200 TPD. Unfortunately these findings of the Respondent are belied by the undiluted production data figures. The combined production achieved even after the installation of the second Splitter seems to be lesser than what could have been achieved by a single Splitter alone. Further the 200 TPD capacity as explained by the appellant is the output guaranteed by the supplier of technology at 99% degree of split. Obviously the production numbers clearly show that the daily production was higher than 200 TPD and that the plant was functioning operating at a lesser degree of Split and was able to achieve a production of around 15000 MT per month. 34. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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