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Commissioner of Central Excise, Meerut V/S Manorama Paper Mills Ltd.

    Excise Appeal No. 1559 of 2011 (Arising out of Order-in-Appeal No. 65/2011 dated 28.2.11 0passed by the Commissioner of Central Excise (Appeals), Indore) and Final Order No. 55764/2017

    Decided On, 09 August 2017

    At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi

    By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA
    By, (PRESIDENT) AND THE HONORABLE JUSTICE: V. PADMANABHAN
    By, MEMBER

    For Petitioner: R.K. Mishra, Advocate And For Respondents: S.C. Jain, DR



Judgment Text


1. The appeal is filed by revenue against the order in appeal No. 65/2011 dated 28.2.11. The assessee is a manufacturer of paper and paper boards, and situated in Uttarakhand and is availing area based exemption in terms of Notification No. 49/2003 dated 10.6.03. The assessee claimed benefit of above notification on account of substantial expansion of unit carried out. It is the claim of the assessee that by means of carrying out changes in factory, the installed capacity of plant was increased from 50TPD to 65TPD which amounts to more than 25% increase in installed capacity. After investigating into the claim for substantial expansion, the original authority denied the benefit of area based exemption notification and demanded payment of Customs duty to the extent of Rs. 5,59,24,239/-. However, when the issue was carried to the Commissioner (Appeals), he set aside the demand and allowed the benefit of area based exemption. Aggrieved by the decision, Revenue has filed the present appeal.

2. With the above background, heard Shri R.K. Mishra, DR for the Revenue and Shri S.C. Jain, Advocate for the respondent.

3. The assessee unit was already in existence prior to the claim for area based exemption. They claimed the increase in installed capacity by more than 25% by incurring capital investment of over Rs. 25.75 lakh by way of investment on machinery and by alterations in the installed machinery. Revenue observed that the plant and machinery claimed by the assessee to have been used for capacity enhancement were infact replacement material which was consumed and the machinery installed were only meant for improvement in the quantity of goods manufactured. Revenue was further of the view that the assessee will be eligible for the claim of substantial expansion only by making additional investment in plant and machinery to give effect to the increase in installed capacity by at least 25%. Learned DR has also cited CBEC circular dated 21.1.2004 wherein clarification has been issued on the term 'substantial expansion' in relation to area based exemption including notification No. 49/2003. In the above circular it has been clarified that the substantial expansion should be the result of increase in installed capacity as a result of installation of additional plant and machinery. Accordingly, revenue's case is that the assessee will not be eligible for area based exemption.

4. Learned Counsel for the respondent supported the impugned order. He argued that it has been certified by the independent Chartered Engineer as well as by Professor from IIT Roorki, DPT Saharanpur that the installed capacity of the assessee unit has, infact been increased by over 25%. He further argued that even if such increase in capacity is a result of replacement of installed machinery and alteration in existing machinery, benefit will be available to the respondent.

5. The respondent has also relied upon several case laws in support of their claim:

1. CCE, Chandigarh vs. Bhandari Deepak Industries P Ltd. [2015 (318) ELT 677 (Tri-Del)]

2. CC vs. Uttaranchal Iron and Ispat Ltd. [2011 (266) ELT 331 (Uttarakhand)

3. Him Engineers India (P) Ltd. vs. CCE, Chandigarh [2016 (332) ELT 872 (Tri-Del)]

4. CCE, Meerut II vs. Prakash Straw Board Pvt. Ltd. [2016 (332) ELT 741 (Tri-Del)]

5. Ruchira Papers Ltd. vs. CCE Chandigarh [2016 (332) ELT 139 (Tri-Del)]

6. CCE Meerut vs. Rana Castings Ltd. [2015 (320) ELT 396 (Uttarakhand)]

7. CCE Meerut vs. Charu Steels Ltd. [2015 (322) ELT 660 (Uttarakhand)]

8. Haryana Steel Alloys Ltd. vs. CCE, N Delhi [2001 (137) ELT 178 (Tri-Del)]

9. Tavadec Industries P Ltd. vs. CC Bangalore [2002 (145) ELT 548 (Tri-Bang)]

The respondent, vide their submissions dated 11.7.2017 also submitted copies of invoices along with the list of plant and machinery used for capacity expansion.

6. After hearing both the sides and perusal of the record, we find that the crux of the issue for decision is whether the respondent assessee has increased the installed capacity of its plant and machinery by over 25% which is the requirement to be satisfied to be eligible for area based exemption under the category of substantial expansion. The increase in the installed capacity by more than 25% has been certified by the independent Chartered Engineer, Shri Rohit Oberai of M/s. Oberoi Associates, Kashipur. The same fact has also been endorsed by the Professor of Department of Paper Technology, Saharanpur as well as IIT Roorkee. The reports submitted by the technical experts reveal that such increase in installed capacity is the result of changes carried out by the respondent by way of replacement material/consumables and by installing machinery meant for improvement in quality of products.

7. After going through various case laws we note that Hon'ble High Court of Uttarakhand has examined a similar issue in the case of Commissioner vs. Uttaranchal Iron and Ispat Ltd. (supra) in which the CBEC circular dated 21.1.2004 was also considered. The Hon'ble High Court has observed as follows:

The Circular nowhere says that such machinery, in order to be additional machinery, should be in addition to those, which are in existence. The said clarification, which also uses the words "additional investment in plant and machinery in modernization", read with the other part of the Circular, makes it abundantly clear that the additional plant and machinery, mentioned therein, is not in addition to the existing, but signifies something new brought-in in the manufacturing process, which in turn, increases the capacity. If that be so, then instead of the respondent, itself, increasing the length of its furnace, could dispose of the same and buy the self-same thing from its vendee after the vendee had enlarged the length thereof in order to prevent such things to happen, the Circular incorporated in it the words "additional investment in plant a

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nd machinery in modernization". 8. In the above decision of the Uttarakhand High Court as well as other decisions of High Courts and Tribunal, it has been categorically held that it is the factum of substantial expansion which is the determinative factor for grant of exemption. It is immaterial whether the substantial expansion is as a result of additional or new plant and machinery or by renovation/modification of existing plant and machinery. 9. In view of the above discussion, we find no justification to interfere with the impugned order. Hence, the same is upheld along with the reasons mentioned therein and appeal filed by the Revenue is dismissed.
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