2021 (9) TMI 474 - HC - Central Excise

Area based exemption - Expansion / enhancement of manufacturing capacity - Part of manufacturing unit or not - Sheds No.15 and 36D of the respondent assessee were part of the existing manufacturing unit or not - exemption under N/N. 69/2003-CE dated 25.08.2003 - HELD THAT - In the present case, the department is not in a position to dispute the factual assertions of the assessee that there was inter linking of a manufacturing process between all sheds, the raw material was procured commonly, that the labour and work force were also commonly maintained. All sheds were under the controlled of the same management and the sheds were under common registration of the factory. It is also pointed out that the sheds No.15 and 36D were adjacent to and inter connected with the existing manufacturing unit located at shed No.14. The Tribunal committed no error in coming to the conclusion that the addition of two sheds to the existing manufacturing unit was only in the nature of expansion of manufacturing capacity and cannot be seen as establishment of new industrial units coming into existence after 28.02.2001 - It is not the case of the department that even if there is any expansion in the existing industrial unit after 28.02.2001, the production achieved through such augmented manufacturing capacity would not qualify for exemption under the said notification dated 25.08.2003. The question is answered in favour of the assessee against the Department - Appeal is dismissed.

Summary

Issues:
Interpretation of exemption notification for manufacturing units expanding after a specified date.

Analysis:
The judgment involves a challenge to the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by the department. The primary issue revolves around whether Sheds No.15 and 36D, acquired after 28.02.2001, are eligible for exemption under notification No. 69/2003-CE dated 25.08.2003. The respondent assessee had an existing manufacturing unit at Shed No. 14, fulfilling exemption conditions. The assessee later acquired Sheds No.15 and 36D, commencing manufacturing activities post the specified date. The department disputed the exemption claim, leading to an order demanding unpaid duty. The Tribunal, however, allowed the appeal, noting common registration for all sheds and considering the additional sheds as part of the existing unit. The department appealed this decision.

The appellant contended that units established after the cut-off date are not eligible for exemption. Conversely, the respondent argued that all requirements for the additional sheds to be part of the existing unit were met. The respondent highlighted commonalities in manufacturing processes, raw material procurement, workforce, tax registrations, and physical proximity of the sheds. The department did not contest these factual assertions, acknowledging the interconnected nature of the manufacturing operations.

The Court upheld the Tribunal's decision, emphasizing the evidence supporting the expansion of manufacturing capacity rather than the establishment of new units post the specified date. Notably, the department did not argue that an expansion after 28.02.2001 would disqualify production for exemption. Consequently, the question was resolved in favor of the assessee, dismissing the appeal and disposing of any pending applications.