TMI Blog2010 (5) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... mar, SDR, for the Respondent. [Order per: Rakesh Kumar, Member (T)]. - The facts leading to these appeals are, in brief, as under:- 1.1 M/s. Rana Castings Ltd., Jashodharpur Industrial Area, Kotdwar, Dehradun (hereinafter referred to as "the appellant company") have a factory manufacturing M.S. Ingots chargeable to Central Excise duty under heading 7206.90 of the Central Excise Tariff. Shri Qamruzaman, Shri Kamruzama Rana, Shri Jakir Rana, Shri Kadir Rana, and Shri Noor Saleem Rana are directors of the appellant company. The appellant company was availing duty exemption under notification No.50/2003-CE dated 1.6.2003 known as "Hill area exemption for Uttranchal and Himachal Pradesh". This exemption is available to the new industrial units set up in the industrial area specified in this notification which have commenced commercial production on or after 7th day of January, 2003, but not later than 31st March, 2010 and industrial units existing prior to 7.1.2003 in the specified areas but which have undertaken substantial expansion by way of increase in the installed capacity by not less than 25% on or after 7th day of January, 2003, but have commenced production from such ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.11.2004, 11.1.2005, 14.2.2005, 15.3.2005, 30.3.2005, 18.5.2005 and 8.7.2005 were issued for the period from October, 2003 to July, 2004 for total duty demand of Rs.1,03,81,578/- along with interest and two show cause notices dated 16.11.2005 and 8.3.2006 were issued for the period, from November 2004 to January 2006 for total duty demand of Rs.2,13,58,256/- along with interest. All the show cause notices, in addition to demand of duty along with interest, also proposed imposition of penalty on the appellant company under Rule 25(1) of Central Excise Rules, 2002 read with Section 11AC and penalty on its Directors under Rule 26 of the Central Excise Rules, 2002. 1.2 The first group of 8 show cause notices for the period October, 2003 to July, 2004 was adjudicated by the Jt. Commissioner vide a common order-in-original No.04-11/JOINT COMMISSIONER/M-I/01 dated 30.01.2006 by which the entire duty demand of rs. 1,03,81,578/- was confirmed along with interest at the applicable rate as per provision of Section 11AB of the Central Excise Act and besides this, penalty of Rs.1,03,81,578/- was imposed on the appellant company and, a penalty of Rs.10 lakh was imposed under Rule 26 of Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defines the term "substantial expansion" as increase in installed capacity by not less than 25%; that in view of this, giving any other meaning to the term "substantial expansion" is totally wrong; that the Board's Circular No.772/5/04-CX dated 21.1.2004 clarified that substantial expansion in installed capacity by not less than 25% must be by way of installation of additional plant and machinery; that the appellants have satisfied this condition inasmuch as they have increased the capacity of furnace by replacing the old furnace of 4 M.T. capacity with a new furnace of 6 M.T. capacity; that the Tribunal in the case of Uttranchal Iron and Ispat Ltd. vs. CCE, Meerut, reported in 2008 (229) ELT 253) (Tri.-Del.) has held that there is nothing in the notification No.50/03-CE to suggest that there should be increase in each and every unit of the plant and that condition of the notification would be satisfied, if there is at least 25% increase in the installed capacity and that in view of this, the impugned orders are not correct. 2.2 Shri Sunil Kumar, learned D.R., defended the impugned order by reiterating the findings of the Commissioner/Commissioner (Appeals) and emphasized that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efficiency or making minor changes in machinery by an existing industrial unit cannot be treated as "substantial expansion by way of increase in installed capacity by not less than 25%", for the purpose of this notification as by treating it so, the words "substantial expansion would become redundant. Therefore, for qualifying for exemption, there must be some expansion/addition of plant and machinery and this expansion/addition must be such that it has resulted in at least 25% increase in the installed capacity. Same view has been expressed by the Board in its circular No.772/5/04-CX dated 21.1.2004, which is reproduced below:- "Area based exemption from Central Excsie duty are currently available under various notifications as follows:- (a) for North Eastern States under notification No.32/99-CE and 33/99-CE both dated 8.7.1999; (b) for Jammu and Kashmir under notification No.56/2007-CE and 57/2002-CE both dated 14.11.2002; (c) for Himachal Pradesh and Uttranchal under notification NO. 49/03-CE and 50/03-CE both dated 10.6.2003. 2. The exemption contained in these notifications is applicable either to the new industrial units or units undertaking substantial expans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 MT furnace can not be called substantial expansion. We do not agree with this view of the Department, as as discussed above, for the purpose of this exemption, the addition/expansion of machinery which results in at lease 25% increase in installed capacity is enough and expansion or addition can be by the way of replacing existing machinery with machinery with higher production capacity. Just because instead of installing another furnace of 2 MT capacity to raise their total capacity to 6 MT, a new 6 MT capacity furnace is installed it cannot be said that there has been no expansion of their plant and machinery. Same view has been taken by the Tribunal in the case of Charu Steels Ltd. vs. CCE, Meerut-I (Order No.65-68/2010-CX dated 30.5.2008). 4.1 The Department relies on Tribunal's judgments in cases of National Newsprint and Paper Mills Ltd. vs. Collector of Customs, Mumbai, reported in 1987 (32) ELT 153 and Travancore Titanium Products vs. Collector of Customs, Cochin (supra). But both these judgments are in respect of scope of the words - "Substantial expansion" in heading 84.66 of the Customs Tariff which covered - "...... machinery etc... required for initial setting up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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