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2015 (7) TMI 264 - CESTAT NEW DELHI

2015 (7) TMI 264 - CESTAT NEW DELHI - TMI - Area based exemption - Exemption under Notification No. 50/03-CE dated 10/6/03 - whether or not the commercial production had commenced on or before 31/03/2010 - Held that:- For being eligible for the exemption notification, it is necessary that the commencing of the commercial production should have been taken place on or before 31/03/2010. Though the appellant had intimated the Jurisdictional Central Excise officers about availment of this exemption .....

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on this point. In this regard, the certificate dated 15/07/2010 given by the Member Secretary, Single Window Clearance Agency, Kala Amb, H.P., is in the appellant s favour as it certifies that the commercial production had commenced on 31/03/2010. However, it is not clear from this certificate that this certificate had been given after actually visiting the plant on 31/03/2010 or only on the basis of the records.

As regards the allegation that sale of 3.48 MT of Aluminium Coils had b .....

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e crucial question to be decided for determining as to whether or not the commercial production had commenced on or before 31/03/2010 is whether the statement of Shri Dinesh Sharma is correct or whether the certificate given by the Board Secretary, Single Window Clearance Agency, Kala Amb, H.P., is correct. For this purpose, in our view, Shri Dinesh Sharma and the person issuing the certificate regarding commencement of the commercial production on 31/03/2010 have to be examined as per the provi .....

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zed Representative (DR) ORDER Per. Rakesh Kumar :- The facts leading to filing of these appeals are, in brief, as under. 1.1 The appellant are manufacturers of aluminium sheets and foils chargeable to Central Excise duty under Chapter 76 of the Central Excise Tariff. The raw material for these finished products of the appellant is aluminium ingots. They have their manufacturing unit in Village Rampur Jattan, Nahan Road, Kala AMB, Distt. Sirmour, Himachal Pradesh. Since, their manufacturing unit .....

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enced commercial production on or after 07/1/03 but not later than 31st day of March, 2010 (b) industrial units existing before 07/1/03 in areas mentioned in Annexure II, but which have undertaken substantial expansion by the way of increase in installed capacity by not less than 25% on or after 07/1/03, and have commenced commercial production from such expanded capacity not later than 31/3/10 . 1.3 The appellant claim to be the unit covered by Clause (a) of para 2 of the notification which was .....

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time of visit, it appeared that the manufacturing unit had not commenced commercial production on or before 31/3/10, in as much as at the time of visit, it appeared that installation/erection of the plant and machinery was under progress and had not been completed on or before the sunset date 31/3/10, the construction of furnace for melting and holding of aluminium ingots (raw material) was in progress, the casting machine which is necessary for production of Aluminium coils/sheets, was being as .....

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d as goods were not up to the mark and they had contacted their Chinese machinery supplier who had advised for re-arranging some of the machinery on the production line, and for this reason, they had removed the machinery, earlier installed and they were waiting for Chinese Engineers to re-install the machinery. On scrutiny of the records of the appellant, it appeared that cable plant had arrived in the factory on 26/6/10 and certain furnace parts had arrived on 19/3/10. It also found that while .....

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rticle boards and medium density fibre board and Director of the Dealer firm in his statement dated 21/5/10 stated that they have not placed any orders for the Aluminium sheets but had been asked by the owner of the Appellant company to receive the said goods on the understanding that the appellant company would arrange for their subsequent sale. 1.5 It is in view of the above investigation that a show cause notice was issued to the appellant company for denial of the exemption. The show cause n .....

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led. 1.7 Subsequent to the denial of the benefit of the exemption notification, the Commissioner after issue of show cause notice vide order-in-original dated 21/2/14 confirmed the duty demand of ₹ 15,27,002/- against the appellant alongwith interest thereon under Section 11AB and imposed penalty of equal amount on them under Section 11AC. The Commissioner confirmed this demand after adjusting the Cenvat credit in respect of the inputs. Against this order of the Commissioner, the appeal No .....

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no definition of the term commercial production in the exemption notification and, therefore, it should be construed in the sense it is understood in common parlance, that the commercial production is the status when the manufacturing unit is ready to produce the product for sale in the open market to its buyers as against which the production during trial production phase may not up to the required standard for sale, that in the present case, the appellant had sold 3.48 MT of aluminium sheets o .....

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rict Industry Centre and hence this should be treated as evidence of the appellant having commenced commercial production on or before 31/3/10, that the Tribunal in the case of CCE, J&K, Jammu vs. GEES Industries reported in 2014 (309) E.L.T. 558 (Tri. Del.) and in the case of CCE, Jammu vs. Metal Extrusions reported in 2010 (257) E.L.T. 564 (Tri. Del.) has held that certificate issued by the General Manager, District Industry Centre is sufficient to satisfy the condition of 25% increase in .....

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xisting industrial units which have undertaken substantial expansion by the way of increase in installed capacity by not less than 25% or on or after 14/6/02, that when in the present case, the District Industry Centre has given a certificate that the appellant unit had commenced commercial production prior to 31/3/10, this certificate should be accepted and that in view of the above submissions, the impugned orders are not correct. 4. Shri Yashpal Sharma, the learned DR, defended the impugned o .....

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s a DG set, the electricity produced by the DG set was being used for welding etc., that some of the important machinery was still lying in packed condition, that manufacturing of aluminium sheets/coils from aluminium ingots is a continuous casting process and requires installation of critical machinery of casting furnace, holding furnace, casting unit and rolling unit, but these machines had either not been installed even by 1st week of April or the same were not in working condition, that Shri .....

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ccording to the admission of Shri Dinesh Sharma of the appellant company, the goods produced were not up to the mark, that even the sale of 3.48 MT, claimed to have been made by the appellant on 31/3/10 to M/s Shirdi Sales is a bogus sale, as inquiry with M/s Shirdi Sales revealed that they are only a dealer of particle board and medium density fibre board and they had not placed any order for the aluminium sheets with the appellant company and that they had been advised by the appellant company .....

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1992 (61) E.L.T. 444 (Del.) relied upon by the Commissioner (Appeals) wherein it has been held that whenever any factory is in process of being set up, it has a trial run and it has to be seen as to whether the machinery which has been installed is working in good order and has been supplied according to the specifications and that whether the production is in the nature of trial production or commercial production is a question of fact which must be decided after taking into account the circum .....

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factory and the certificate of the Director of Industries has only certain evidentionary value and the same cannot override the statutory records. He, therefore, pleaded that there is no infirmity in the impugned orders. 5. We have considered the submissions of both the sides and perused the records. 6. The appellant manufacture aluminium sheets/coils and have claimed for duty exemption under Notification No. 50/03-CE dated 10/6/03. The only point of dispute is as to whether the appellant are el .....

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ch have undertaken substantial expansion by the way of increase in installed capacity by not less than 25% on or after 07/1/03, but have commenced commercial production from such expanded capacity, not later than 31/3/10 . 7. The appellant claim to be covered by para 2 (a) of the exemption notification i.e. they claim to be a new unit set up after 07/1/03 which had commenced commercial production on or before 31/3/10. This claim of the appellant is disputed by the Department. 7.1 The appellant i .....

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the Jurisdictional Central Excise Authorities for availing this exemption under their declaration dated 23/3/10. While during last week of March, 2010, the appellant s unit was not visited by any Jurisdictional Central Excise Authorities, their unit was visited in 1st and 2nd week of April, 2010 and 3rd week of May 2010 i.e. on 05/4/10, 06/4/10 and 17/5/10. The Department in support of its allegation that as on 31/3/10, the appellant unit had not commenced commercial production and was not even .....

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led (3) as per the statement dated 06/4/10 of Shri Dinesh Sharma, Supervisor of the appellant company though the factory had manufactured 5.5 MT of aluminium coil with the help of DG set on 30/3/10, the quality of the same was not up to the mark and the same had not to be sold and for this reason, the appellant had contacted the Chinese machinery supplier who had advised that some re-arrangement of the machinery on the production line is required and that for this reason, they had removed the ma .....

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rd and medium density fibre board and its Director Shri Sanjay Bajaj in his statement dated 21/5/10 stated that they had not placed any orders for the said goods but they had been advised by the owner of the appellant company to receive the said goods for which they (the appellant company) would arrange some buyers. (6) Beside this, some photographs taken by the Investigating Officers on 17/5/10 have also been placed on record, which according to the Department show that even as on 17/5/10 the f .....

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duction on or before 31/3/10. Though the term commercial production is not defined in this notification, in our view, this term should be construed in contradistinction with the term trial production , as trial production is followed by the commercial production. Trial production is the production during the process of commissioning of a plant. The commissioning of a manufacturing plant starts after completion of the erection and installation. During commissioning the machinery is run on trial/t .....

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and as per its installed capacity and some production has been made, that plant can be said to have commenced commercial production, as it is at that stage only that the plant is in a position to start commercial production, that is, the production of the saleable goods as per its installed capacity. However, for this purpose, the quantum of production on the day of completion of commissioning process or immediately thereafter is not relevant as a manufacturer may not manufacture the full quant .....

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eady to manufacture the goods of the desired quality as per the installed capacity. For being eligible for the exemption notification, it is necessary that the commencing of the commercial production should have been taken place on or before 31/03/2010. Though the appellant had intimated the Jurisdictional Central Excise officers about availment of this exemption under their letter dated 23/03/2010, their unit was not visited by the Jurisdictional Central Excise Officers during the last week of .....

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mb, H.P., is in the appellant s favour as it certifies that the commercial production had commenced on 31/03/2010. However, it is not clear from this certificate that this certificate had been given after actually visiting the plant on 31/03/2010 or only on the basis of the records. 10. The Jurisdictional Central Excise officers instead of visiting the appellant s unit on 31/03/2010 visited only on 06/04/2010 and on the basis of the condition of the plant on that date have alleged that the comme .....

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who has advised for re-arranging some of the machines on the production line. When the Department relies upon the statement of Shri Dinesh Sharma for alleging that as on 31/03/2010, the plant was not in a position to commence commercial production, in our view, his cross-examination, should have been allowed, as the statement given by a person under Section 14 of the Central Excise Act, 1944, can be acted upon only when it is true and for ascertaining its truth, the cross examination of the depo .....

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v Garg vs. Commissioner of Customs reported in 2013 (294) E.L.T. 353 (Del.) with regard to provisions of Section 9D of Central Excise Act, 1944. 11. As regards the allegation that sale of 3.48 MT of Aluminium Coils had been shown to M/s Shirdi Sales on 31/03/2010, who were only a dealer in Particle Boards and whose Director, Shri Sanjay Bajaj on inquiry had stated that they had not placed any orders for these goods, the statement dated 31/05/2010 of the Director, Shri Sanjay Bajaj stating that h .....

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