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2015 (8) TMI 59 - CESTAT NEW DELHI

2015 (8) TMI 59 - CESTAT NEW DELHI - 2015 (329) E.L.T. 255 (Tri. - Del.) - Area based exemption - commercial production before 31-3-2010 commenced or not - Denial of exemption under notification no.50/2003-CE dated 10.06.2003 - New industrial unit - Held that:- Date of commencing of the commercial manufacture is the date of commissioning of plant when the newly commissioned plant had been run and some goods of the desired quality had been produced. However, once the plant is commissioned, it is .....

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nded duty of ₹ 90,805/- on 30.4 MTs. of M.S. Ingots cleared during March, 2010 and this duty demand is included in the duty demand of ₹ 5,27,66,984/- confirmed by the appellant in the impugned order. Thus, the Department's allegation that there was no production by the appellant unit during March, 2010 and that the appellant have made only bogus entries regarding production during March, 2010, in their records is not compatible with the Commissioner's order confirming duty demand of .....

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's claim of having commenced production during March, 2010, the Department, merely on the basis of its own interpretation of Electronic Load Survey Report for 30.03.2010 and 31.03.2010 cannot allege that the appellant unit had not commenced commercial production on or before 31.03.2010. - Even though, there is minor discrepancy, between the production recorded on 30.03.2010 & 31.03.2010 of about 29 MT and the goods sold upto 31.03.2010 - 30.40 M.T., the fact remains that on 30.03.2010, the furna .....

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d order is not sustainable. The same is set aside - Decided in favour of assessee. - Excise Appeal No. 57744/2013-EX(DB) - FINAL ORDER NO. 51590/2015 - Dated:- 12-5-2015 - Rakesh Kumar, Member (T) And S. K. Mohanty, Member (J),JJ. For the Appellant : Shri K K Anand, Shri Amit Singh, Shri Vivek Tomar, Ms Pareena Swarup, Ms Surabhi & Ms Priyanka Goel, Advs. For the Respondent : Shri Ranjan Khanna, DR ORDER Per Rakesh Kumar: The facts leading to filing of this appeal are, in brief, as under:- 1 .....

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viz.:- "(a)New Industrial units set up in areas mentioned in Annexure-II and Annexure-III which have commenced commercial production on or after the 7th day of January, 2003, but not later than the 31st day of March, 2010] and (b)Industrial units existing before the 7th day of January, 2003 in areas mentioned in Annexure-II, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after the 7th day of January, 2003, .....

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n no.50/03-CE dated 10.06.2003, wherein they had declared the product to be manufactured by them and that they intended to start commercial production on or before 31.03.2010. 1.2 According to the department, an information was received that the appellant were wrongly availing this exemption notification inasmuch as they had failed to commence commercial production on or before 31.03.2010 and had actually commenced commercial production only after 31.03.2010 and hence, they were not eligible for .....

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and there is also a third stand by crucible, that the total capacity of the unit is 12 MTs., that earlier a load of 3000 KVA has been sanctioned to them but later on, they got the additional load of 2000 KVA and accordingly their total sanctioned loaded is 5000 KVA and that they had purchased the furnace from M/s.Inductotherm (India) Pvt. Ltd., Ahmedabad (hereinafter referred to as 'IIPL') in Feb., 2010 and in this furnace, two crucibles can be operated at a time. The officers at the tim .....

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se Order dated 29.11.2009 placed by the appellant company. Shri Tarun Sanghal in his statement dated 15.3.2011 stated that the furnace supplied with 2 crucibles of 6 MT. each capacity with one stand by crucibles and that two crucibles can be operated at a time. He stated that the furnace supplied was installed and commissioned in two parts - one inverter and three crucibles were commissioned on 30.3.2010 and the second inverter was commissioned on 20.05.2010 and that their engineers had visited .....

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anager, Uttrakhand Power Corporation Ltd. (UPCL) and on inquiry, it was learnt that the power consumption of the appellant company on 29.03.2010, 30.03.2010 and 31.03.2010 was 340 units, 6000 units and 30,420 units respectively while the production of 11.68 MT had been shown on 29.03.2010, the production of 11.67 MT was shown on 30.03.2010 and the production of 17.52 MTs was shown on 31.03.2010. The Department was of the view that the appellant had not commenced commercial production as looking .....

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no production of M.S. Ingots on 29.03.2010, but they claimed that the same has been wrongly shown in the records. However, in respect of the operation of the furnace on 29.03.2010 and 31.03.2010, while the appellant company claimed that they had manufactured 29 MT of M.S. Ingots, according to the department, from the mode of the operation of the furnaces and power consumption, it was not possible to manufacture the quantity of M.S. Ingots claimed to have been manufactured by the appellant and a .....

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on it under Section 11 AB and also for imposition of penalty on them under Section 11 AC. 1.3 The above show cause notice was adjudicated by the Commissioner of Central Excise, Meerut-I vide order-in-original dated 29.01.2013 by which the above mentioned duty demand was confirmed against the appellant along with interest and besides this, penalty of equal amount was imposed on them under Section 11 AC. The Commissioner held that the appellant had not commenced commercial production on or before .....

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is order of the Commissioner, this appeal has been filed. 2. Heard both the sides. 3. Shri K.K. Anand, Ms. Pareena Swarup and Ms. Priyanka Goyal, Advocates, the ld. Counsels for the appellant, pleaded that the appellant company had set up a unit at C-8, UPSIDC Industrial Estate, Bahadra, Dist. Haridwar, Uttrakhand for manufacture of M.S. Ingots from M.S. Scrap and Sponge Iron , that the induction furnace had been procured from M/s. Inductotherm India Pvt. Ltd (IIPL) in Feb. 2010, that the furnac .....

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and the goods manufactured are also covered for exemption under this notification, that during the last week of March, 2010 the appellant unit had received 100.260 MTs of M.S. Scrap, 236.50 MTs of Sponge Iron and 47 MTs of Silco Magnese, that power consumption on 29.3.2010, 30.03.2010 and 31.03.2010 was 340 units, 6052 units and 30420 units respectively and the production recorded on 30.03.2010 and 31.03.2010 was 11.675 Mts. and 17.52 MTs. respectively, that there was no production on 29.03.201 .....

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hat the panel in dual mode can operate two crucibles of 6 MT. each simultaneously, that the equipment was commissioned in two parts - one inverter and three crucibles were commissioned on 30.03.2010 and the second inverter was commissioned on 20.05.2010, that the plant was handed over by the furnace suppliers- IIPL to the appellant on 30.03.2010 to start commercial production but their engineer had stayed that till 1.4.2010 for observation, that the furnace was handed over for commercial product .....

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, as in the show cause notice issued to the appellant, the Department has demanded duty of ₹ 90,805 on clearance of 30 MTs of M.S. ingots during March, 2010 and the Commissioner in the impugned order has confirmed this duty demand, that, therefore, the Department can not allege that there was no production of M.S. Ingots during March, 2010, that the Commissioner's finding that the production claimed to have been made during March, 2010 was bogus production and was shown only in the rec .....

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re not eligible for the exemption notification no.50/2003-CE and confirmation of duty demand on this basis against the appellant company for the period from March, 2010 to September, 2011 along with interest under Section 11AB and imposition of penalty of equal amount on them under Section 11 AC is not sustainable. 4. Shri Ranjan Khanna, ld. Departmental Representative vehemently defended the impugned order by reiterating the findings of the Commissioner in it and pleaded that even as per the ap .....

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s of the appellant's own norm of power consumption, production of 11.67 MTs. recorded for this date was impossible, that - similarly, production of 17.52 MTs recorded for 31.03.2010 is impossible looking to the period for which the furnace was operated; that initial heating of the furnace takes 14 hours and hence the production of 11.675 MTs. shown on 30.03.2010 and production of 17.52 Mts. was of 31.03.2010 is impossible, that even as per the opinion of M/s. Rajeev Jain and Associates, Char .....

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survey report from 29.03.2010 to 31.03.2010, no production was possible on any of these three dates and the function of the furnace has to be treated as trial run and not commencing of commercial production. With regard to the appellant's claim regarding production of M.S. Ingots on 30.03.2010 and 31.03.2010, he reiterated the Commissioner's findings in para-23 to 38 of the impugned order and emphasized that operation of the plant was only trial run, which cannot be called commencing of .....

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pellant are a manufacturer of M.S. Ingots, the raw materials for which are the raw M.S. Scrap and Sponge Iron. Notification no.50/03-CE dated 10.06.2003 exempts the goods other than those mentioned in Annexure-I to this notification and manufactured and cleared from the industrial areas, etc. mentioned in an Annexure-II and III to the notification from the whole of the central excise duty leviable under Section III of the Central Excise Tariff Act, 1944 and also from additional excise duty levia .....

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te of exercise of option. There is no dispute that the goods being manufactured are not mentioned in the negative list of the items specified in Annexure-I of the notification and the Khasra No. of the Plots on which the unit is located are specified in Annexure-II of the notification. There is also no dispute that the appellant under their letter dated 26.3.2010 had filed the necessary declaration to the jurisdictional Central Excise Authorities informing that they will commence commercial prod .....

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roduction on or after the 7th Day of January, 2003, but not later than the 31st day of March, 2010; (b) Industrial units existing before the 7th day of January, 2003 in areas mentioned in Annexure-II, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after the 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2010." The appell .....

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or being eligible for exemption must be - (I) A new industrial unit set up in areas mentioned in Annexure-II or Annexure-III, and (II) which has commenced commercial production on or after the 7th Day of January, 2003, but not later than the 31st day of March, 2010; The term, "new" in the context of this notification must be construed as "not existing before". Thus, a new unit which had been set up either prior to 7.1.2003 or on or after 7.1.2003, but which had commenced comm .....

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tion precedes the commercial production. The first stage of setting up of a manufacturing plant is erection work in course of which foundation of the machinery, on which machinery is to be installed is prepared, supporting structures which support the machinery to be installed are erected and the sheds which house the machinery are constructed. After completion of the erection work, the next stage is the installation of the machinery. However, before the machinery can be used for full-fledged co .....

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led capacity. In our view, the date of commencing of the commercial manufacture is the date of commissioning of plant when the newly commissioned plant had been run and some goods of the desired quality had been produced. However, once the plant is commissioned, it is not necessary that from the day one it must start manufacture at its full installed capacity, as the quantum of the goods produced would depend upon the supply orders which the manufacturer may have at that time or the quantity of .....

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had produced about 30 MTs. of M.S. Ingots which had been declared by them in the quarterly return for Jan. 2010 to March, 2010 filed by them and which had been cleared on payment of duty. The appellant in this regard also rely upon the certificate given by the furnace supplier,IIPL and also the statement of Shri Tarun Sangal, Senior Manager of IIPL. Besides this, the appellant also rely upon the purchase of raw materials of 100 MTs. of M.S. Scrap and 236.50 MTs. of sponge iron during the last we .....

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eges that looking to the pattern of the power consumption on these dates, the production of about 29 MTs claimed during these two dates is impossible. The Department also alleges that initially the appellant had shown production of about 11 MTs. for 29.03.2010 against the power consumption of about 340 units but subsequently, they themselves accepted that the production of 11.68 Mts. of M.S. Ingots with power consumption of 340 units of electricity was not possible and have pleaded that this ent .....

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.4 MTs. of M.S. Ingots cleared during March, 2010 and this duty demand is included in the duty demand of ₹ 5,27,66,984/- confirmed by the appellant in the impugned order. Thus, the Department's allegation that there was no production by the appellant unit during March, 2010 and that the appellant have made only bogus entries regarding production during March, 2010, in their records is not compatible with the Commissioner's order confirming duty demand of ₹ 90,805/- in respect .....

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mp; 31.03.2010, it would not be correct to conclude that there was no production of M.S. Ingots on these dates. While the Engineer of IIPL which had supplied the induction furnace has given a certificate that the equipment supplied by them was commissioned in two installments - one inverter and three crucibles were commissioned on 30.03.2010 and second inverter was commissioned on 29.03.2010 and that on 30.03.2010, the plant was in position to start commercial production. Further, Department' .....

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ts resistance which melts the metal. In ferro magnetic material like iron scrap, the heat is also generated by the phenomenon of magnetic hystersis. The function of inverter is to provide alternating current of different frequencies. Since one inverter along with the three crucibles had been commissioned on 30.03.2010, there is no reason to disbelieve the furnace supplier's certificate that the induction furnace had been commissioned on 30.03.2010 and was in a position to start commercial pr .....

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nt has not disputed the procurement of raw materials during March, 2010 and its consumption and there is no evidence to prove that the sale of about 30 MTs. of M.S. Ingots during the last week of March, 2010 was false and when the Commissioner has confirmed the duty demand on 30.4 MTs. of M.S. Ingots cleared during the month of March, 2010, and thereby accepting the appellant's claim of having commenced production during March, 2010, the Department, merely on the basis of its own interpretat .....

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