Substantial expansion under exemption notification supported waiver of pre-deposit where capacity increase was prima facie shown.

Notification No. 50/03-C.E. exempts existing industrial units in specified areas if they undertake substantial expansion by increasing installed capacity by at least 25% after 7-1-03 and begin production from the expanded capacity within the stipulated period. The Board's circular clarifies that substantial expansion may be shown by installation of additional plant and machinery, and the amount of investment is not decisive if that result is achieved. On the record, the unit's capacity was certified as increasing from 3 MT to 4 MT, and the absence of check-post entries for capital goods was considered insufficient by itself to negate receipt of goods where no supplier inquiry had been made and other material supported the capacity increase. The appellants therefore established a prima facie case for waiver of pre-deposit and stay of recovery.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of the duty demand and penalties, on the question whether the unit satisfied the conditions of Notification No. 50/03-C.E. by undertaking substantial expansion through increase in installed capacity by not less than 25% after 7-1-03.

Analysis: Notification No. 50/03-C.E. grants exemption to existing industrial units in the specified areas if they undertake substantial expansion by increasing installed capacity by at least 25% on or after 7-1-03 and commence production from the expanded capacity within the stipulated period. The Board's Circular No. 772/5/04-CX clarifies that substantial expansion means increase in installed capacity by installation of additional plant and machinery, and the quantum of investment is not ative if that result follows. On the materials placed, the unit's installed capacity had earlier been 3 MT and was later certified by the General Manager and verified by the departmental officer as 4 MT. The denial of exemption rested mainly on the alleged absence of proof from the check-post entries regarding movement of capital goods. The non-entry of forms at the trade tax check post, by itself, was held insufficient to conclude that the goods were not received, particularly when no inquiry had been made with the suppliers and the record otherwise supported the capacity increase.

Conclusion: The appellants established a prima facie case for waiver of pre-deposit and stay of recovery.

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