Area-based exemption denied for a claimed separate unit where operational overlap showed it was part of the existing undertaking.

Where two units shared location, access, raw-material storage and operations, Unit-II was treated as part of the existing unit and could not claim separate area-based exemption under Notification No. 49/2003-CE. The exemption period was linked to the original commencement of commercial production of Unit-I, not the alleged commencement of Unit-II, subject to the notification's outer limit.

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Issues: (i) Whether the newly set up Unit-II had an independent existence so as to claim area-based exemption separately under Notification No. 49/2003-CE. (ii) Whether, on the facts, the exemption period had to be reckoned from the commencement of commercial production of Unit-II or from the earlier commencement of Unit-I.

Issue (i): Whether the newly set up Unit-II had an independent existence so as to claim area-based exemption separately under Notification No. 49/2003-CE.

Analysis: The factual material showed common location, lack of clear demarcation, common access, common storage of raw material and operational overlap between the two units. On that basis, the Unit-II could not be treated as an independent unit distinct from Unit-I. Once the Unit-II was held to be only a part of the existing unit, its claim to a separate exemption as a new independent unit could not be sustained.

Conclusion: Unit-II was not an independent unit and could not claim separate area-based exemption in its own right.

Issue (ii): Whether, on the facts, the exemption period had to be reckoned from the commencement of commercial production of Unit-II or from the earlier commencement of Unit-I.

Analysis: Since Unit-I and Unit-II were treated as one entity, the exemption could operate only once for the common unit and not afresh from the alleged commencement of Unit-II. The period of exemption was therefore linked to the original commencement of commercial production of Unit-I, subject to the outer limit under the notification.

Conclusion: The exemption period had to be reckoned from the commencement of commercial production of Unit-I and not from the alleged commencement of Unit-II.

Final Conclusion: The appeal failed to establish a separate entitlement for Unit-II, though the units were treated as one entity for purposes of exemption and the time limit had to be computed accordingly.

Ratio Decidendi: A unit cannot claim a fresh area-based exemption as a separate undertaking where the facts show that it is merely part of an existing exempt unit; the exemption period runs from the original commencement of commercial production of the common entity.

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