Substantial expansion exemption turns on actual installed capacity, not proposed capacity, when testing eligibility under the notification.

Exemption under Notification No. 50/2003-CE depends on the actual installed capacity existing before expansion, not on a higher proposed or notional capacity shown in other records. On the facts discussed, records and prior findings established an installed capacity of 26,400 MT before October 2003, and the later increase to 33,000 MT constituted more than 25% expansion, satisfying the substantial expansion condition. The discussion states that exemption was therefore available, with duty demand, interest and penalty not surviving once the exemption applied.

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Issues: Whether the appellant was entitled to exemption under Notification No. 50/2003-CE on the basis that its installed capacity prior to October 2003 was 26,400 MT and the later increase to 33,000 MT constituted substantial expansion.

Analysis: The relevant records, including certificates, departmental correspondence, progress reports and prior appellate findings, showed that the appellant's actual installed capacity before October 2003 was 26,400 MT and not 30,000 MT. The proposed or licensed capacity mentioned in some documents did not displace the established installed capacity. The subsequent increase to 33,000 MT represented an expansion of more than 25% over the existing capacity and therefore satisfied the condition of substantial expansion for the exemption. Once the exemption applied, the duty demand could not survive, and the penalty was also unsustainable as consequential relief.

Conclusion: The appellant was entitled to the exemption under Notification No. 50/2003-CE, and the duty demand, interest and penalty were set aside.

Ratio Decidendi: For exemption linked to substantial expansion, the operative benchmark is the actual installed capacity existing before expansion, and where the increase exceeds the prescribed threshold, the exemption cannot be denied on the basis of a higher proposed or notional capacity mentioned in other documents.

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