Area based exemption allowed where production had already commenced despite initial use of a smaller tank for limited output.

Area based exemption under Notification No. 50/2003-CE was available where manufacture had already commenced before the cutoff date, even though the assessee initially used a smaller tank because production requirements were limited. The later use of larger tanks as demand increased did not alter the fact that the unit had started production and was functioning for manufacturing activity. On that basis, the exemption was held available and the Department's challenge failed.

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Issues: Whether the assessee was entitled to area based exemption under Notification No. 50/2003-CE despite the use of a smaller tank at the initial stage of production.

Analysis: The production of the polymer based soil stabilizer had commenced before the relevant cutoff date, and the initial use of a smaller tank was only due to lower production requirements. The subsequent use of larger tanks as demand increased did not negate the fact that manufacture had already started and the unit was functioning for production.

Conclusion: The assessee was entitled to the area based exemption under Notification No. 50/2003-CE, and the Department's appeal failed.

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