Substantial expansion under exemption notification justified duty relief, and prior factory approval was not a condition precedent.

Exemption under Notification No. 33/99-CE was available where an existing industrial unit had undertaken substantial expansion on or after 24.12.1997 resulting in at least a 25% increase in installed capacity. The record and inspection evidence showed section-wise expansion in the tea factory, including withering, CTC and fermenting capacity, and the notification did not require increase in every section. Benefit could not be denied for want of prior approval of the Chief Inspector of Factories, and the absence of an industrial licence was treated as extraneous. The exemption and refund sanction were upheld in favour of the assessee.

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Issues: Whether the respondent was entitled to exemption under Notification No. 33/99-CE on the basis of substantial expansion of installed capacity, and whether absence of prior approval of the Chief Inspector of Factories or increase in every section of the tea factory could defeat the exemption.

Analysis: The exemption was available to industrial units existing on 24.12.1997 that had undertaken substantial expansion resulting in an increase of installed capacity by not less than 25% on or after that date. The records, verification report, and spot inspection showed section-wise expansion in the factory, including increase in withering, CTC, and fermenting capacity. The cited circular and registration letter clarified that increase in every section was not a condition precedent. The benefit could not be denied merely because the alteration or addition was made without prior approval of the Chief Inspector of Factories, and the objection regarding absence of industrial licence was held to be extraneous.

Conclusion: The respondent satisfied the conditions of the exemption notification and the denial of benefit was unsustainable.

Final Conclusion: The appeal failed and the refund sanction and exemption benefit were upheld in favour of the respondent.

Ratio Decidendi: Where substantial expansion of installed capacity by at least 25% is established under the exemption notification, the benefit cannot be denied on the ground that every section did not expand or that prior approval of the Chief Inspector of Factories was not obtained.

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