Area-based exemption denied where an old unit continued in the same premises with existing machinery and undisclosed restructuring.

Area-based exemption under Notification No. 32/99 was denied because the unit was not a genuinely new industrial unit: it had already begun commercial production before the relevant cut-off date, operated in the same premises, and continued with partly existing plant and machinery despite a change in product line. The notification was treated as applying only to genuine new units or qualifying expansions, not to a continuation of an earlier unit with partial reconfiguration. Suppression of the removal and replacement of machinery, and the undisclosed restructuring of the premises, also justified denial of benefit and invocation of the extended period, so the demand was sustained.

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Issues: (i) Whether the appellant was entitled to area-based exemption under Notification No. 32/99 on the footing that the unit was a new industrial unit; (ii) whether suppression of facts justified denial of the benefit and recovery of duty.

Issue (i): Whether the appellant was entitled to area-based exemption under Notification No. 32/99 on the footing that the unit was a new industrial unit.

Analysis: The unit had commenced commercial production long before the relevant cut-off date and was operating in the same premises with partly old plant and machinery. The later activity involved use of existing infrastructure along with limited fresh investment, and the change in product line did not convert the earlier unit into a new industrial unit. The notification was intended to encourage genuine new units or qualifying expansions, not a continuation of an old unit with partial reconfiguration.

Conclusion: The appellant was not entitled to treat the unit as a new industrial unit for the purpose of Notification No. 32/99.

Issue (ii): Whether suppression of facts justified denial of the benefit and recovery of duty.

Analysis: The removal and replacement of plant and machinery and the subsequent use of the premises for a new product line were not disclosed to the department. The undisclosed restructuring supported the finding that the benefit had been availed on an incorrect factual basis and that the extended period could be invoked.

Conclusion: Suppression of facts was established and the demand and denial of benefit were upheld.

Final Conclusion: The appeal failed on the merits and the denial of exemption was sustained, resulting in dismissal of the appeal.

Ratio Decidendi: For area-based exemption, a unit is not a new industrial unit where it continues in the same premises with partly existing machinery and no genuine new establishment or qualifying expansion is shown.

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