2020 (3) TMI 840 - AT - Central Excise

Tribunal grants area-based exemption to appellant's industrial complex units under Notification No. 50/2003-CE

The Tribunal ruled in favor of the appellant, finding that their units qualified for the area-based exemption under Notification No. 50/2003-CE. The ... Area based exemption - adjacent plot/merger requirement for expansion - continuity of boundary and exclusive corridor as test of single factory - successor unit entitlement to earlier declaration - seizure and confiscation of goods - penalty under Section 11AC read with Rule 25 of Central Excise RulesArea based exemption - adjacent plot/merger requirement for expansion - continuity of boundary and exclusive corridor as test of single factory - successor unit entitlement to earlier declaration - Entitlement of unit-II (Khasra No.115) and unit-III (Plot B of Khasra No.119) to area based exemption under Notification No.50/2003-CE. - HELD THAT: - The Tribunal found that the appellant's main unit at Plot F/119, unit-II at Khasra No.115 and unit-III at Plot B/119 are situated within the same private industrial complex, share a common entry/exit from the public road and are connected by a virtual private corridor/road. On the admitted facts that (a) the two contested units are successors to earlier beneficiaries who had filed declarations on 27.12.2006, and (b) there is no practical interference by neighbouring units in the appellant's exclusive use of the north west passage, the Tribunal held that the arrangement satisfies the requirement of merger/continuity envisaged by the Board clarifications of 17.02.2012 and 01.04.2013. Accordingly, unit II and unit III qualify for area based exemption (including by virtue of being successors to earlier declared eligible units) for the relevant period, and the factual and documentary materials relied upon by the appellant (including engineer certification and use of a continuous boundary/common access) were sufficient to uphold eligibility. [Paras 23]Unit II and Unit III are entitled to the area based exemption; the Tribunal allows the appeal on this ground.Seizure and confiscation of goods - penalty under Section 11AC read with Rule 25 of Central Excise Rules - Validity of seizure/confiscation, demand of duty and penalties imposed in the impugned order. - HELD THAT: - As the Tribunal concluded that the contested units were eligible for area based exemption (including by succession), the foundational premise for the seizure, the extended duty demand for the period April 2016 to 16.11.2016 and the penalties imposed on the appellant and its working manager did not survive. The Tribunal therefore found the impugned adjudication unsustainable and set aside the order of confiscation, demand and penalties. Consequential benefits were directed to be given in accordance with law. [Paras 24]Seizure/confiscation, demand and penalties set aside; appeals allowed and consequential relief granted.Final Conclusion: The Tribunal held that the appellant's unit II and unit III qualify for area based exemption (including by succession to earlier declared units), and accordingly set aside the adjudicatory order confirming seizure/confiscation, demand of duty and penalties; the appeals of the firm and its working manager are allowed with consequential benefits. Issues Involved:1. Whether the appellant correctly availed the 'Area based exemption' under Notification No. 50/2003-CE for goods manufactured in the factory shed at Khasra No. 115 and Plot No. B of Khasra No. 119.2. Whether manufacturing facilities in Khasra No. 115, Plot No. F of Khasra No. 119, and Plot No. B of Khasra No. 119 can be considered a single factory eligible for area-based exemption under the relevant Board Circulars.3. Whether goods lying in the factory on 17.11.2016 were liable to be seized/confiscated.4. Whether penalties under Section 11AC and Rules 26 and 27 of Central Excise Rules were rightly imposed.Issue-wise Detailed Analysis:1. Availing 'Area based exemption' under Notification No. 50/2003-CE:The appellant's factory is located in Roorkee, Uttarakhand, and the partners developed a private industrial campus in Khasra Nos. 114, 115, 118, and 119. The area-based exemption was available for units that commenced commercial production or undertook expansion between 10.06.2003 and 31.03.2010. The appellant expanded its production by installing additional plant and machinery in Khasra No. 115 and used Plot 'B' of Khasra No. 119 for storage. The Revenue contended that the appellant wrongly claimed the exemption as Khasra No. 115 was not adjacent to Plot-F/119, thus not qualifying for the exemption.2. Single factory eligibility for area-based exemption:The appellant argued that the units at Khasra No. 115 and Plot B of Khasra No. 119 were adjacent to Plot F/119, forming a single industrial unit eligible for the exemption. They relied on Board Circulars dated 17.02.2012 and 01.04.2013, which clarified that expansion by acquiring an adjacent plot with a common boundary qualifies for the exemption. The appellant provided certificates from a Chartered Engineer and other units certifying the continuous boundary and single entry/exit for the industrial complex. The Revenue, however, argued that the units were separated by open space and other factory premises, thus not adjacent.3. Seizure/Confiscation of goods:The Revenue seized goods valued at Rs. 1,11,15,702/- on 17.11.2016, believing the appellant wrongly availed the exemption. The appellant contended that the goods were inside the factory and not liable for seizure or confiscation. They argued that there was no clandestine removal or manufacturing activity and the issue was interpretational.4. Imposition of penalties:The Revenue imposed penalties under Section 11AC and Rules 26 and 27 of Central Excise Rules, alleging mis-declaration and intent to evade duty. The appellant argued that the show cause notice was issued within the normal period of limitation, indicating no mis-declaration. They also contended that penalties were not warranted as the goods were not clandestinely removed and the issue was interpretational.Judgment:The Tribunal found that the appellant's units at Khasra No. 115 and Plot B of Khasra No. 119 were eligible for area-based exemption. It was undisputed that the main unit at Plot F/119 was entitled to the exemption. The Tribunal noted that the appellant's units had a common entry/exit and a continuous boundary, forming a single industrial complex. The Tribunal held that the appellant correctly availed the exemption and set aside the impugned order, allowing the appeals and entitling the appellants to consequential benefits.Pronounced on 13.03.2020.