2023 (6) TMI 949 - AT - Central Excise

Tribunal affirms benefits under Notification No.20/2007-CE for manufacturer of excisable goods

Commissioner of Central Excise, Dibrugarh Versus M/s. Duroply Industries Limited Formerly Sarda Plywood Industries Limited

The tribunal upheld the impugned order granting benefits under Notification No.20/2007-CE dated 25.04.2007 to the respondent, a manufacturer of excisable ... Area based exemption - Set up of new unit at the same site / old site - Benefit on establishment of new unit as per N/N. 20/2007-CE Dated 25.04.2007 denied - case of Revenue is that when the ban was removed, the respondent applied for start of their unit on the same site, the same cannot be termed as new unit, so, they can not avail benefit of exemption Notification No.20/2007-CE Dated 25.04.2007 - HELD THAT:- It is a fact on record that the unit of the respondent was functional prior to 12.12.1996, when the ban was imposed on the industry of the appellant. Thereafter the appellant surrendered their factory licence on 10.01.2002 and also surrendered their Central Excise registration on 10.04.2003. Moreover, machinery was also transferred to the Rajkot (Gujarat) factory and list of the machinery was also produced before us. Some plant and machinery was sold by the appellant, that details thereof was also placed on record. Director, Shri M.P.Pariwal also resigned on 20.03.2004 from Board of Directors. Thereafter, the appellant has obtained licence from office of the Divisional Forest Officer, Dibrugarh, Assam vide letter dated 06.08.2008, wherein it has been mentioned that in pursuant of the above, a fresh licence is being issued to your industry bearing No.Sl.No.DIB/PLY/JEIPORE/IE/21 dated 05.08.2008. The Ld.Counsel produced registration and licence to work a factory from Government of Assam dated 16.09.2008 and sanctioning of loan from North Eastern Development Finance Corporation Ltd. vide letter of sanction dated 09.04.2009. They have also produced certificate issued by District Industry and Commercial Centre, Dibrugarh, Assam. On going through the finding of the Ld.Commissioner(Appeals) in the impugned order and the documents placed here, which are evident that the respondent has established a new unit although at the same site. The respondent is entitled for benefit of exemption Notification No.20/2007-CE dated 25.04.2007 - Appeal of Revenue dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a manufacturing unit that ceased operations following a statutory ban, surrendered Central Excise registration, removed/transferred and sold plant and machinery, obtained fresh statutory clearances and recommenced commercial production after a long gap at the same site can be treated as a 'new industrial unit' for entitlement under Notification No.20/2007-CE dated 25.04.2007 (as amended). 2. Whether the availability of sufficient CENVAT credit on the last day of the month under consideration bars refund entitlement under the Notification where duty was paid through PLA and the Notification conditions require first utilization of CENVAT credit and payment of only the balance in cash. ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: Characterisation as 'New Industrial Unit' Legal framework: Entitlement under Notification No.20/2007-CE (as amended) depends on a unit qualifying as a 'new industrial unit' which requires fresh commencement of commercial production after the specified date and satisfaction of prescribed statutory formalities and clearances. Precedent treatment: The Tribunal examined administrative and documentary criteria (registration, licences, sanctioning of loan, commissioning of machinery, transfer/sale of prior plant, resignation of director) as determinative of whether a unit is a fresh establishment rather than mere renovation. No contrary judicial authority was invoked or deemed controlling in the text. Interpretation and reasoning: The Tribunal found on record that the prior unit ceased functioning upon imposition of the ban, the license and Central Excise registration were surrendered, substantial plant and machinery were transferred to another State and some machinery sold, and a director resigned. After the ban was removed, the respondent obtained fresh clearances and licences from relevant authorities (Divisional Forest Officer, District Industry and Commercial Centre), fresh registration/registration certificate and financial sanction, commissioned new machinery and commenced commercial production after the Notification's relevant date. The Tribunal distinguished 'renovation' (refurbishing existing premises) from establishment of an industry afresh with fresh clearances and new/moved machinery after a prolonged closure; it held that the facts demonstrated a new establishment notwithstanding use of the same site. Ratio vs. Obiter: Ratio - factual matrix showing surrender of registration, transfer/sale of machinery, fresh statutory clearances and new commissioning constitutes a 'new industrial unit' for purposes of the Notification when production restarts after a long cessation. Obiter - general remarks on the definition of renovation versus fresh establishment as conceptual guidance. Conclusion: The Tribunal concluded that the unit, though located at the same site, met the conditions of a 'new industrial unit' and was entitled to benefits under Notification No.20/2007-CE dated 25.04.2007. ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: Effect of Available CENVAT Credit on Refund Entitlement Legal framework: The Notification conditions require that the manufacturer first utilize the whole of the CENVAT credit available on the last day of the month under consideration for payment of duty on goods cleared during the month and pay only the balance in cash; refund entitlement is subject to this condition. The practical question is whether payment through PLA despite available CENVAT affects entitlement. Precedent treatment: The adjudicating authority applied the Notification literally to deny refund because there was sufficient CENVAT credit available on the first day of the month, observing that refund sanctionable for the month of November 2009 was nil. The Commissioner(Appeals) accepted entitlement to the Notification but agreed that the claim for refund was impacted by the CENVAT-utilisation condition. The Tribunal reviewed the factual findings and the statutory condition's application; no prior judicial authorities were cited to depart from that statutory condition. Interpretation and reasoning: The Tribunal and the Commissioner(Appeals) treated the CENVAT-utilisation requirement as a distinct compliance condition that determines the refundable amount for a particular month. The record showed duty was paid through PLA although sufficient CENVAT credit existed; the adjudicating authority's result (nil refund for the month) was based on the condition that available CENVAT must be first utilised. The Tribunal affirmed that while the unit qualifies as 'new' and is eligible under the Notification, the procedural/financial condition regarding first utilization of CENVAT affects month-wise refund sanction and may result in nil refund for that period despite overall entitlement to Notification benefits. Ratio vs. Obiter: Ratio - entitlement to the Notification is separable from monthly compliance regarding utilisation of CENVAT; satisfaction of the Notification's eligibility conditions does not override the explicit requirement that CENVAT available on the relevant date must be utilised first before claiming cash refund for value addition. Obiter - observations on payment through PLA versus cash and administrative practice surrounding verification of credits. Conclusion: The Tribunal upheld that the unit is eligible under the Notification, but recognised the adjudicating authority's application of the CENVAT-utilisation condition which can limit or reduce refund for the month in question (including a nil refund outcome where sufficient CENVAT existed), subject to verification of monthly compliance. CROSS-REFERENCES & MISCELLANEOUS FINDINGS 1. The Tribunal accepted the Commissioner(Appeals)'s factual verification of documents (licences, registration, sanction letters, machinery lists) and agreed with the conclusion that the unit was newly established after a long cessation despite being on the same site. 2. The Tribunal rejected the Department's characterization of the unit as merely 'renovated' or a restarted old business, holding that 'renovation' implies refurbishing whereas the facts demonstrated fresh establishment. OPERATIVE CONCLUSION The Tribunal upheld the Commissioner(Appeals) holding of eligibility under Notification No.20/2007-CE dated 25.04.2007, dismissed the Revenue's appeal, and affirmed that any month-wise refund computation remains subject to the Notification's express condition requiring first utilisation of available CENVAT credit.