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2024 (3) TMI 976
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....ed into VVF (India) Limited was approved by the Order of Hon'ble High Court of Bombay dated 20.04.2012. Accordingly, M/s VVF Limited (Unit-II) had surrendered their Registration Certificate and M/s VVF (India) Ltd, being the resultant company, submitted application for Central Excise Registration and obtained new Central Excise Registration bearing No. AADCV4970GEM006 for factory premises of M/s VVF Limited (Unit-II) on 25.05.2012. 1.1 M/s VVF had set up new industrial unit with original investment of Rs. 34,66,48,392/- in Plant and Machinery and commenced production of finished goods on 25.12.2005. As a unit located in the Kutch district, they applied to the department for benefit of area-based exemption in terms of Notification No. 39/2001-CE, dated 31.07.2001. M/s VVF Limited was enjoying benefit of the same from December, 2005 onwards. M/s VVF obtained two certificates both dated 07.03.2006 issued by the committee consisting of the Chief Commissioner of Central Excise Ahmedabad and the Principal Secretary to the Government of Gujarat, Department of Industries & Mines, Gujarat bearing File No. V/30-25/CCO/Tech/Kutch/2005, in terms of Para 3(ii) and 3(iv) of the Notificati....
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....sidered the submissions made by both sides and perused the records. It appears to us that the issue in dispute can be addressed both on a legal as also factual matrix. We are, accordingly framing the following questions that need to be addressed: 1. Insofar as the legal dispute is concerned the following questions arise for consideration: i) Whether a new industrial unit, which admittedly is eligible to the benefit of exemption in terms of Notification No.39/2001 dated 31.7.2001 can be denied the benefit of exemption in respect of goods manufactured using Plant and Machinery installed after 31.12.2005. Particularly by reading in a condition to the exemption notification, which does not exists in the notification, as has been done by the adjudicating authority. In other words whether the adjudicating authority was correct in adding a condition in Explanation I (ii), which defines the expression "set up on or after the date of publication of this Notification in the official gazette but not later than 31st day of December 2005", to the effect that "ALL" civil construction and installation of plant and machinery, should have been completed before the cut-off date, ev....
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....e exemption available under the Notification. 5. The Notification, as initially enacted, did not provide for any time period within which the commercial production had to commence, being the date relevant for reckoning the original value of investment in plant and machinery as also for reckoning the 5 year period for which the exemption was to be available. All that was required was that any civil construction work in the factory premises and any installation of plant and machinery therein commences only after 31st July 2001 but before the cut-off date. For ease of reference the relevant extract of the Notification as enacted is reproduced herein below: Gujarat)- Exemption to excisable goods (except those specified in Annexure) and cleared from Units in Kutch District of Gujarat In exercise of the powers conferred by sub-section (1) of section SA of the Central Excise Act 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Governm....
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.... (i) It shall apply only to new industrial units, that is to say, units which are set up on or after the date of publication of this notification in the Official Gazette but not later than the 31st day of July, 2003; (ii) in order to avail of this exemption, the manufacturer shall produce a certificate from a Committee consisting of the Chief Commissioner of Central Excise, Vadodara and the Principal Secretary to the Government of Gujarat. Department of Industry, to the jurisdictional Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, that the unit in respect of which exemption is claimed is a new unit and has been set up during the time period specified in condition (i) above (iii) Before effecting clearances under this notification, the manufacturer shall also furnish a declaration regarding the original value of investment in plant and machinery installed in the factory as on the date of commencement of commercial production, to the Assistant Commissioner of the Deputy Commissioner of Central Excise, as the case may be (iv) The manufacturer shall also produce a certificate from the said Committee confirming the....
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....on or after the date of publication of this Notification in the Official Gazette" by substituting the same with the expression "set up on or after the date of publication of this notification in the Official Gazette but not later than the 31st day of December, 2005", to mean that - (a) any civil construction work on its factory premises and any installation of plant and machinery therein commences only on or after the date of publication of this notification in the Official Gazette; and (b) the said civil construction work on its factory premises and installation of plant and machinery therein is completed, and the unit starts commercial production, not later than the 31st day of December, 2005. 7. The relevant extract of the revised notification, after the aforesaid amendments read as under: In exercise of the powers conferred by sub-section (1) of section SA of the Central Excise Act 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excuse (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 197....
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....ioner of Central Excise, as the case may be. (IV) The manufacturer shall also produce a certificate from the said Committee confirming the original value of investment and such a certificate shall be produced within a period of one month from the date of commencement of commercial production, or such extended period as the said Assistant Commissioner or Deputy Commissioner may allow. (V) In case on the basis of such certification, or otherwise, the original value of investment in plant and machinery, (a) is found to be less than rupees twenty crore but was declared to be rupees twenty crore or more, the manufacturer shall be liable to pay back the entire amount of duty exemption availed under the notification alongwith interest at the rate of twenty four per cent, per annum as if no exemption were available or (b) is found to be less than the declared value and was declared to be below rupees twenty crore, the manufacturer shall be liable to pay duty on the goods cleared, if any, in excess of twice the actual value of original investment in each of the years during which exemption has been claimed under this notification alongwith interest at the....
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.... cut-off date..........". Though elsewhere in the order the adjudicating authority does not dispute that if the addition of the plant and machinery after the cut-off date was merely to improve the quality of the product, such addition was permissible. The mis-reading of the notification by adding the word "ALL" is evident in para 16 as also 25 of the impugned order. 9. We find that it is impermissible to read in any condition or word into an exemption notification, especially a benevolent one which has been issued with the objective of encouraging investment in the earthquake ravaged region of Kutch. In our view there is neither any legal basis nor rationale for reading in the word 'ALL' in the exemption notification and with reference to the same construe that since some machinery was installed after the cut-off date, the benefit of the exemption would not be available, to goods manufactured using the said machinery. The law with respect to strict construction of the term of an exemption notification and there being no scope to add any words or conditions to the same has been settled by the Hon'ble Gujarat High Court in the case of Inter-Continental India vs U....
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....It is not the case that by increasing the investment, the appellant is getting exemption for more than 5 years. Irrespective of huge investment the appellant is entitled for exemption only up to the 5 years from the commencement of commercial production. Therefore, the intention of the notification is very clear that if the initial civil work and installation of the Plant and Machinery is completed and commercial production in such unit started before 31.12.2005, the exemption for 5 years irrespective of any of the amount of value or quantity is available. We have also perused the Board Circular No. 110/21/2006-Cx dated 10.07.2008 wherein the ambiguity with respect to eligibility of benefit of exemption notification was clarified as under: "Point No. 1: Whether the benefit of exemption would be available goods/products that the units start manufacturing after the cut off date for the commencement of commercial production i.e. 31/12/2005. Comments: There would be two situations. First is that where a unit introduces a new product by installing fresh plant, machinery or capital good after the cut of date in such a situation, exemption would not be ....
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....ard has examined the matter. Under the said notifications, any new unit set up or an existing unit which has undergone substantial expansion that commences commercial production before the cut-off date is entitled to excise duty exemption in respect of excisable goods (other than those appearing in the negative list) manufactured and cleared for a period of ten years from the date of commencement of commercial production. The provisions of these notifications do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date and during the exemption period of ten years as per the notification. Therefore, it is clarified that in all the above situations, the benefit of the excise duty exemption under the notifications would continue to be available to eligible industrial units. However the period of exemption would remain ten years and would not get extended on account of such modifications or additions under any circumstances." 15. From the above clarification, it is clear that irrespective of any addition or modification in the plant and machinery since the notification d....
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....ry was less than 20 crores but was declared to be more than 20 crores or where the value declared though been less than 20 crores was found to be incorrect. It is nobody's case that there is any manipulation in the declared value of original plant and machinery and consequently in our view there is no legal or logical or justifiable reason to deny the benefit of exemption in respect of the goods produced using the plant and machinery installed after the cut-off date. 13. It is also relevant to note that the CBEC has issued various circulars in the context of similar area based exemption schemes, introduced with the objective of industrialising the backward areas/areas ravaged by natural calamities. These circulars clearly clarify in unequivocal terms that the benefit of the exemption would not be lost even if additional plant and machinery was installed in the eligible units after the cut-off date. Though the said circulars have been issued in the context of the Himachal Pradesh and Uttarakhand exemption schemes, however on an examination of the terms of exemption under the Kutch and the Himachal/Uttarakhand schemes, it appears that both are broadly on the same lines a....
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....he benefit of the excise duty exemption under the notifications would continue to be available to eligible industrial units. However the period of exemption would remain ten years and would not get extended on account of such modifications or additions under any circumstances. ........................................................... ........................................................... Circular No.960/03/2012-dated 17.2.2012 2. References have been received from field formations as well as from trade and industry seeking clarification regarding admissibility of benefit under area-based exemption Notifications No. 49/2003-CE. and 50/2003-CE, both dated 10-6-2003, in the following situations: a. When there is a change in the ownership of a Unit already availing of the benefit of an area-based exemption Notification; b. When a Unit availing of the exemption physically shifts to a new location within the areas specified in the exemption Notification, and c. When a Unit availing of the exemption under an area-based Notification expands by acquiring a plot of land adjacent to its existing premises and installing new ....
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....djoining plot with at least one common boundary which merges with the existing plot/premises to make it one unit Installing of new plant and machinery in a plot which is away from the existing plot is not akin to the situation mentioned in para 5 of the said circular. Installation of plant and machinery on such a plot would tantamount to setting up another unit by the manufacturer, the eligibility of exemption of which is independent of the eligibility of exemption to the existing unit 4. For the removal of doubts, it is therefore clarified that the clarification in para 5 of the Circular No. 960/03/2012-CX, dated 17-2-2012 is meant for the units which undertake expansion by acquiring the adjoining plot with at least one common boundary with the existing plot and merge it with the existing plot/premises to make it one unit. 14. From the above Board's clarifications, we find that while the CBEC has taken pains of clarifying time and again that the mere addition of plant and machinery after the cut-off date will not have any adverse impact on the units eligibility to claim benefit of the exemption. However, the adjudicating authority has chosen to completely ignore ....
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....ion is for a period of 5 years and plant and machinery is added after expiry of 2 years, the period for which the benefit of exemption would be available to goods manufactured using the said Plant and machinery would be limited to 3 years. 17. We may also look at the dispute from another perspective, if the revenue's contention is to be accepted it would mean that the unit has to freeze in a point of time and no further addition of any machinery equipment can be made to the same during the period of exemption. Such a suggestion would in our view absurd and illogical. We can test the absurdity of such an interpretation, by considering an example of a unit manufacturing copper anode from copper concentrate, for which it has installed a smelter. If such a smelter was to break down or become in-operational for any reason after commencement of commercial production, going by the revenue's stand the unit could not have replaced the smelter and continued with its production. This in our view is clearly antithetical to the objective that the notification in question seeks to achieve. We are therefore of the view that the clarification dated 22 12.2010 referred to above iss....
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....y. This power to issue circulars is for just, proper and efficient management of the work and in public interest It is a beneficial power for proper administration of fiscal law, so that undue hardship may not be caused. ..............." We feel that the CBEC circulars have only clarified what was obvious and implicit in the exemption notification and in any case applying the ratio laid down by the Apex Court, if there was any ambiguity, the same has been resolved by the circular. 20. We are therefore of the view that the addition of any plant and machinery after the cut-off date would not disentitle the Appellant, being a new industrial unit, from the benefit of exemption in respect of goods manufactured using the said plant and machinery. Even, according to the adjudicating authority the same seems to be permissible in a case where the addition of plant and machinery is done to improve the quality of the product manufactured and does not result in increase in the production capacity. This interpretation is based on application of TRU letter dated 10.7.2008 wherein the TRU has communicated to the Chief Commissioner, Ahmedabad that "As long as there is no increase....
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....which the oil remains within the Splitting columns would determine the degree of split, which is referred to as the Degree of Split. 25. In technical terms, the measure of splitting reaction is defined as "Degree of Split (DoS=Acid Value/Saponification Value x 100, i.e., AV/SV x 100). The reaction mechanism occurring while splitting is that first, water emulsifies in oil/fat. This water reacts sequentially to split the fat, from tri to di-glyceride, from di to mono-glyceride and finally from mono-glyceride to fatty acid. In other words, the splitting process is nothing but breaking the complex triglycerides (fatty matter) contained in the vegetable oils into simple fatty acids. As per the technical literature it appears that generally around 90% of the fat would be split in four hours of processing time, where after it slows down as equilibrium is approached and that splitting from 90 to 95% would take about another 4 hours and so on. This phenomenon has been explained in the technical books/write-up, produced before us in the form of extract of the book titled "The manufacture of soap, other detergents and glycerine by Mr Edger Woollatt. The same phenomenon has a....
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....of split by increasing the time for which the oil remained within the splitter. It is the case of the adjudicating authority that there is no evidence of improvement in the quality of the output and that it could be safely assumed that the quality of the output prior to installation of the second Splitting column and subsequent thereto was the same. 30. We find that neither sides have adduced any evidence to substantiate whether or not there was any difference in the quality of the output prior to and subsequent to installation of the second Splitting column. However, this in our view may not be determinative as what would be relevant, to fall within the realm of the TRU clarification will be the object with which the additional plant and machinery has been installed. While there is nothing to show whether there was an improvement or not in the quality of the output, however it is evident from the production data that there hasn't been in any real change in the production after installation of the second Splitting column. The production data in our view can be taken as a safe guide for manifesting the intention of the appellant in installing the second Splitting column....
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....008 12339.149 July 2008 16849.975 August 2008 10977.859 September 2008 11466.371 October 2008 15030.564 November 2008 6362.321 December 2008 5244.044 January 2009 3625.164 February 2009 8494.693 March 2009 896.220 F. Y. 2009-10 Month Production of Crude / Split fatty acid (MT) April 2009 8268.960 May 2009 4687.680 June 2009 8930.873 July 2009 8480.053 August 2009 10836.330 September 2009 10822.109 October 2009 14034.244 November 2009 14059.742 December 2009 14153.200 January 2010 11939.684 February 2010 12089.330 March 2010 12713.270 April 2010- December-2010 Month Production of Crude / Split fatty acid (MT) April 2010 10973.780 May 2010 8808.830 June 2010 13943.220 July 2010 9824.840 August 2010 12866.640 September 2010 11162.680 October 2010 13792.220 November 2010 18085.090 December 2010 19597.870 32. While we are discussing the production achieved by the Appellant prior to and subsequent to the installation of the second Splitting column, there is also inciden....