Custom, Excise & Service Tax Tribunal
M/S Rama Vision Limited vs Cce, Meerut I on 26 March, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 26/03/2015. DATE OF DECISION : 26/03/2015. Excise Appeal Nos. 339 and 928 of 2006 alongwith Misc. Application Nos. 55489-55490 of 2014 [Arising out of the Order-in-Original No. 31/Comm/MRT-II/2005 dated 23.11.2005 and 33/Comm/MRT-II/2005 dated 14.12.2005 both passed by The Commissioner of Central Excise, Meerut.] For Approval and signature : Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Rama Vision Limited Appellant Versus CCE, Meerut I Respondent
Appearance Ms. Surabhi Sinha, Advocate for the Appellants.
Shri M.S. Negi, Authorized Representative (DR) for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial) Final Order No. 51024-51025/2015 Dated : 26/03/2015 Per. Rakesh Kumar :-
The facts leading to filing of these appeals are, in brief, as under.
1.1 The appellant in their factory located in Uttrakhand are engaged in manufacture of Black and White Picture Tubes also called Cathode Ray Tubes (CRTs). Their unit had started manufacture in 1988 with the production capacity of 13 lakhs CRTs per annum. First expansion of the production capacity took place in 1997 with investment of Rs. 2.97 crores and as a result of which, the production capacity increased from the earlier 13 lakh CRTs to 20 lakh CRTs per annum and while earlier there was only one line of production, after capacity expansion in 1997, the production lines increased to two.
1.2 On 10/06/2003 Notification No. 50/2003-CE was issued which provided for full duty exemption in respect of duty of excise leviable under Section 3 (1) of Central Excise Act, 1944 and the Additional Duties of excise leviable under Additional Duties of Excise (Goods of Special Importance) Act, 1987 [AED (GSI)] and under Additional Duties of Excise (Textile and Textile Articles) Act, 1978 [AED (T&TA)] to the units manufacturing the goods other than the goods mentioned in Annexure I to the notification and which are located in the areas specified in Annexure II of the notification. This exemption notification was applicable to two types of units (1) the new industrial units which commenced their commercial production on or after 07/1/03 but not later than 31/3/2010 (2) the industrial units existing before 07/1/03 and which have undertaken substantial expansion by the way of increase in installed capacity by not less than 25% on or after 07/1/03 and have commenced commercial production from such expanded capacity not later than 31/3/10. The appellant under their letter dated 26/9/03 addressed to the Jurisdictional Assistant Commissioner informed him that in order to achieve economy of scale of operation and reduce the manufacturing cost, they have expanded the installed capacity of their unit as per the advice of their technical consultants M/s Anurag Technologies, that they have expanded their installed capacity by adding certain equipments and by modification in manufacturing process and this has resulted in increased in the installed capacity from 6060 per CRTs per day to 9030 CRTs per day i.e. from the earlier 20 lakhs CRTs to 30 lakhs CRTs per annum based on 330 working days in a year. Alongwith this letter, the appellant enclosed a certificate dated 25th September 2003 of M/s B.K. Arora and Associates, Chartered Engineers, certifying that the appellant have installed additional equipment the details of which are given in the certificate and by this their installed capacity has increased to 30 lakh CRTs per annum.
1.3 The Department thereafter conducted inquiry with the appellants employees and also sought the technical opinion of Professor Arun Kumar of the Department of Electronics and Computer Engineering in the Indian Institute of Technology, Roorkee. Professor Arun Kumar visited the appellants unit alongwith excise team and after inspecting the unit, submitted a report dated 23/09/04 to the Commissioner giving his conclusion that there is no change in the input block and output block and it appears that no capacity expansion has been carried out by the company. Based on this report, a show cause notice dated 24/9/04 was issued to the appellant company for denying the benefit of exemption Notification No. 50/03-CE and for recovery of the Central Excise duty amounting to Rs. 78,86,321/- for the period from 27/9/03 to 31/8/04 alongwith interest thereon under Section 11AB and also for imposition of penalty on them under Rule 25 of the Central Excise Rules. Thereafter another show cause notice dated 06/10/05 was issued for demand of duty amounting to Rs. 38,44,135/- for the period from 01/9/04 to 31/3/05 alongwith interest therein under Section 11AB and also for imposition of penalty under Rule 25 of the Central Excise Rules, 2002.
1.4 The above show cause notices were adjudicated by the Commissioner by two different orders-in-original dated 23/11/05 and 14/12/05 by which the above-mentioned duty demands were confirmed against the appellant by denying the exemption notification and besides demanding interest on duty under Section 11AB, penalty of equal amount was imposed on the appellant under Rule 25 (1) of the Central Excise Rules. In both the orders, the duty exemption has been denied mainly on the basis of the IIT Professors report and also taking into account the fact that the company is under BIFR and for this reason also, their claim that they have spent money to expand their installed capacity is not believable. Against the above orders of the Commissioner, these appeals have been filed.
2. Heard both the sides.
3. Ms. Surabhi Sinha, Advocate, the learned Counsel for the appellant, pleaded that the appellant had undertaken expansion in the year 2003 based on the technical opinion of M/s Anurag Technologies, that on the basis of technical opinion of M/s Anurag Technologies, the Board of Directors took a decision to undertake substantial expansion as it would not cost much and would result in economies of scale and reducing the cost of production, that the exercise of substantial expansion was undertaken during August and September 2003 and was completed by third week of September 2003, that in this regard M/s B.K. Arora and Associates in certificate dated 25/9/03 have given the details of the modifications done and the equipment added, that the machinery/equipments added had been fabricated in the factory and only the inputs/components or raw materials for fabrication of the equipment/machinery had been procured in respect of which the invoices have been enclosed alongwith the reply to the show cause notice, that after completion of exercise of the substantial expansion, the necessary intimation had also been given to the District Industry Centre with request to issue the necessary certificate, but they have neither issued a certificate nor have inspected the unit, that immediately after completion of capacity expansion, necessary intimation was given to the Jurisdictional Assistant Commissioner, Central Excise, that the appellant claim of expansion of the installed capacity is doubted by the Department mainly on the basis of the report of Professor Arun Kumar of the Department of Electronics and Computer Science, IIT Roorkee, that a professor of Computer Sciences and Electronics is not competent to give opinion on the point as to whether a factory has undertaken substantial expansion of installed capacity or not, as it is a subject of Mechanical Engineering, that in his opinion, he has not refuted the Chartered Engineers certificate, that in view of this, the impugned orders totally relying upon the opinion of Professor Arun Kumar, of the Department of Electronics and Computer Engineering, IIT Roorkee, is not correct, that the appellant have also submitted data showing that on certain dates after the expansion, the per day production was around 9,000 CRTs, that the Departmental officers had visited the factory and have inspected their records which are not disputed, that the purchase of raw material/components purchased for use in the exercise of substantial expansion is also not disputed and that in view of this, the impugned orders mainly based on the opinion of the IIT Professor Arun Kumar are not sustainable. She also emphasised that for the benefit of Notification No. 50/03-CE what is material is that the installed capacity should have increased by 25% or more on or after 07/1/03 and commercial production from such installed capacity should have commenced and that these conditions stand satisfied in this case. She also pleaded that Shri Sanjay Agarwal, DGM (Production) and Shri B.C. Sharma, Vice President (Production) in their respective statements have given details of the exercise of the expansion of the installed capacity which have not been disputed. She, therefore, pleaded that the impugned orders are not correct.
4. Shri M.S. Negi, learned DR, defended the impugned order by reiterating the findings of the Commissioner in it and pleaded that while for first expansion of installed capacity from 13 lakhs CRTs to 20 lakhs CRTs per annum took place in the year 1997 and for which investment of 2.71 crores have been made, for the claimed expansion in the year 2003 from 20 lakhs per annum to 30 lakhs per annum, a meagre investment of about Rs. 8 lakhs has been shown, which is not believable, that Shri B.C. Sharma, Vice President in his statement had stated that the capacity expansion has been undertaken to reduce the cost of production by increasing the productivity and also to avail the benefit of duty exemption, that Professor Arun Kumar in his report has given sufficient reasons for his conclusion that no investment has been undertaken, that the appellants claim of enhancement of capacity of production is not backed by the certificate from the District Industry Centre, that not only this, after the claimed capacity expansion in September 2003, their actual production during 2003-2004 has decreased to 249235 CRTs from the production of 433687 CRTs in 2002-2003 and during 2004-2005 it further decreased to 141299 CRTs and from this, it is doubtful as to whether their installed capacity of production has actually increased. He also pleaded that from their percentage of capacity utilisation since 2000-2001 it is seen that they had excess capacity and in fact their capacity utilisation was constantly decreasing which also creates serious doubts about their claim of having increased the installed capacity. He cited the judgment of the Tribunal in the case of Rana Casting Ltd. vs. CCE, Meerut reported in 2010 (257) E.L.T. 104 (Tri. Del.) wherein, it has been held that though the words substantial expansion had not defined in the notification, these words indicate that in order to qualify for exemption there must be some expansion or addition of the plant and machinery which is substantial and which has resulted in 25% or more increase in installed capacity and increase in installed capacity by 25% or more is has not been achieved by minor modification in the machinery or increasing the efficiency of the manufacturing process, as if mere modification in manufacturing process and minor changer in machinery resulting in increased production is treated as substantial expansion, the word substantial expansion would become redundant. He emphasised that the appellants unit, at the most, have made only some minor changes so as to improve the efficiency and this exercise cannot be treated as substantial expansion for the purpose of this exemption notification. He also pointed out that the unit had been visited by IIT Professor Arun Kumar alongwith Shri Munish Agarwal, DGM (Production) of the appellant unit and Shri Munish Agarwal in his statement has stated that no changes have been made in the rating of the motors installed with the concerned machines, that vacuum pumps installed with the concerned machines have not been changed and that no change has been made in the number of getter welding machines. He pleaded that the report of Professor Arun Kumar indicates that only minor changes have been made in the machinery and as such it was not an exercise of substantial expansion by installation of additional machinery.
5. Ms. Surabhi Sinha, in rejoinder pleaded that the appellant in their reply to the show cause notice had given a list of the 11 new machinery which had been fabricated in the factory and this fact is not disputed by the Department. Beside this, there were 10 machines in which modifications had been done. She, therefore, emphasised that the substantial expansion in the installed capacity had been achieved by addition of new machine and not by merely improving the efficiency or by minor changes in the machinery.
6. We have considered the submissions from both the sides and perused the records.
7. The basic point of dispute in this case is as to whether the appellant have expanded their installed capacity by more than 25%. If this claim of the appellant is correct, they would be eligible for the exemption notification. The appellant in support of this claim rely upon the certificate dated 25 September 2003 given by M/s B.K. Arora and Associates. The Department, however, relies upon the report of Professor Arun Kumar of the Department of Electronics and Computer Engineering in IIT, Roorkee. While the certificate of M/s B.K. Arora and Associates certifies that the appellant have expanded their installed capacity from 2 million CRTs per annum to 3 million CRTs per annum and this has been achieved by installing additional equipment as per the details given and by modification of certain existing machinery, Professor Arun Kumar in his report has doubted the correctness of the certificate of the Chartered Engineer and has also observed that he could not find any facility for fabrication of the machinery which are claimed to have been fabricated by the appellant in their factory. The Commissioner has chosen to rely upon the opinion of Professor Arun Kumar on the ground that he is an independent authority and his report is a later report and only a Chartered Engineers certificate cannot wish away the experts report. In our view this conclusion is wrong as a Chartered Engineer is as much an expert as a Professor of IIT. Moreover, we find merit in the appellants plea that a Professor of the Department of Electronics and Computer Science is not competent to give opinion on the question whether substantial expansion of installed capacity of production had been undertaken, which is a discipline of Mechanical Engineering.
8. In any case, since the Commissioners conclusion is based on the expert opinion of Professor Arun Kumar, in our view, his cross examination by the appellant should have been permitted, as the report of Professor Arun Kumar is only an opinion whose correctness has to be tested by his cross examination. The Commissioner in the impugned order simply relies upon the IIT Professor report on the ground that it is a later report and he is an independent authority and therefore she has no reasons to doubt the same. But she does not discuss as to why the certificate given by the Chartered Engineer is not correct.
9. In view of the above, we set aside the impugned orders and remand the matter to the Commissioner for denovo adjudication. In course of denovo adjudication, the cross examination of Professor Arun Kumar on whose opinion that the Commissioners conclusion is based should be allowed. The Department can also cross examine the Chartered Engineer on whose report the appellant are relying upon to test its correctness. The appeals stand disposed of as above.
10. The miscellaneous applications for extension of stay are dismissed as infructuous since the appeals themselves have been disposed of.
(Dictated and pronounced in open court.) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member (Judicial) PK ??
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