Custom, Excise & Service Tax Tribunal
Tirupati Lpg Industries Ltd vs Cce, Meerut-I on 19 February, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066. DIVISION BENCH Court No.3 For approval and signature: HonbleMr.Rakesh Kumar, Member (Technical) HonbleMr.Ashok Jindal, 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 should 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 Departmental authorities? E/Misc/55442/13,,55769-55772/14,55443/13,55773-55776,50297,55765-55768/2014 in Appeal No.E/3198-3200/2006-EX (Arising out of OIO No.35-40/2006 dt.22.6.06 passed by the CCE,Meerut-I) Appeal No.E/637-640/2007-EX (Arising out of OIO No.138/2006 dt.13.12.06 passed by the CCE, Meerut-I) Appeal No.E/2237-2240/2012-EX (Arising out of OIO No.11-17/Commissioner/MRT-I/12 dt.31.1.12 passed by the CCE, Meerut-I) Appeal No.E/60275-60278/2013-EX (Arising out of OIO No.55/Commissioner/MRT-I/13 dt.8.8.13 passed by the CCE, Meerut-I) Tirupati LPG Industries Ltd. Appellant ShriGyan Chand Goyal, Director ShriArunGoyal, Director ShriAnkitGarg, Director Vs .
CCE, Meerut-I Respondent Present for the Appellant: ShriB.L.Narsimhan, Advocate Present for the Respondent:ShriYashpal Sharma, AR Coram: HonbleMr.Rakesh Kumar, Member (Technical) HonbleMr.Ashok Jindal, Member (Judicial) Date of Hearing/Decision: 19.02.2015 FINAL ORDER NO.51137-51152/2015 PER: RAKESH KUMAR The facts leading to the filing these appeals are in brief as under:
1.1 M/s.Tirupati LPG Industries Ltd. (hereinabove referred to as the appellant company) are located at Khasra No.238/1,238/2,235 & 237 of Village Central Hope Town, Selakui Industrial Region, District Dehradun. S/ShriGyan Chand Goyal, ArunGoyal and AnkitGarg are directors of the appellant company. This unit was set up sometime in 2000 for manufacture LPG cylinders andstarted production in 2001 with installed capacity of 3,68,440 cylinders. During December, 2002, this company set up another unit in the same compound for manufacture of ACSR conductors and for this purpose procured old and used plant and machinery. According to the appellant, there was trial production of certain quantity of conductors during the October, 2002 to December, 2002 which was cleared on payment of duty.
1.2 On 10.6.2003, exemption notification No.50/03-CE dated 10.6.03 was issued which exempted the goods other than those mentioned in the Annexure I to the Notification and cleared from a unit located in the areamentioned in the Annexure II of the notification from the whole of Central Excise duty leviable under section 3 of Central Excise Act, 1944 and Additional excise duty leviable under Additional Duties of Excise (Goods of Special Importance) Act,1957 [AED (GSI)] and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978[AED(T&TA)]. This exemption notification was amended by Notification No.27/05-CE dt.19.5.05 by which in addition to some changes, Annexure III was also added. The exemption notification No.50/03-CE, as amended by Notification No.27/05-CE was applicable to two types of units (1) new industrial unit set up in the area specified in Annexure II and III which have commenced their commercial production on or after 7.1.2003 but not later than 31.3.2010;(2)- industrial units existing before 7.1.2003 but which have undertaken substantial expansion by way of increase in installed capacity by not less than 25%, on or after 7.1.2003 and have commenced commercial production from such expanded capacity not later than 31.3.2010.
1.3 There is no dispute that the goods manufactured by the appellant company are not in the negative list of annexure I. 1.4 According to the appellant -regular production of ASCRS conductors started in April, 2003. On 11.7.2003, the appellant company intimated to the Range Superintendent that they have started commercial production of conductors from 1.4.2003 and they want to avail of the duty exemption under Notification No.50/03-CE. The appellant started availing of exemption under Notification No.50/03-CE from July, 2003.
1.5 In November, 2003, the appellant company undertook substantial expansion of the production capacity of cylinders which was completed in January, 2004 and installed capacity of manufacture of cylinders increased to 5,52,460 per annum from the earlier installed capacity of 3,68,440 cylinders per annum which was more than 25% increase. On 6.1.2004, the appellant filed declaration to the jurisdictional Deputy Commissioner for availing exemption in respect of cylinders unit on basis of capacity expansion and in this regard they also enclosed a certificate of chartered engineer regarding capacity expansion in respect cylinder unit. Thus, with effect from 6.1.2004, the appellant had started availing exemption from duty under Notification No.50/03-CE in respect of LPG cylinders also.
1.6. The department was of the view that since there was no expansion of installed capacity in respect of conductor unit, the cylinder unit would not be eligible for exemption, as LPG cylinder unit would be eligible for exemption only if there was expansion in the entire factory i.e. the both the divisions. The department was also the view conductor unit cannot be treated as new unit as it had commenced production before 7.1.2003 and also it being part of the factory manufacturing LPG cylinders which had started production in the year 2001, it cannot be treated as new unit commencing production on or after 7/1/2003. Another objection of the department is that khasra numbers on which the factory is located are not specified in Annexure II of the notification against the Village Camp Road, central Hope Town. It is on this basis that show cause notices were issued to the appellant company for demand of duty totalling Rs.65,70,41,629/- in respect of clearance of LPG cylinders and conductors during the period from 1.7.2003 to 1.12.2012alongwith interest and imposition of penalty on the appellant company under section 11AC read with Rule 25(1), and also on the directors of the company namely, Shri Gyan Chand Goyal,Shri Arun Goyal and Shri Ankit Garg under Rule 26.
1.7. The show cause notices were adjudicated by the Commissioner vide four Orders-in-Original dated 22/6/2006,13/2/2006,31/1/2012 and 8/8/2013 by which the above mentioned duty demands totalling Rs.65,70,41,629/- were confirmed alongwith interest and besides this, penalty of equivalent amount was also imposed on the appellant company under section 11AC and penalty of Rs.10,000/- each were imposed on each ShriGyan Chand GoyalShriArunGoyal and Shri Ankit Garg under Rule 26 of the Rules. This penalty of Rs.10,000/- was imposed on each directors by each of the four Orders-in-Original. Against these orders of the Commissioner, these 16 appeals have been filed.
2. Heard both sides.
3. Shri B.L.Narsimhan, Advocate, learned Counsel for the appellants, pleaded that both manufacturing units - ACSR unit and LPG cylinder unit are situated in the same factory, that the cylinder unit started manufacture in 2001 and became eligible for exemption under Notification No.50/03-CE by way of capacity expansion by more than 25% with effect from 6.1.2004, as while initial capacity of this unit was 3,68,440 LPG cylinders per annum by January, 2004 it had increased to 552460 cylinders per annum, that this capacity expansion is supported by chartered engineers certificate and had been achieved by addition of new machines, viz. five Mig Welding Machines, one Deep Drawing Hydraulic of Press, 200 tons, one Trimming machine, one Foot Ring Forming machine, two Rotary Shearing Machines, two Auto Welding (CA) machines and two Automatic Bung Welding machines, that as regards the conductor division, commercial production of ACSR conductor was started only after 7.1.03, as the production during the October to December,2002 was only trial production which could not be considered as commercial production, that both divisions conductor division and LPG cylinder division have to be treated as separate manufacturing units eligible for exemption independently, that for exemption under this notification to cylinder unit, it is not necessary that installed capacity should also have increased by 25% or more, in respect of the conductor unit also; that the factory is a wider term which can have more than one manufacturing unit and in this regard he relies on judgements of the Apex Court in the case of Textile Machinery Corporation Ltd. vs. CIT-1977 (2) SCC 368,CCE vs. Himalayan Co-op. Milk Product-2000 (122) ELT 327 (SC) and Reckitt Colman of India-1997 (92) ELT 457 (SC) and of Bombay High Court in the case ofDevidayal Electronics & Wires vs. UOI-1984 (16) ELT 30 (Bom.), that while cylinder unit had increased its capacity expansion with effect from 6.1.2004, conductor unit which is a new unit, had commenced commercial production with effect from 1.4.2003, that for availing exemption in respect of conductor unit, the appellant intimated the department on 11/7/2003, that both unit are independently eligible for exemption under Notification No.50/03-CE, that the khasra nos. of the plot of land on which the factory is located were mentioned against Selakui Industrial Region of Tehsil Vikasnagar, District Dehradun in Annexure II of the Notification No.50/03-CE even before the amendment by Notification No.27/05-CE and therefore, the departments contention that Khasra nos. of the plot of land on which the factory is located were not mentioned under Notification No.50/03-CE during the period prior to 19/5/05 is not correct, and that in view of above submissions, the impugned order is not correct.
4. Shri Yashpal Sharma, learned DR, defended the impugned order by reiterating the findings of the Commissioner. He submitted that the conductor unit was not eligible for exemption, as it had started commercial production before 7.1.2003. With regard to the cylinder unit, he pleaded that both units conductor division as well as cylinder division have to be treated as one factory and for duty exemption under Notification No.50/03-CE to the cylinder unit, capacity expansion by 25% or more should have taken place in both the divisions i.e.in the cylinders unit as well as in the conductor unit. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions made from both sides and perused the records.
6. It is not in dispute that both divisions conduction division and cylinder division are located within the same factory compound and the goods being manufactured ACSR conductors and LPG cylinders are not in the negative list of Annexure I and are covered for exemption. The first point of dispute is as to whether the Khasra Nos. on which the manufacturing units are located are notified in the annexure II of the notification and the second point of dispute is as to whether the conductor unit and LPG cylinder unit are independently eligible for exemption under this notification.
7. As regards, the first point of dispute, the factory in which both the units are located is on Khasra Nos.235,237,238/2 and 238/2 in village Central Hope Town, Tehsil Vikasnagar, of district Dehradun. In Annexure II, under Existing Industrial Estates/Regions of District Dehradun against S.No.11 pertaining to Selakui Industrial Region of village Selakui, Tehsil Vikasnagar, among other khasra Nos., the khasra Nos.235 to 259 are mentioned S.No.12, also pertaining to Selakui Industrial Region of village Selakui, of Camp Road, Central Hope Town of Tehsil Vikasngar covered Khasra Nos.1011 to 1019, 1021 to 1031, 1033 to 1051, 990 to 1002, 1006,1008,1009,1054, 1055, 1064 & 1081. By amending notification N0.27/05-CE dt.19/5/05, Notification No.50/03-CE dt.10/6/03 was amended and against S.No.11 of the existing Industrial Estates/ Regions of District, Dehradun in Annexure II, the entry Selakui under column NO.3 pertaining to village, was substituted by Village Selakui, Central Hope Town and Camp Road. The Departments contention is that only w.e.f.19.5.05 the khasra No. of the appellant unit got covered under the notification No. 50/03CE and during period prior to 19/5/05 the appellant unit would not be eligible for this exemption.
7.1 We do not agree with the contention of the Department. The notification NO.50/03-CE dated 10.06.03 exempts from duty the goods other than those mentioned in Annexure I of the notification which has been cleared from a unit located in the Industrial Growth Centres or Industrial Infrastructure Development Centres or Export Promotion Industrial Park, or Industrial Estates or Industrial areas or Commercial Estates or Scheme Areas as the case may be specified in Annexure II and Annexure III appended thereto. The Industrial areas, Industrial estates etc. are specified in Annexure II and Annexure III. In the table appended to the notification in Annexure II and III, while the 2nd column mention the name of the Industrial area, Industrial estate etc. the 3rd and 5th columns mention the village and the Tehsil under which the Industrial area/ Industrial estate etc. falls. Column 4 mentions the khasra number of the plots of land of which the Industrial area/ Industrial estate comprises. In this case the appellants factory is located at khasra No. 235,237,238/1 and 238/2 of Selakui Industrial Region located in Tehsil Vikas Nagar, District Dehradun. Even during period prior to 19/05/05, in Annexure II under the list of Existing Industrial Estates /Region of District Dehradun Selakui Industrial region of tehsil vikasnagar is mentioned against S.No. 11 and against Selakui Industrial Region among the khasra numbers, the khasraNos 235 to 257 are mentioned. Therefore the factory of the appellant unit has to be treated as located in the notified Industrial area and therefore eligible for exemption even during the period prior to 19/5/05. By notification No. 27/05-CE dated 19.5.05, against S.No 11 of the list of existing Industrial areas of District Dehradun given in Annexure II, only the name of the village mentioned in 3rd column against Selakui Industrial Region was changed from Selakui to Village Selakui, Central Hope Town and Camp Road The amendment by notification No. 27.05-CE dated 19.5.05, by which the name of the village in which the Industrial Area Selakui Industrial Region falls was changed, is in our view, only a clarificatory amendment. Though, by the amending notification dated 19.5.05, some minor changes were made, the Khasra No. 235 to 243 still remain covered under this Industrial Area. For the purpose of this exemption notification, what is relevant is as to whether the manufacturing unit is located in the Industrial area/ estate mentioned in Annexure II and III and the khasra no. of the plot of land on which the unit is located is mentioned against that Industrial area. Just because the village in which the Industrial area falls was wrongly mentioned and the village name is corrected by amending notification, it does not mean that before the amendment, the unit was not located in the notified Industrial area and was not eligible for exemption.
8. Next question is as to whether the conductor unit is eligible for the exemption.The Conductor unit had been set up during Octo.2002 to December, 2002 period and there is no dispute that during this period a total 3000 metres had been manufactured out of which only 300 metres were cleared on payment of duty. However, production during Jan.2003 to Marrch,2003 increased to 46137 metres and during April,03 to June,2003 the same increased to 4,42100 metres. The appellant intimated to the Range Superintendent in their letter dated 7.11.2003 about commencing commercial production of ACSR conductors with effect from 1.4.2003. The question arises as to whether the conductor unit, in the circumstances mentioned above, would be eligible for exemption under Notification No.50/03-CE dt.10/6/03.
8.1 Notification No.50/03-CE issued on 10/6/03, in terms of its para 2 is applicable to two kinds of units (1) New Industrial units which have commenced their commercial production on or after 7/1/2003;
(2) Industrial units existing before 7/1/2003, but which have undertaken substantial expansion by the way of increase in installed capacity by not less than 25%, on or after 7/1/2003.
Subsequently, by amending notification No.27/05-CE dt.19/5/05, a sunset clause was introduced in Notification No.50/03-CE and accordingly the new industrial units set up in area specified in Annexure II and III for being eligible for the exemption must have commenced commercial production on or after 7/1/03, but not later than 31/3/2010.Similarly, the industrial unit existing before 7/1/03 in area mentioned in Annexure II, which have undertaken substantial expansion by way of increase in installed capacity by not less than 25% on or after 7/1/03, for being eligible for the exemption must have commenced commercial production from such expanded capacity, not later than 31/3/2010.
8.1.1 However, in this case, we are not concerned with sunset clause introduced by Notification No.27/05-CE dt.19/5/05 but are concerned withthe sunrise clause i.e. which industrial unit are to be treated as new industrial unit eligible for this exemption when this exemption notification was issued on 10/6/03.
8.2 Para 2(a) of the Notification No.50/03CE dt.10/6/03, as the same stood during the period prior to its amendment on 19/5/05- covered- new industrial units which have commenced their commercial production on or after 7th January, 2003.
8.3 The word new , as per Chambers 21sth Century Dictionary means recently made, brought, built, ---- ,etc. recently discovered, never having existed, before, just invented, - recently arrived, installed and as per Little Oxford Dictionary, 7th Edition, the word new means of recent origin or arrival; made, discovered or acquired or experienced for the first time, unfamiliar In our view, in the context of this notification, the work new must be construed as not existing earlier.
8.4 Now, the new industrial unit cannot be the one commencing commercial production on or before after 10/6/03, the date of issue of exemption notification - as, if this meaning is adopted, the condition of commencing commercial production on or after 7/1/03 would become redundant. Therefore, the word new has to be construed with regard to the reference date 7/1/03. Since a new industrial unit which has commenced production on 7/1/03, has to be set up i.e. erected and installed before 7/1/03, this notification would also cover these unit, which had been set up before 7/1/03, but commenced commercial production on or after 7/1/03. Therefore, new industrial unit would include not only those units set up on or after 7/1/03, but would also include those industrial units which have been set before 7/1/03. But the new industrial unit set up either on or after 7/1/03 or set up prior to 7/1/03, must, for being eligible for the exemption satisfy the condition of having commenced their commercial production on or after 7/1/03. This condition becomes important for the units set up before 7/1/03, as the units set up on or after7/1/03 would naturally have commenced their commercial production on or after 7/1/03 and thereby would satisfy this condition. If an Industrial unit installed prior to 7/1/03 had commenced its commercial production prior to 7/1/03, it would be out of the purview of the notification. For this purpose, distinction has to be made between Commercial Production and Trial Production. Though the term commercial production is not defined in this notification, it should be construed in contradistinction with the term Trial Production Trial Production is followed by commercial production. Trial Production is the production during the process of commissioning of a plant. The process of commissioning of a manufacturing plant starts after completion of erection installation. During commissioning, various machinery is run on trial/test basis and if the production is not of the desired quantity and if the desired quality, the necessary adjustments are made. The running of a plant during its commissioning is only a trial run meant to make the necessary adjustments in the machinery and calibrate them to optimise their productivity. Commercial Production starts only when the commissioning i.e. trial run is complete. Though during trial run, there may be some production and the manufacturer may have sold the same, the plant cannot be said to have commenced commercial production during that phase. The plant can be treated as having commenced commercial production only after completion of trial run i.e. commissioning.
8.5 In this case from the production figures of conductor unit during Oct 02- Dec02 period, Jan 03 to March 03 period and from April 03 to June 03 period, it is clear that production during period prior to April,03 was only trial production, and there is merit in the Appellants plea that their commercial production started in April 03 and accordingly this unit would be eligible for exemption from July 03 when the necessary declaration filed with the Assistant Commissioner.
9. As regards, the cylinder unit, this unit had started production sometime in 2001 and this unit undertook expansion of installed capacity only in December, 2003 which was completed on Jan.2004, as result of which, installed capacity for production of cylinders increased to 552460 per annum from the earlier capacity of 368440 per annum. It is not in dispute that the capacity expansion was achieved by adding certain machinery, namely, five Mig Welding Machines, one Deep Drawing Hydraulic Press of 200 tons, one Trimming machine, one Foot Ring Forming machine, two Rotary Shearing Machines, two Auto Welding machines and two Automatic Bung Welding machines. The only ground on which the exemption is sought to be denied, is that expansion of 25% or more of installed capacity should have been in both units i.e. in conductor unit also. In our view, this ground for denial of exemption to cylinders unit is totally incorrect as, as held by apex court in the case of Reckitt Colman of India Ltd. (supra) each section or part of a factory manufacturing a different commodity has to be treated as separate manufacturing unit. The same view has been expressed by the Apex Court in the case of Himalayan Co-op. Milk Product (supra) and also Honble Bombay High Court in the case of Devidayal Electronics & Wires (supra). Therefore, a factory manufacturing more than one commodity in different sections, has to be treated as consisting of more than one manufacturing unit and each section or part of the factory would be independently eligible for exemption, as the duty exemption under Notification No.50/03-CE is unit-wise and not factory wise. Therefore, for determination of eligibility of cylinder unit, for exemption under Notification No.50/03-CE the capacity expansion of 25% or more has to be seen in respect of this unit only and not the capacity expansion of the entire factory as a whole. In view of this, the impugned order denying benefit of exemption in respect of cylinder unit is also not correct.
10. In view of above discussion, the impugned order is not correct and the same is set aside. The appeals are allowed. Since the appeals have been disposed of , the miscellaneous applications for extension of stay are dismissed as infructuous.
(Pronounced in the open court)
(ASHOK JINDA) (RAKESH KUMAR)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)
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