Custom, Excise & Service Tax Tribunal
Cce, Meerut Ii vs M/S Prakash Straw Board Pvt. Ltd on 18 November, 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. II DATE OF HEARING : 18/11/2015. DATE OF DECISION : 18/11/2015. Excise Appeal No. 864 of 2007 with CO No. 157 of 2007 [Arising out of the Order-in-Appeal No. 02/CE/MRT-II/2007 dated 04/01/2007 passed by The Commissioner (Appeals), Customs & Central Excise, Meerut II.] For Approval and signature : Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 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? CCE, Meerut II Appellant Versus M/s Prakash Straw Board Pvt. Ltd. Respondent
Appearance Ms. Neha Garg, Authorized Representative (DR) for the appellant.
Shri Amit Jain, Advocate for the Respondent.
CORAM: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 53521/2015 Dated : 18/11/2015 Per. Ashok Jindal :-
Revenue is in appeal against the impugned order wherein the learned Commissioner (Appeals) allowed the benefit of exemption Notification No. 49-50/2003-CE dated 10/06/2003 holding that the respondent had undertaken substantial expansion by way of installed capacity by not less than 25% on or after 7th January, 2003.
2. The facts of the case are that the respondent were engaged in manufacture of Paper Board and Spiral Paper Tube. The respondent informed to the Department on 29/3/2004 that they have undertaken substantial expansion of installed capacity in respect of Paper Board and shall be availing benefit of exemption under Notification No. 50/2003-CE dated 10/6/03. The installed capacity of the unit prior to 07/01/2003 was 15 Ton Per Day (TPD) or 4500 TPA in respect of Paper Board and 5 Ton Per Day of 1500 TPA in respect of the Spiral Paper Tube. The respondent claimed that after expansion of the unit the installed capacity of the Paper Board has increased from 15 TPD to 25 TPD. It was also informed that the respondent has not undertaken any expansion in respect of Spiral Paper Tube. A show cause notice issued to the respondent on the allegation that the installed capacity of Spiral Paper Tube has not been increased, therefore, the respondent has failed to make substantial expansion under notification as expansion occurring in the notification means the installed capacity in relation to each and every item being manufactured by existing industrial relate. The show cause notice was adjudicated and it was held that respondent has undertaken substantial expansion by way of increase in installed capacity by more than 25%, therefore, the respondent is entitled for benefit of exemption notification cited hereinabove. The said order was challenged before the learned Commissioner (Appeals) who upheld the adjudication order. Aggrieved from the said order, the Revenue is in appeal. The respondent also filed Cross Objection appeal filed by the Revenue.
3. The learned AR submits that in this case there is a combined factory and the respondent has taken an expansion in respect of Paper Board Section and not Spiral Paper Tube Section, therefore, the respondent is not entitled for benefit of exemption notification as their installed capacity has not been increased by more than 25%. She further submits that the claim of the respondent is that Paper Board Section and Spiral Paper Tube are two different units and they are not claiming benefit of exemption notification for Spiral Paper Tube Section, the said contention is not acceptable as per the exemption notification, in Central Excise Act, there is no term as unit. In fact, Central Excise Act recognize only factory and factory is a composite factory of two units, therefore, the substantial expansion has not been taken over by the respondent, accordingly, the respondent is not entitled to take benefit of exemption notification.
4. On the other hand learned Counsel for the respondent submits that the appeal is not maintainable as there is no authorization has been filed by the Revenue to file this appeal as per Section 35B (2) of the Central Excise Act, 1944. On merits, he submits that issue is squarely covered by the decision of this Tribunal in the case of Tirupati LPG Industries Ltd. vs. CCE, Meerut I reported in 2015 (324) E.L.T. 201 (Tri. Del.). Therefore, the impugned order is to be upheld. In that case also, the assessee is having two units in the same factory i.e. conductor unit and LPG Cylinder unit and this Tribunal has held that the installed capacity of the each unit is to be considered separately and the same has been considered by this Tribunal in that case. Therefore, the impugned order is to be upheld.
5. Heard the parties considered the submissions.
6. The contention of the learned AR is that the production capacity of the both the units are to be counted as one. As in the Spiral Paper Tube unit, the substantial expansion has not been taken, therefore, the respondent is not entitled for the benefit of the notification. We have seen that prior to substantial expansion the Paper Board unit was having installed capacity of 15 TPD and Spiral Paper Tube unit was having installed capacity of 5 TPD, therefore, there was a total production capacity of the factory was 20 TPD. After expansion in Paper Board unit, the total installed capacity has been increased to 30 TPD which is more than 25% of the installed capacity prior to substantial expansion. On this ground itself, the Revenue has not case, but in the impugned order the learned Commissioner (Appeals) before allowing the exemption, has examined the issue of substantial expansion in detail and observed as under :-
6. The Department has preferred this appeal on the ground that the Notification No. 49/2003 and 50/2003 (supra) lays down the expansion in installed capacity of an Industrial Unit and do not provide expansion product wise. Secondly exemption to an Industrial Unit is available only when there is substantial expansion of installed capacity by not less than 25%. In this case the unit is manufacturing two different specified products and expansion has been undertaken for manufacturing of only one specified product by the unit, therefore, it cannot be treated as substantial expansion of installed capacity as per notification. The Circular issued by CBEC vide 772/5/2004-CX dated 21/01/2004 also corroborate the view of the Department.
The party has controverted the grounds of appeal taken by the Department. Their initial submission may be summarized as under :
(i) That they claimed exemption in respect of Paper Board Section only and opted to pay duty on Spiral Paper Tube Section notwithstanding the fact that as a result of substantial expansion carried out by them the overall installed capacity of their factory was increased by more than 25%. They could have also claimed exemption in respect of Spiral Paper Tube section, but preferred to pay duty thereon as no expansion was done by them in respect of this Spiral Paper Tube Section. As a matter of fact, the installed capacity of the unit prior to 07/1/2003 was 15 TPD or 4500 TPA in respect of Paper Board and 05 TPD or 1500 TPA in respect of Spiral Paper Tube. The party claimed that after expansion of the unit the installed capacity of Paper Board has increased from 15 TPD to 25 TPD. This claim of the party is certified by the experts of Department of Paper Technology, IIT, Roorkee in their report dated 22/03/2005 as manifest from the Capacity Assessment Report available on record.
(ii) That the appeal filed by the Department is time barred in terms of Section 35E of the Central Excise Act, 1944. In this regard, the party also quoted the provisions of Section 35E verbatim. They added that since no justifiable reasons have been brought forth in the Order in Review passed by the Commissioner as also the appeal filed by the Department, for reviewing the order within the period of six months, the appeal filed against the Order-in-Original No. 18/Addl./Commr./M-II/2005 18/08/05 is beyond the period specified under the Act as impugned Order-in-Original was passed on 18/08/2005, whereas authorization for filing appeal against this order was made on 11/08/2006 by the Commissioner i.e. after a period of more than 11 months from the date of Order-in-Original.
(iii) They also averred that benefit of Notification claimed by them is in accordance with law as the fact of substantial expansion carried out by them is undisputed in so far as Paper Board is concerned. The Department has not refuted at any stage the material fact that as a whole overall installed capacity of their unit has increased by more than 25% including Spiral Paper Tube Section also. Since they opted to pay duty on Spiral Paper Tube, therefore, the Department raised the Demand against them on the ground that substantial expansion ought to have been carried out in each and every section.
(iv) That the notification in dispute grant exemption to the goods cleared from a unit and not to the goods cleared from a factory. Thus the exemption is neither granted to a manufacturer nor is the exemption factory specific. Therefore, the Paper Board division in which substantial expansion has been carried out by them is in industrial unit and hence exemption availed by them was in accordance with law. They averred that the impugned notification makes a distinction between a factory and an industrial unit. The word factory is a genus and industrial unit is a species comprising of various divisions of a factory.
(v) That factory has been defined under Section 2 (3) of the Central Excise Act, 1944. All industrial units are to be considered as parts of the factory whereas a factory cannot be a part of industrial unit. Thus the Paper Board division of their will be considered as an industrial unit within the factory.
(vi) Their aforesaid submission is corroborated by the judgment of Honble Supreme Court in the case of Textile Machinery Corporation Ltd. vs. CIT. 1977 (2) SCC 368. In this case the Honble Apex Court laid down the test to consider whether a unit is a new industrial unit or an expansion of the already existing unit. A similar view was also taken by the Madras High Court in the case of Rajeswari Mills Ltd. vs. CIT reported in (1963) 50 ITR 29 (Mad.). They further relied on the decision of Bombay High Court in the case of Devidayal Electronics & Wires Ltd. vs. Union of India reported in 1984 (16) E.L.T. 30 (Bom.), wherein factory was distinguished from an industrial unit.
(vii) Further, in response to a query by TATA Motors, the CBEC vide their letter dated 21/03/2006 have also clarified that if a new assembly line or a production line is installed after 31/03/2007 and would commence production after that date, then benefit of said notification (i.e. 49 and 50/2003) would not be available to Motor Vehicles manufactured in such assembly/production lines because at the material time the sun set clause was 31st March, 2007.
As regards partys additional reply dated 07/11/2006, the party therein almost cited all case laws already given by them initially in order to prove that a factory is distinguishable from an industrial unit. Further, as a whole overall installed capacity of their unit has increased by more than 25% including Spiral Paper Tube Section also, they are otherwise eligible for exemption even considering their Paper Board unit and Spiral Paper Tube Unit as one industrial unit. They also relied the following case laws to support their contention that if overall capacity has been increased by 25% or more than there is no need to increase in installed capacity of all the Divisions/Sections :
(a) CCE vs. Monabari Tea Estate 2003 (154) E.L.T. 230 ;
(b) CCE vs. Assam Polyester Co-op Society Ltd. 2003 (162) E.L.T. 350 ;
(c) CCE vs. Hindustan Coca Cola Beverages Ltd. 2004 (169) E.L.T. 154 ;
(d) CCE vs. MKB (Asia) Pvt. Ltd. 2003 (158) E.L.T. 616 ;
(e) CCE vs. Hindustan Coca Cola Beverages Ltd. 2005 (186) E.L.T. 242 ;
(f) CCE vs. Dorria Tea Estate 2003 (156) E.L.T. 999.
The party, therefore, contended that the appeal filed by the Department is contrary to the above judgments and binding Board Circular is therefore liable to be rejected.
I have gone through the grounds of appeal preferred by the Department, the written submissions of the party, copies of relevant documents available on record and the record of personal hearing.
I find that the gist of the Departments appeal is that party has not carried out substantial expansion in their units each section or to say that though installed capacity of Paper Board Section has been enhanced by the party by more than 25%, yet they have made no increase in installed capacity of their Spiral Paper Tube Section.
As regards to partys averment that the appeal filed by the Department is time barred in terms of Section 35E of the Central Excise Act, 1944 as no justifiable reasons have been brought forth in the Order in Review passed by the Commissioner is also the appeal filed by the Department, for reviewing the order within the period of six months, the appeal filed against the Order-in-Original No. 18/Addl./Commr./M-II/2005 dated 18/08/2005 and the same is beyond the period specified under the Act as impugned Order-in-Original was passed on 18/08/2005, whereas authorization for filing appeal against the order was made on 11/08/2006 by the Commissioner i.e. after a period of more than 11 months from the date of Order-in-Original.
I however, do not accede to this averment of the party and to refute it would like to quote relevant extract of the sub-Section (2) and (3) of Section 35E of the Act ibid as under :
(2) The Commissioner of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate on him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the [Commissioner (Appeals)] for the determination of such points arising out of the decision or order as may be specified by the [Commissioner of Central Excise] in his order.
(3) The Committee of Chief Commissioners of Central Excise] or Commissioner of Central Excise, as the case may be, shall, where it is possible to do so, make order under sub-Section (1) or sub-Section (2), within a period of six months, but not beyond a period of one year, from the date of the decision or order of the adjudicating authority.
A perusal of sub-Section (2) and (3) leaves not an iota of doubt that order under sub-Section (1) or sub-Section (2) is to be made by the Commissioner, passing the review order, where it is possible, within a period of six months, but not beyond a period of one year, from the date of the decision or order of the adjudicating authority. The word used by the legislature are where it is possible to do so. So the order of review is not to be made mandatorily in six months as contended by the party. Therefore, in the instant case review order is passed within the normal period of one year as stipulated in Section 35E. Therefore, on this count, partys contention is not tenable.
I observe that the facts which remain uncontroverted in the instant case are that :
(i) The party has carried out substantial expansion after 7th day of January, 2003. Further, the installed capacity of the unit prior to 07/01/2003 was 15 TPD or 4500 TPA in respect of Paper Board and 05 TPD or 1500 TPA in respect of Spiral Paper Tube. The party claimed that after expansion of the unit the installed capacity of Paper Board has increased from 15 TPD to 25 TPD. This claim of the party is certified by the experts of Department of Paper Technology, IIT, Roorkee vide their report dated 22/03/2005 as manifest from the Capacity Assessment Report available on record. Thus as a whole, their installed capacity also increased by more than 25% (from 15+5=20 TPD to 25+5=30 TPD).
(ii) In the case of CCE vs. Monabari Tea Estate reported in 2003 (154) E.L.T. 230, it was held by the Honble CESTAT that there is nothing in the notification to suggest that there should be an increase in each and every section of the manufacturing unit. If there is overall increase of 25%, the same would meet the conditions of Notification No. 33/99 (Area Based Notification for Jammu & Kashmir).
(iii) In the case of CCE vs. Assam Polyester Co-op Society Ltd. reported in 2003 (162) E.L.T. 350 it was held by the Honble CESTAT held that the Revenue in their memo of appeal has contended that there has been no expansion of installed capacity of weaving section. Weaving section, being an integral part of process of manufacture, the non-expansion in the said section will not entitle the respondents to claim the benefit of the notification. The court does not agree with the said contention of the Revenue. The Tribunal in the case of CCE, Shillong vs. M/s Monabari Tea Estate has held that there is nothing in the notification to suggest that there should be an increase in each and every section of the manufacturing unit. If there is an overall increase of 25% the same would meet the conditions of notifications. It was found that the Revenue has not disputed the fact that there is an overall increase of 25% in the manufacturing unit of the Respondents. As such even if the weaving section has not increased its installed capacity, the benefit cannot be denied to the respondents. Revenues appeal is rejected. The case is against the department.
(iv) CCE vs. Hindustan Coca Cola Beverages Ltd. reported in 2004 (169) E.L.T. 154 the Honble CESTAT had held that Notification No. 32/99-CE, dated 08/07/1999 granted benefit to the units situated in the North-East Area, after the installed capacity of the already existing unit is increased by 25%. Notification requiring an overall increase of 25% of installed capacity of units. The Certificates obtained from the Chartered Engineer and Directorate of Industries and submitted by the assessee, shows different figures and percentage of expansion, however both showing an overall increase of more than 25%. In the present case, going by either of the Certificates, the increase is more than 25%, we are of the view that the benefit of the Notification in question has been rightly extended to the respondents. Accordingly, the Revenues appeal is rejected.
(v) CCE vs. MKB (Asia) Pvt. Ltd. reported in 2003 (158) E.L.T. 616, the Honble CESTAT had held that the Revenues main grievance is that the appellate authority has taken into consideration the overall increase in the installed capacity of the unit but has not considered the increase in the separate key area/section of the unit. It is held that overall increase of 25% in the installed capacity of the unit but has not considered the increase in the separate key area/section of the unit. It is held that overall increase of 25% in the installed capacity is required for the availment of benefit of Notification No. 33/99-CE. Increase in separate key area/section is not required. Revenue appeal is rejected.
(vi) CCE vs. Hindustan Coca Cola Beverages Ltd. reported in 2005 (186) E.L.T. 242, wherein the Honble CESTAT had held that Expansion of Notification No. 33/99-CE Bottle washer and filter installed in aerated water bottling plant Commissioner accepted the reliance of respondent stating that there has been substantial expansion of the industrial unit by of increase in installed capacity As per the notification there should be substantial expansion in industrial unit and the expansion should not be regarding to any individual section of the unit or machinery in the unit Benefit of exemption available. Appeal rejected.
(vii) CCE vs. Dorria Tea Estate reported in 2003 (156) E.L.T. 999, wherein Honble CESTAT had held that after going through the appeal memos filed by the Revenue, we find that there is no evidence on record to rebut the above findings of the Commissioner (Appeals). The Revenue has nowhere contended that the production capacity as reflected in the impugned order by the Commissioner (Appeals), does not show an increase of 25%. Similarly, it is seen that the Revenue has accepted that there is an increase of 25% in the overall installed capacity, but not in each and every wing of the different manufacturing units. We find that the Notification in question talks about the overall increase of 25% in the installed capacity and does not require that each and every section should be upgraded by 25%. In this view of the matter, we do not find any merits in the Revenues appeals and reject all of them.
In view of the ratio of the above decisions and nothing contrary to them on record, I find that there is nothing in the Notification No. 49/2003 and 50/2003 both dated 10/06/2003 to suggest that there should be an increase in each and every section of the manufacturing unit. If there is overall increase of 25%, the same would meet the conditions of Notification No. 49/2003 and 50/2003 both dated 10/06/2003.
Further, in addition to the above discussion and findings, even applying the ratio of the decisions cited by the party in the context of the definition of an industrial unit it is to be held that a factory is different than that of an industrial undertaking. All industrial units can be considered as parts of the factory whereas a factory cannot be a part of industrial unit. Also Board (CBEC) vide its letter dated 21/03/2006 (available on record) have also clarified that if a new assembly line or a production line is installed after 31/03/2007 (i.e. after sun set clause or the ultimate dead line or availing exemption) and would commence production after that date, then benefit of said Notification (i.e. 49 and 50/2003) would not be available to Motor Vehicles manufactured in such assembly/production lines. This clarification of the Board also supports the view that industrial unit is other than a factory. Here, it would be pertinent to mention that sun set clause has been extended upto 31st March, 2010 by virtue of Notification No. 38/2006-CE dated 02/08/2006. Therefore, the partys averment that their Paper Board Section is a separate industrial unit and as such benefit of exemption is rightly allowed to them is strongly in their favour. However, as per the ratio of decisions discussed at Sl. No. (ii) and (vii) (supra), I find that benefit of exemption is otherwise also admissible to them in as much as the evidences available on record i.e. the report of the experts of Department of Paper Technology, IIT, Roorkee in their report dated 22/03/2005 have also certified that there is an increase of installed capacity of the partys plant is more than 25%.
I, therefore, conclude that in view of the factual position as narrated above in context of interpretation of Notification No. 49/2003-CE and 50/2003-CE both dated 10/06/2003 vis-`-vis grounds of appeal preferred by the Department, the appeal filed by the Department lacks merit and deserves to be rejected.
7. We further find that in the case of Tirupati LPG Industries Ltd. vs. CCE, Meerut I (supra), the assessee was having two separate units in their factory one for manufacturing of LPG cylinder and another for conductors unit and this Tribunal has considered the substantial expansion of both the units separately, therefore, following the precedent decision of this Tribunal and observation made by the learned Commissioner (Appeals) in the impugned order, we do not find any infirmity in the impugned order.
8. In these circumstances, we uphold the impugned order confirming that the sustainable expansion has taken in Paper Board Unit and the respondent is entitled for benefit of the exemption notification consequently, the appeal filed by the Revenue is dismissed.
9. Cross Objection filed by the respondent are also disposed of in the above terms.
(Operative part of the order pronounced in the open court.) (Ashok Jindal) Member (Judicial) (B. Ravichandran) Member (Technical) PK ??
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