Exemption for Payment of Excise Duty under Notification allowable When Installed Capacity of Factory has Enhanced Substantially by More Than 25%: CESTAT [Read Order]

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that exemption for payment of excise duty under notification is allowable when the installed capacity of  factory has been enhanced substantially by more than 25%.

M/s. Behali Tea Estate, the Appellant had sought exemption for payment of Excise Duty under Notification No. 33/99 dated 08/07/1999, on the ground that the installed capacity of their factory has been enhanced substantially by more than 25% after 24/12/1997.

After the initial round of litigation up to the High Court, the matter was remanded for Denovo Adjudication to the Commissioner (Appeals). The Commissioner (Appeals) has upheld the Order of the Lower Authority and rejected the Appeal filed by the Appellant.

The issue involved is to decide as to whether the Appellant has undertaken substantial expansion of their installed capacity which would amount to enhancement of the capacity by more than 25% or not. 

The Appellant has heavily relied on the Certificate issued by the Chartered Engineer vide their Report dated 25/06/2004. It was viewed that the Commissioner (Appeals) has considered the Chartered Engineer Certificate and all the factual details in a detailed manner.

The Appellant has contended forcefully that their original installed capacity has been increased more than the stipulated Twenty-five per cent, (25%), as evidenced by the Chartered Engineer’s report, effected utilizing replacing the ECP and VFBD Dryers by a set of two new VFPD-EE3 Dryers together with the inclusion of the ECP Dryer (capacity: 140 kg./hr), which was earlier used for the gapping purpose, with effect from 21.04.2000, and hence are eligible for exemption.

The Lower Authority has claimed that the Chartered Engineer in his report claimed that the expansion was effected from 01.04.2000 (the date of installation of the 2nd VFBD-EE3Dryer). But when the Range Superintendent objected pointing out that the said dryer was installed on 20.04.2000 and as such the production capacity was increased w.e.f. 21.04.2000 and not from 01.04.2000, the Appellant vide their letter dated 09.12.2004 has agreed and accepted that the date of installation as indicated by the Range Superintendent w.e.f. 21.04.2000 and not from 01.04.2000 the Appellant has also accepted the amendment readily, in the face of the said Report. Therefore, it is evident that the report of the Chartered Engineer cannot and ought not to be accepted blindly without any further scrutiny.

A two-member bench of Mr R Muralidhar, Member (Judicial) and Mr K Anpazhakan, Member (Technical) observed that “as per the terms of the said notification, the installed capacity is required to be increased by not less than the stipulated Twenty-Five per cent (25%). It is evident that since the said ECP Dryer (of installed capacity-140 kg./hr) had already been installed during the pre-increase stage (i.e., 21-04-2000), the capacity of the same should necessarily have been considered and included for assessing the pre-increase installed capacity, and it cannot be included for the post-increase determination, as has been done by the Appellant. Hence, the Appellant’s claim of a due increase in the installed capacity is not borne out by the material and evidence on record. “

The plea of the Appellant that their eligibility for exemption under the said notification has attained its finality once the Order was accepted by the Commissioner, is not found to be proper. This argument is not applicable here, as it is on record that the Appellant had voluntarily refunded the said amount along with interest on 29.06.2004 and also thereby withdrawn their first claim, dated 16.02.2004.

The CESTAT refused to interfere with the detailed findings and the Order passed by the Commissioner (Appeals), wherein he has considered all the factual details and the Chartered Engineer’s Certificate and the statutory provisions. Therefore, the Tribunal dismissed the present Appeal filed by the Appellant.

To Read the full text of the Order CLICK HERE

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