Machinery Manufactured by Establishing a separate unit is eligible for Excise Duty Exemption: CESTAT [Read Order]

The appellants,M/s Savita Industries were engaged in manufacture of rings.The appellant had gone on to install separate machinery and started fabricating machinery and claimed tax exemption for the same availing Notification No. 50/2003-CE. He had declared the new production the second manufacturing unit as “a new unit”. The appellant had filed a refund claim for Rs.4,60,800/- on the ground that they had substantially expanded the installed capacity.

Revenue sought to deny the refund claim made by the appellant and issued a show-cause notice to the appellant. Revenue rejected the refund claim of the appellant on the ground that the appellants have violated conditions of Notification No.49-50/2003-CE and SSI Exemption No.08/2003 and raised the charge of unjust enrichment against the appellant. On an appeal filed by the appellants, Commissioner (Appeals) upheld the impugned order.

Appellant argued that notification does not define ‘new industrial unit’. The appellant also contended that the Revenue is not right to place reliance on the definitions contained in the policy formulated by Government of Himachal Pradesh. Appellant also contended that the new unit started by them has no connection with the existing manufacture and has to be treated as a new unit for the purpose of the notification. The appellant argued that the condition of grant of permission by the District Industries Centre or by any other authority of the State Government cannot be read into the notification.

The appellant further contended that Revenue also erred in observing that the appellant’s claim must be supported by a certificate issued by the Director of Industries or District Industry Centre, as there is no such condition built into the notification. The appellant also submitted that there is no unjust enrichment as his tax exemption claims are based on the Chartered Accountant Certificate.

Revenue disputed the second manufacturing unit set up by the appellant is not a new unit. Revenue contended that the appellant is not eligible for the exemption under Notification No.50/2003 on the machinery manufactured by them in the unit set up by them on or after 07.01.2003 as per the notification and as no certificate has been given by the Competent Authority in the Government of Himachal Pradesh.

Revenue further contended that Plant and building used exclusively for the manufacture of goods in question alone are to be treated as industrial unit. Revenue also contended that the Rules Regarding Grant of Incentives, Concessions & Facilities to Industrial Units in Himachal Pradesh (1999), “Commencement of commercial production” means the date on which the new industrial unit actually commenced commercial production as certified by the Director of Industries/ General Manager, District Industries Centre/ Member Secretary, Single Window Agency.

A two member bench of CESTAT comprising S.S.Garg (Member, Judicial) and P. Anjani Kumar (Member, Technical)  held the appellant’s arguments were acceptable and they were of the opinion that the machinery manufactured by the appellants by establishing a separate unit which started production after 07.01.2003, is eligible for benefit of Notification No.50/2003. The bench also observed that there was no condition in the said notification, so as to restrict benefit to only those units which were permitted by the District Industries Centre or any other authority.

The appellant was represented by Sudeep Singh Bhangoo and the respondent was represented by Narinder Singh and Shri Harish Kapoor.

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