No Commencement of Commercial Production of Aluminium, Benefit of Excise Notification not Allowable: CESTAT [Read Order]

The Delhi  bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that benefit of excise notification not allowable in absence of commencement of  commercial production of aluminium.

M/s Agarwal Aluminium filed the appeal to assail the order-in-original. The short issue to be decided is whether the appellant was entitled to the benefit of area based exemption Notification No. 50/2003-CE dated 10.06.2003 or not.

One of the conditions for availing the benefit of this notification was that the factory should have commenced “commercial production on or before 31.03.2010”. The appellant claimed the benefit of this notification. A show cause notice dated 16.07.2015 was issued to the appellant after detailed investigation which showed to the Revenue that the appellant had, in fact, not commenced commercial production before 31.03.2010.

The demand was confirmed by the Commissioner by order dated 22.07.2016 which, on assessee’s appeal, was remanded to Original Authority by the Tribunal’s order dated 07.11.2017 in view of some contradictory facts mentioned in that order. Thereafter, the impugned order was passed on 27.01.2020 by the Commissioner in the denovo proceedings.

The case of the Revenue is that the appellant had purchased an industrial furnace with accessories from M/s Macro Engineers, Himachal Pradesh under invoice dated 26.03.2010. This consignment crossed the border into Uttarakhand only on 29.03.2010 and therefore it could not have been brought into the factors, installed, commissioned, tested and production commenced by 31.03.2010.

According to the appellant, it had two small karahai type furnaces called as moose furnaces in which aluminium scrap was molted and ingots were produced prior to this date. It is also the case of the appellant that the industrial furnace was brought in and installed and used prior to 31.03.2010 and the first invoice for final product was issued on 31.03.2010. An intimation was served upon the Deputy Commissioner of Central Excise and the Range Superintendent of letter dated 29.03.2010.

 Authorized Representative for the Revenue stated that under this invoice dated 31.03.2010 aluminium sections were sold which are extrusion products and there was no equipment for extrusion in the factory.

The appellant was asked as to how it could have produced 430.2 kg. of aluminium sections within two days by consuming a mere on 136.31 kg. of scrap, he claimed that records will be supplied later, but never did so. In the absence of any contrary evidence The Tribunal accepted Revenue’s contention that it was impossible for appellant to have produced 430 kg. of sections by consuming 136 kg. of aluminium scrap. Therefore, on the facts of the case we are not convinced that any commercial production was commenced on or before 31.03.2010.

It was found that the furnace of the factory was still under installation and hydraulic mechanism of furnace and electrical panels were not installed the furnace was also not connected to the electrical line. Therefore, it is highly doubtful that the appellant had, as it claimed installed the electrical furnace on two days between 29.03.2010 and 31.03.2010 and also completed the production.

“It is hard to believe that the production could have taken place without any electricity at all. The appellant claimed that it had a diesel generator set for a few days, but was unable to provide any evidence to support its claim.”, the Tribunal comprising Mr. Justice Dilip Gupta, President and  Mr. p.v. Subba Rao, Member (Technical) viewed.

The appellant’s submission that it was manufacturing products in the moose furnaces, which were essentially karahais with fire under them are not convinced by the CESTAT as it was impossible that those furnaces would have been able to produce ingots on such a large scale and certainly they could not have extruded and produced aluminium extruded products, such as, aluminium sections.

While dismissing the appeal, the CESTAT upheld the impugned order.

To Read the full text of the Order CLICK HERE

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