CX - It is only commencement of commercial production which is essential and not emergence of fully saleable finished product - Benefit of Notfn 50/2003 rightly extended: CESTAT
BY TIOL News Service
NEW DELHI, DEC 11, 2015: THIS is a Revenue appeal.
The respondents are engaged in the manufacture of lead acid batteries and claimed exemption under Notfn. No. 50/2003-CE dated 10.6.2003.
The department sought to deny the exemption on the ground that the respondent did not commence commercial production on or before 31.3.2010. The show cause notices demanded duty for clearances made from 1.4.2010.
The SCNs were dropped by the CCE, Chandigarh and, therefore, Revenue is in appeal.
The AR submitted that the order is erroneous as -
a) Respondents did not have connection for required power Supply.
b) Purchase of raw material and first sale of final product appears to be manipulated.
c) Full plant and machinery required have not been installed. The respondents did not have proper clearance from HP State Environment Protection and Pollution Control Board.
d) The certificate of commencement of commercial production issued by Deputy Director of Industries, Department of Industries cannot be considered for extending the excise concession as the same is based on submissions made by respondent.
e) The respondents claim that they could make saleable batteries before 31.3.2010 and cleared the same is not supported by facts as technical expert has stated that plate casting will take at least 72 hours for ageing. It is not possible for the respondent to manufacture and clear batteries before 31.3.2010.
The respondent rebutted each of these points by making the following submissions -
+ They had power connection of 48Kw from HP SE Band 62KVA DG set. Power supply of these sources is sufficient to run the machines installed in the month of March 2010. It is admitted fact that they did not have all the machines installed and were not fully operational during March 2010. The power availability during the month of March 2010 is sufficient for commencement of commercial production.
+ Regarding purchase of raw material and their utilization, apart from the documents in stock register, the same is supported by their annual balance sheet which shows the quantum of purchase, use and closing balance. They have attendance register, salary ledger, wages register till 31.3.2010.
+ Range Superintendent vide his letter dated 5.3.2011 addressed to the Asstt. Commissioner, Shimla specifically stated that respondent commenced the commercial production by 31.3.2010 and recommended for concession under the above notification.
+ They had manufactured grids with the help of grid casting machines and all the further processes were carried out manually. Such processes were well recognized in the industries.
+ Member-Secretary of the Board over-ruled the objection dated 31.3.2010 raised by the officers and extended the approval and the issue of certificate by the Pollution Control Board.
+ They were availing concession for sales tax and income tax based on same condition of commencement of commercial production prior to 31.3.2010.
+ Himachal Pradesh State Industrial Policy Rules essentially requires certificate of commencement of commercial production to be granted by the Directorate of Industries. Such certificate stating the date of commencement of commercial production as 31.3.2010 has been issued to them on 21.9.11.
The CESTAT after considering the submissions observed -
"…Concession under notification No. 50/03-CE is in pursuance of industrial policy notified through office memo No. 1(10)/2001-NER dated 7.1.2003. In pursuance of the said Central Government Policy, the State Government also commenced Industrial Policy, 2004 to extend concession and facility for the industries in Himachal Pradesh. In terms of the said Policy "commencement of commercial production" means the date on which industrial enterprise actually commenced the commercial production as certified by Director etc. In the present case, the State authorities have certified commencement of commercial production as 31.3.2010. The respondents were also given the benefit under Income Tax Act and Sales Tax Act on the ground that they commenced production before 31.3.2010."
To the Revenue argument that it was not possible to manufacture Lead Acid battery in short span of few days and to clear that before 31.3.2010 as claimed by the respondents, the Bench observed -
++ We find notification talks about "commencement of commercial production". It is clear that commercial sale of manufactured items on or before 31.3.2010 is not a pre-requisite as per notification.
++ It is only the commencement of commercial production which is essential and not emergence of fully saleable finished product. As such, the sale of such item at best can only establish the existence of commercial production prior to that date but that is not only evidence to say that the commercial production commenced or not.
++ It is apparent that if the clearances made from 1.4.2010 are to be charged to duty as they are manufactured by the respondent, the commercial production would have certainly commenced prior to that date.
++ Regarding non-availability of certain raw material the respondent have clarified that while most of the raw materials were procured by them, some essential raw materials in small quantities were either taken from the samples given by the vendors and also supplied by vendors of capital machines as sales promotion.
Holding that the conclusion arrived at by the Adjudicating authority based on the analysis of the direct and corroborative evidence is proper and legal, the Revenue appeal was dismissed.
(See 2015-TIOL-2640-CESTAT-DEL)
