By TIOL News Service

NEW DELHI, APR 04, 2016: THE applicant is availing the area based excise duty exemption under Notification No. 50/2003-C.E. dated 10.6.2003. They propose to effect substantial expansion in the existing location by installing more than 25% additional plant and machinery and constructing new building and claim that thus there would be substantial expansion by 25% which qualifies as substantial expansion as per Board's Circular No. 772/5/2004 CX. dated 21.1.2004; that for this Haridwar Plant-II, applicant would obtain separate factory license and E.S.I., PF Code; that applicant proposes to separate existing works with the proposed Haridwar Plant-II by putting a wall in between the two; that they would maintain a separate series of invoices to be issued each prefixed with the letters “SE” - to indicate that the invoices pertain to clearances from the expanded capacity, though the excise return & service tax return for the unit shall be filed in consolidated manner as substantial expansion is taking place in the same plot.

Applicant further submits that CBEC by its Circular No. 939/29/2010-CX dated 22.12.2010 & Circular No. 960/03/2012-CX dated 17.02.2012 has clarified on the subject matter.

The applicant, therefore, avers that since the expansion and installation of the plant and machinery is taking place in the same Khasra No. 72 & 74 for which ten year exemption has already been granted and is being availed & when even extending to adjacent plot of land is allowed, there is no reason why similar expansion within the same Khasra no. cannot be permitted.

The question before the Authority for Advance Rulings is -

Whether the benefit of Notification No. 50/2003-C.E. dated 10.06.2003 will be available to goods manufactured from the unit i.e. PLANT-II HARIDWAR established from expansion of the existing unit?

It is the contention of the Revenue that the said “Haridwar Plant-II” cannot be termed as “expansion” of the existing unit and will be an altogether different entity from the existing unit, which is availing area based exemption under Notification No. 50/2003- CE, dated 10.6.2003; that since the proposed new unit will come into existence after sun set clause i.e. after 31.3.2010, the said unit will not be eligible to enjoy the benefit of the said exemption notification and shall have to pay duty at the applicable rates.

After adverting to the conditions of the notification 50/2003-CE and the Circular No. 939/29/2010-CX dated 22.12.2010 which clarified that Notification No. 50/2003-CE does not place a bar or restriction on any addition / modification in the plant or machinery or on the production of new products after the cut-off date, the Authority observed -

+ In the instant case, applicant proposes to manufacture shoes of different brand and design by installing fresh plant/machinery. Further, the contention of Revenue that the applicant proposes to take separate factory license, ESI No. and PF Codes for expanded Haridwar Plant II, therefore, it will not fall under the category of existing unit, is not correct. Relevant Notification No. 50/2003-CE, as also CBEC Circular dated 22.12.2010 and 17.02.2012, do not envisage such condition. In view of said clarifications issued by CBEC, applicant can continue to avail the benefit of excise exemption.

+ As far as second issue raised by Revenue regarding applicant starting a new unit i.e. Haridwar Plant II and not falling under the existing unit, is concerned, it is observed from Circular No. 960/03/2012-CX dated 17.02.2012 that the situation of expansion of an eligible unit by acquiring an adjacent plot of land and installing new plant and machinery on such land, is akin to expansion by way of installing new plant and machinery inside the existing plot/premises. CBEC clarified that in such cases the exemption should continue to be available from the residual period of exemption.

+ In the present case, applicant proposes to effect expansion in Khasra No. 72 and 74, wherefrom the new unit had started commercial production w.e.f. 26.03.2010. Therefore, in view of Circular dated 17.02.2012, applicant is eligible for said exemption.

+ It would be retrograde step and not in consonance with the policy of the Government, not to allow existing unit to grow in the existing plot of land, by installation of new plants and machineries.

AAR Ruling:

The benefit of Notification No. 50/2003-C.E. dated 10.06.2003 will be available to goods manufactured from the unit i.e. PLANT-II HARIDWAR established from expansion of the existing unit.

(See 2016-TIOL-10-ARA-CX)