By TIOL News Service

NEW DELHI, AUG 18, 2017: THIS is a Revenue appeal.

The assessee is a manufacturer of paper and paperboards situated in Uttarakhand.

The assessee claimed benefit of notification No. 49/2003-CEon the ground of having carried out substantial expansion of unit. It is the claim of the assessee that by incurring capital investment of over Rs.25.75 lakh by way of investment on machinery and by alteration in the installed machinery the installed capacity of plant was increased from 50TPD to 65TPD which amounts to more than 25% increase in installed capacity.

The original authority denied the benefit and demanded duty to the extent of Rs.5,59,24,239/- but this order was set aside by the Commissioner (Appeals).

Aggrieved, Revenue is before the CESTAT.

It is the Revenue contention that the plant and machinery claimed by the assessee to have been used for capacity enhancement were infact replacement material which was consumed and the machinery installed were only meant for improvement in the quality of goods manufactured. The AR also cited CBEC circular dated 21.1.2004 wherein clarification has been issued on the term ‘substantial expansion' in relation to area-based exemption including notification No. 49/2003-CE. Inasmuch as the assessee will not be eligible for area-based exemption, the AR emphasised.

The respondent argued that it has been certified by the independent Chartered Engineer as well as by Professor from IIT Roorkee that the installed capacity of the assessee unit has, infact, been increased by over 25%; that even if such increase in capacity is a result of replacement of installed machinery and alteration in existing machinery, benefit will be available to the respondent. Reliance is inter alia placed on the Uttarakhand High Court decision in Uttaranchal Iron & Ispat Ltd. - 2011-TIOL-222-HC-UKHAND-CX in support.

After considering the submissions made, the Bench observed –

++ The increase in the installed capacity by more than 25% has been certified by the independent Chartered Engineer, Shri Rohit Oberoi of M/s. Oberoi Associates, Kashipur. The same fact has also been endorsed by the Professor of Department of Paper Technology, Saharanpur as well as IITRoorkee. The reports submitted by the technical experts reveal that such increase in installed capacity is the result of changes carried out by the respondent by way of replacement material / consumables and by installing machinery meant for improvement in quality of products.

Adverting to the High Court decision (supra), the CESTAT observed that it is the factum of substantial expansion which is the determinative factor for grant of exemption and it was immaterial whether the substantial expansion was as a result of additional or new plant and machinery or by renovation /modification of existing plant and machinery.

Concluding that there is no justification to interfere with the impugned order, the Revenue appeal was dismissed.

(See 2017-TIOL-2980-CESTAT-DEL)