Case Law Details

Case Name : Wipro Enterprises Pvt. Ltd Vs Commissioner (CESTAT Chandigarh)
Appeal Number : Excise Appeal No. 60202 of 2021
Date of Judgement/Order : 23/08/2022
Related Assessment Year :

Wipro Enterprises Pvt. Ltd Vs Commissioner (CESTAT Chandigarh)

Held that duty exemption benefit under notification no. 50/2003-CE dated 10.06.2003 cannot be denied because of a diversification of production capacity by adding new machines.

Facts-

M/s. Wipro Enterprises Pvt. Ltd. (Unit-II) has filed this appeal to assail the order dated 03.02.2021 by which the Commissioner, CGST, Commissionerate, Shimla has held that the appellant is not eligible to avail benefit of exemption from duty under notification no. 50/2003-CE dated 10.06.2003 in respect of new products which were manufactured/added by the appellant after the cut-off date i.e. 31.03.2010. The Commissioner has, accordingly, confirmed the demand of Rs. 6,28,16,499/- against the appellant under section 11A(1) of the Central Excise Act, 1944 and ordered for its recovery with interest and penalty.

Conclusion-

The appellant had not set up a new Unit and there was only a diversification of production capacity by adding new machines. The old products were continued to be manufactured, in addition to the new products. The fact that the investment for the new products was very large and the percentage of production of the new product was also very large cannot be made a ground to deny the benefit of the Exemption Notification dated 10.06.2003 to the appellant.

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

M/s. Wipro Enterprises Pvt. Ltd. (Unit-II)1 has filed this appeal to assail the order dated 03.02.2021 by which the Commissioner, CGST, Commissionerate, Shimla2 has held that the appellant is not eligible to avail benefit of exemption from duty under Notification No. 50/2003-CE dated 10.06.2003 3 in respect of new products which were manufactured/added by the appellant after the cut-off date i.e. 31.03.2010. The Commissioner has, accordingly, confirmed the demand of Rs. 6,28,16,499/- against the appellant under section 11A(1) of the Central Excise Act, 19444 and ordered for its recovery with interest and penalty.

2. Jayaz Electrical Motors filed a declaration dated 24.12.2008 under the aforesaid area based Exemption Notification dated 10.06.2003 for manufacture of electrical motors, torch, LED products, liquid detergent and toilet soap 5 stating that the commercial production had commenced on 02.12.2009. The appellant purchased Jayaz Electrical Motors on a slump sale basis and intimated this fact to the Department by a letter dated 31.03.2014. The appellant also stated that it will continue to avail exemption as per Exemption Notification. By a letter dated 24.03.2015, the appellant intimated the Department that the Unit was shifted from Khasra No. 85/4, Plot No. 5, Crestal Complex, EPIP Jharmajri, Baddi to Plot No. 87-A, EPIP Phase-I, Jharmajri, Baddi. The appellant started manufacturing certain other products namely, body wash, deo, face wash, glucovita bolts, hand and body lotion, liquid hand wash, shaving cream, talcum powder, fabric conditioner, MCB, socket, panel and switch 6 and intimated this fact to the Department by letters dated 12.08.2016, 30.03.2017 and 18.01.2018.

3. The dates on which the appellant started manufacturing new products are as follows:

S. No. Description of the goods Estimated start production date
1. Liquid Hand Wash 10.07.2016
2. Face Wash 10.07.2016
3. Talcum Powder 01.09.2016
4. Shaving Cream 01.09.2016
5. Hand & Body Lotion 01.09.2016
6. Deodorant 09.02.2017
7. Body Wash 09.03.2017
8. Glucovita Bolts 30.03.2017
9. Fabric conditioner 06.10.2017
0. MCB 23.11.2017
1. Socket 25.11.2017
2. Panel 25.11.2017
3. Switch 27.11.2017

4. The Department issued a show cause notice dated 16.10.2018 and proposed to deny the benefit of Exemption Notification on new products on the ground that the appellant started manufacturing these products after 31.03.2010. It was also alleged that the appellant started a new Unit for manufacturing new products and the benefit of Exemption Notification was not available on such new products.

5. The adjudicating authority passed the impugned order, whereby the proposals made in the show cause notice were confirmed holding that the appellant established a new Unit for manufacturing new products after the cut-off date in the name of enhancement/diversification of existing production. The adjudicating authority relied on the Instructions dated 09.05.2016 and the order dated 11.12.2017 passed in the case of the appellant. The relevant portion of the order passed by the adjudicating authority is reproduced below:

“21. I find that the notification no. 50/2003-CE dated 10.06.2003, supra, provided full exemption from Excise duties to goods cleared from industrial units in the state of Himachal Pradesh & Uttarakhand for a period of ten years from the date of commencement of commercial production. The exemption was available to new industrial units set up after 07.01.2003 or existing industrial units which had undergone substantial expansion after 07.01.2003 and had commenced commercial production on or before 31.03.2010. As per provisions of notification no. 50/2003-CE dated 10.06.2003, the Noticee was required to file a declaration with the Jurisdictional Assistant Commissioner declaring therein details of name of finished goods, inputs etc. for purpose of availing exemption under the said notification. Thus, it can be seen from the above Notification that the exemption was available only to the finished goods which were declared by an assessee in their declaration filed with the Jurisdictional Assistant Commissioner at the time of opting for exemption subject to commencement of commercial production on or before the cut-off date i.e. 31.03.2010 and complying with other conditions appended therewith. Further, as per clarifications issued by the Board from time to time, an eligible unit, in order to meet its bonafide needs, could enhance or diversify its production capacity, however, installation of a new unit in the guise of enhancement or diversification of production capacity beyond the cut-off date is not allowed.

******

26. In view of the above facts and discussion, I find that there is no bonafides in the addition of the new products as has been discussed above. I further find that the Noticee had devised a modus operandi in such a manner that a completely new unit was set up in the garb of diversification /expansion of the unit by adding new products to the existing products in order to fraudulently avail inadmissible benefit of duty exemption on the new products namely Liquid Hand Wash, Face Wash, Talcum Powder, Shaving Cream, Hand & Body Lotion, Deodorant, Body Wash, Glucovita Bolts, Body Wash, Fabric Conditioner, MCB, Socket, Panel & Switch in Unit-II (acquired Unit) for a further period of ten years. It is also an undisputed fact on record that the Noticee did not manufacture the new products from the acquired unit before cut-off date of 31.03.2010 and commenced their commercial production much after cut-off date, thus, the condition of the Notification, supra, regarding commencement of commercial production on or before 31.03.2010 also remains unfulfilled to be eligible for availing duty exemption on addition of new products in the acquired unit.

******

I find that the intention of the Government in issuance of Circular No.939/29/2010-CX dated 22.12.2010 and Circular No.960/03/2012-CX dated 17.2.2012 was only to assist bonafide needs of an eligible unit to enhance or diversify its production capacity. In this regard, I further find that the Board office vide letter issued from F.No.101/7/2015-CX3 dated 09.05.2016 has also clarified that clarifications issued vide aforesaid Circulars were issued only to assist bonafide needs of an eligible unit to enhance or diversify its production capacity and the Notifications, supra, do not allow the installation of a new unit in the guise of enhancement or diversification of production capacity beyond the cut-off date. On harmonious and holistic reading of the above circulars and clarifications issued by the Board and circumstances as discussed above, I observe that it was never the intention of the above circulars to extend such exemption to a completely new unit commencing its commercial production of totally new products after the cutoff date i.e. 31.03.2010 by setting up a new unit with totally new plant and machinery in the existing unit. In this regard I further observe that interpretation of the circulars by the Noticee would go much beyond the scope of the conditions prescribed in the exemption notifications and therefore would not be permissible.”

(emphasis supplied)

6. Shri B.L. Narasimhan, learned counsel for the appellant made the following submissions:

(i) The appellant has fulfilled the condition of the Exemption Notification. For the purpose of the Exemption Notification, it is required that the goods should be specified in the Schedule to the Tariff Act, they should not be figuring the Annexure-I to the Notification and they should be cleared from a Unit located in one of the industrial centres etc., specified in the Annexures to the Notification. In the present case, there no dispute regarding the satisfaction of any of these three elements of the Notification;

(ii) The appellant acted in accordance with the Circulars issued by Central Board of Excise and Customs 7 . The appellant had set up additional plant and machinery to manufacture new products by relying on the Circular dated 22.12.2010. The Circular clarified that the Notification do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible Unit after the cut-off date and during the exemption period of ten years. In support of this contention reliance has been placed on the decisions of the Tribunal in:

a) Richfeel Health and Beauty Pvt. Ltd. CCE & ST8;

b) Khurana Oleo Chemicals CCE, Chandigarh9; and

c) Dharmpal Satyapal Ltd. CCE.10

(iii) The Circulars issued by CBEC are binding on the Department;

(iv) Reliance placed on the letter dated 09.05.2016 issued by the Board is incorrect;

(v) Reliance placed on the order dated 11.12.2017 passed in the case of the appellant is incorrect; and

(vi) No interest is chargeable and no penalty is imposable.

7. Ms. Shivani, learned authorized representative appearing for the Department, however, supported the impugned order and made the following submissions:

(i) The Board has issued a letter dated 09.05.2016 which clarifies that the Exemption Notification was issued to assist bonafide needs of an eligible Unit to enhance or diversify its production capacity and not to allow installation of a new Unit in the guise of enhancement or diversification of production capacity beyond the cut-off date. It was never the intention of the Circulars dated 20.12.2010 and 17.02.2012 to extend such exemption to a new Unit commencing its commercial production of totally new products after the cut-off date i.e 31.03.2010;

(ii) It is an undisputed fact that the appellant did not have the plant and machinery to manufacture “new products” on or before the cut-off date i.e. 31.03.2010, and with the installation of the plant and machinery for manufacture of the new products, a completely new Unit has come into existence which is clearly distinct from the existing Unit i.e. the Unit manufacturing products declared initially on 24.12.2008 by Jayaz Electrical Motors which was eligible for availing area based exemption till 01.12.2019;

(iii) It is a fact that the existing investment was almost negligible as compared to proposed new investment. The appellant has invested all in the new plant machinery and new setup after the cut-off date mentioned in the Exemption Notification;

(iv) Reliance placed by the appellant on Richfeel Health, Khurana Oleo Chemicals and Dharmpal Satyapal Ltd. is misplaced. In fact, the issue stands decided in favour of the Department in the following cases:

a) Wipro Enterprises Ltd. Cex, Shimla11;

b) Tirupati LPG Industries Ltd. Commissioner of C.Ex, Meerut-I12;

c) Devidyal Electronics & Wires Ltd. UOI 198413;

d) Collor of Central Excise vs. Reckitt Colman of India Ltd14; and

(v) An Exemption Notification should not be liberally construed and the benefit must be given to the Department.

8. The submissions advanced by the learned counsel for appellant and the learned authorized representative appearing for the Department have been considered.

9. The issue that arises for consideration in this appeal is as to whether the appellant is entitled to avail the benefit of the area based Exemption Notification dated 10.06.2003. It would, therefore, be appropriate to reproduce the relevant portion of the said Notification and it as follows:

notification no. 50/2003-CE dated 10.06.2003

Exemption to goods other than specified goods cleared from units located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area of Uttarakhand and Himachal Pradesh. – In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in Annexure-II and Annexure-III appended hereto, from the whole of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts:

*******

2. The exemption contained in this notification shall apply only to the following kinds of units, namely :-

(a) new industrial units set up in areas mentioned in Annexure-II and Annexure-III, which have commenced commercial production on or after the 7th day of January, 2003, but not later than the 31st dat of March, 2010;

(b) industrial units existing before the 7th day of January, 2003, in areas mentioned in Annexure-II, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five per cent, on or after the 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2010.

3. The exemption contained in this notification shall apply to any of the said units for a period not exceeding ten years from the date of publication of this notification in the Official Gazette or from the date of commencement of commercial production, whichever is later.”

(emphasis supplied)

Denial of exemption under notification 50-2003-CE unsustainable

10. It follows from the aforesaid Notification that for the purpose of claiming exemption under the Notification, it is necessary that the goods should be specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 15 ; they should not figure in Annexure 1 to the Notification; and they should be cleared from a Unit located in one of the industrial sectors specified in the Annexure to the Notification.

11. In the present case, as noticed above, Jayaz Electrical Motors had filed a declaration under the Exemption Notification for manufacture of the old products and the commercial production had commenced on 02.12.2009. The appellant had purchased Jayaz Electrical Motors and informed the Department by a letter dated 31.03.2014. The appellant also stated that it will continue to avail the exemption under the said Notification. The appellant also intimated the Department, by a letter dated 24.03.2015, that it was shifting its Unit from Khasra No. 85/4, Plot No. 5, Crestal Complex, EPIP Jharmajri, Baddi to Plot No. 87-A, EPIP Phase-I, Jharmajri, Baddi. The appellant also started manufacturing new products in addition to the manufacture of old products and intimated this fact to the Department by letters dated 12.08.2016, 30.03.2017 and 18.01.2018.

12. The first issue that arises for consideration is as to whether the appellant has fulfilled the conditions of the Exemption Notification.

13. Regarding the conditions specified in the preamble to the Notification, the appellant satisfies the requirement that the goods should be specified in the two Schedules to the Tariff Act and they should not figure in Annexure 1 to the Notification. The requirement that the goods should be cleared from a Unit located in one of the industrial centres specified in the Annexure to the Notification is also satisfied. Thus, all the three requirements set out in the main portion of the Exemption Notification stands satisfied.

14. The requirement of satisfying clause 2(a) of the Exemption Notification also stands satisfied as the industrial Unit in question was set up in the year 2008 and it commenced commercial production on 02.12.2009, much prior to the cut-off date i.e. 31.03.2010.

15. Thus, when these two conditions are satisfied and no dispute has been raised regarding the other conditions mentioned in the Notification, the appellant is entitled to claim benefit of the exemption in respect of the products manufactured and cleared by the appellant from the concerned Unit either before or after 31.03.2010. The preamble to the Notification does not restrict its applicability to only those goods which the Unit manufactures from its inception.

16. The CBEC, by its Circular dated 22.12.2010, clarified the scope of the Exemption Notification dated 10.06.2003. It is reproduced below:

“Central Board of Excise and Customs

New Delhi, dated the 22nd December, 2010

To

All Directors General

All Chief Commissioners of Central Excise

All Chief Commissioners of Central Excise and Customs

Sir/Madam,

Subject: Scope of Notification Nos. 49/2003-CE and 50/2003-CE both dated 10.06.2003

Kind attention is invited to Notification Nos. 49/2003-CE and 50/2003-CE both dated 10.06.2003 which provide full exemption from excise duties to goods cleared from industrial units in the states of Uttarakhand and Himachal Pradesh for a period of ten years from the date of commencement of commercial production. The exemption is available to new units set up or existing units which have undergone substantial expansion in terms of the said notifications and commence commercial production before the cut-off date, that is, on or before 31.3.2010.

2. Representations have been received from Trade and Industry Associations seeking clarification on the availability of the exemption benefit under these notifications in the following situations:

(i) Where a unit starts producing some new products after the cut-off date 31.03.2010 using plant and machinery installed up the said cut-off date and without any further addition to the plant and machinery.

(ii) Where the installed capacity in a particular unit is upgraded after the cut-off date, so as to increase the efficiency of the machinery by installing ancillary machines or replacement of some parts etc but in such a way that it does not lead to increase in capacity of production.

(iii) Where new dosage forms are manufactured after the cut-off date on the same line of production with the same machinery.

(iv) Where a unit manufacturers a new product by installing fresh plant, machinery or capital goods after the cut-off date.

3. Board has examined the matter. Under the said notifications, any new unit set up or an existing unit which has undergone substantial expansion that commences commercial production before the cut-off date is entitled to excise duty exemption in respect of excisable goods (other than those appearing in the negative list) manufactured and cleared for a period of ten years from the date of commencement of commercial production. The provisions of these notifications do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cut-off date, and during the exemption period of ten years as per the notification. Therefore, it is clarified that in all the above situations, the benefit of the excise duty exemption under the notifications would continue to be available to eligible industrial units. However the period of exemption would remain ten years and would not get extended on account of such modifications or additions under any circumstances.”

(emphasis supplied)

17. It would be seen from the aforesaid Circular dated 22.12.2010 regarding the scope of Notification dated 10.06.2003 that the provisions of the Notification dated 10.06.2003 do not place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible Unit after the cut-off date and during the exemption period of ten years. In all such cases, the benefit of the excise duty exemption under the Exemption Notification would continue to be available to an eligible industrial Unit, though, the period of exemption would remain to be ten years.

18. It needs to be noted that the words “addition/modification” appearing in the aforesaid Circular dated 22.12.2010 are not preceded by the words “existing machinery”. It can thus safely be concluded that the ambit of the Exemption Notification cannot be narrowed down to allege that the assessee can only add on machinery to the existing machinery to manufacture those products which were manufactured prior to the sunset clause of 31.03.2010.

19. In the present case, the appellant had set up new plant and machinery for manufacture of new products and, therefore, the appellant was eligible to avail the exemption for the residual period on the new products

20. In this connection, it would be appropriate to refer to the decision of the Tribunal in Richfell Health. The appellant had established a Unit in 2007 and availed the benefit of excise duty under the Exemption Notification dated 10.06.2003. In the year 2015, the appellant purchased a Unit named RKS Industries which was engaged in the manufacture of blow moulded and injection moulded plastic products since 2010 and was availing excise duty exemption under the aforesaid Notification. After taking over RKS Industries, the appellant installed fresh machinery. The dispute that arose was whether the appellant was entitled for exemption on the new products manufactured through the new plant machinery. After referring to the Circular dated 22.12.2010, the Division Bench of the Tribunal observed as follows:

“11. On going through the said circular, we find that the notification do no place a bar or restriction on any addition/modification in the plant or machinery or on the production of new products by an eligible unit after the cutoff date and during the exemption period of ten years. Admittedly, the appellant has manufactured new products by addition of plant and machinery, therefore, the items sought to be added by the appellant in their exemption are covered by the CBEC Circular dated 22.12.2010 and the circular issued by the CBEC is binding upon the adjudicating authority in the light of the decision of Ambuja cements ltd. (Supra).

******

14. In view of the above, we hold that the CBEC circular dated 22.12.2010 is binding on Ld. Commissioner and as per the said circular, the appellant is entitled to add new plant and machinery and he can manufacture of new products in terms of Notification No, 56/2003-CE dated 10.06.2003.”

21. It needs to be stated that the Department filed an appeal before the Supreme Court against the aforesaid decision of the Tribunal in Richfell Health, being Civil Appeal No. 5931 of 2019, which is said to be pending. The adjudicating authority has, however, distinguished this decision on facts.

22 .In Khurana Oleo Chemicals, a Division Bench of the Tribunal observed as follows:

“We also note that in terms of Board’s Circular dated 22-12­2010, it is clear that the provision of the said notification do not place any bar or restriction or any addition/alteration in the plant or machinery or on the production of new product by an eligible unit after cutoff date during exemption period of 10 years as per notification. We further note that the Board has clarified the scope of exemption in its Circular dated 17-2-2012. It is noted that if the exemption is extended to one unit, the change in its ownership would not jeopardize the admissibility of exemption for remaining part of the period. The guidelines have been issued with regard to the shifting of eligible unit to new location. In the present case, the evidence submitted by the appellant establishes that the eligible unit has been acquired by the appellant and manufacture of earlier specified product did continue in the new appellant’s unit also. In addition, the appellant manufactured new product – OSAA.”

23. It is not in dispute that the appellant has continued manufacturing of the old products, which were initially manufactured by Jayaz Electrical Motors.

24. The learned authorized representative appearing for the Department has, however, submitted that in view of the subsequent Circular dated 09.05.2016 the benefit of the earlier Circular on 22.12.2010 would only be available for bonafide needs of an eligible Unit to enhance or diversify its production capacity but would not allow the installation of a new Unit in the guise of enhancement or diversification of production capacity beyond the cut-off date.

25. It would, therefore, be necessary to reproduce the Circular dated 09.05.2016 and it is as follows:

“Central Board of Excise and Customs

New Delhi, dated 9th May, 2016

Sir,

Sub: Instruction regarding implementation of exemption Notification Nos. 49/2003-CE and 50/2003-CE both dated 10.06.2003-reg.

Kind attention is invited to Circular nos. 939/29/2010-CX dated 22.12.2010 and 960/03/2012-CX dated 17.2.2012, wherein admissibility of exemption under Notification Nos. 49/2003-CE and 50/2003-CE both dated 10.06.2003 under certain circumstances was clarified. In total, there are seven situations, four in the circular of 2010 and three in the circular of 2012, where it was clarified that the benefit of exemption would continue to be available to an industrial unit. The matter has been re-examined with reference to sub-paragraph (iv) of paragraph 2 of the circular dated 22.12.2010 and sub-paragraph(c) of paragraph 2 of the circular dated 17.2.2012, which are reproduced below, for ease of reference.

(i) “2.(iv): Where a unit manufacturers a new product by installing fresh plant, machinery or capital goods after the cut-off date.”

(ii) “2.(c): When a Unit availing of the exemption under an area-based Notification expands by acquiring a plot of land adjacent to its existing premises and installing new plant/machinery on such land.”

2. These clarifications were issued to assist bonafide needs of an eligible unit to enhance or diversify its production capacity. Instances have come to notice where the clarifications referred to in the above two sub paras are being attempted to be availed individually or collectively, contrary to the purpose of the exemption notification. The notifications under reference do not allow installation of a new unit in the guise of enhancement or diversification of production capacity of an eligible unit beyond the cut-off date. Such an interpretation of the circular would go much beyond the conditions prescribed in the exemption notifications and therefore would not be permissible.

3. Accordingly, it is hereby directed that any application for manufacture of new products by installing fresh plant, machinery or capital goods after the cut-off date or expanding operations to an adjacent plot should be examined carefully and allowed only after reaching a conclusion that the application has been made for bonafide reasons. Reasons for reaching such conclusion should be recorded in the file and approved by the Commissioner. Every such approval along with reasons for such approval should be brought to the notice of the Chief Commissioner also.

4. This issues with the approval of the Competent Authority. Difficulty faced, if any in implementation of the above instructions may be brought to the notice of the Board.”

26. In this connection, the learned authorized representative pointed out that the new products that the appellant had started manufacturing at Unit II were either those that were being manufactured at Unit I (exemption of which expired on 17.08.2014) or Unit-III (exemption of which was denied on 08.10.2014). Learned authorized representative further pointed out that the appellant did not have the plant and machinery to manufacture the new products and so it installed new plant and machinery as a result of which a completely new Unit came into existence which was distinct from the existing Unit that was manufacturing the old products; from the project reports submitted by the appellant it was clear that as against the existing investment to the extent of .04%, the new investment was to the extent of 99.95%; and as per the returns filed by the appellant, the percentage of production of the old products was .017% while that of the new products was 99.98% of the total production. Learned authorized representative, therefore, submitted that the functional section of the factory of the appellant that was manufacturing new products can be said to be a different industrial Unit that was established after the cut-off date and it does not comply with the conditions specified in the Exemption Notification. Learned authorized representative also submitted that the expressions “factory” and “industrial unit” have different meanings. An “industrial unit” would mean something other than a factory, which would be a separate isolated and self-sustainable part of a factory/plant which is manufacturing goods exclusively or capable of manufacturing goods independently. For this reason also, learned authorized representative submitted that two Units came into existence, one manufacturing the old products and the other manufacturing the new products.

27. It is not possible to accept the contentions advanced by the learned authorized representative appearing for the Department.

28. Reliance on the subsequent Circular dated 09.05.2016 is misconceived. The Circular dated 09.05.2016 merely clarifies that the earlier Circulars dated 22.12.2010 and 17.02.2012 were issued to assist bonafide needs of an eligible Unit to enhance or diversify its production capacity and that the Notification dated 10.06.2003 does not allow installation of a new Unit in the guise of enhancement or diversification of production capacity of an eligible Unit beyond the cut­off date. It would, therefore, be seen that the Circular dated 09.05.2016 only denies the benefit of the Exemption Notification dated 10.06.2003 if the new Unit is set up in the guise of enhancement or diversification of production capacity.

29. The appellant had not set up a new Unit and there was only a diversification of production capacity by adding new machines. The old products were continued to be manufactured, in addition to the new products. The fact that the investment for the new products was very large and the percentage of production of the new product was also very large cannot be made a ground to deny the benefit of the Exemption Notification dated 10.06.2003 to the appellant.

30. Learned authorized representative appearing for the Department also placed reliance upon the decision of the Tribunal in Wipro Enterprises Ltd. in the case of the appellant to contend that the plant manufacturing old products would be one Unit and the plant manufacturing new products would be another Unit. Paragraph 24 of the decision of the Tribunal is reproduced below:

“24. In view of above analysis, we hold that the appellant has started three different units on the same plot of land and having separate plant and machinery, separate, inputs, manpower, finances and are manufacturing different products, therefore, all the three units cannot be considered as one unit. In fact in the factory, there are three different units, therefore, we hold that the Unit No. III is separate from Unit No. I is entitled for exemption under Notification No. 50/03-CE.”

31. In the present case, neither there was a charge in the show cause notice nor there is a finding in the impugned order that the old products and the new products had separate manpower or finances. It has, therefore, to be considered as a single Unit.

32. Thus, for all the reasons stated above, the impugned order dated 03.02.2021 passed by the Commissioner cannot be sustained and is set aside. The appeal is, accordingly, allowed.

(Order Pronounced on 23.08.2022)

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