Sunset clause of area based exemption notification relevant only for the purpose of eligibility and not for claiming exemption

In a recent case, the Hon’ble CESTAT (Delhi) while allowing the Assessee to claim area-based excise duty exemption under Notification No. 50/2003-CE dated 10.06.2003 held that the sunset clause only relevant for the purpose of eligibility and not for claiming exemption. The Assessee is also allowed to add new products and plant or machinery during the exemption period.

MR Tubes Pvt Ltd Vs. Commissioner, CGST-Dehradun [Final order No. A/50892-50894/2022-EX[DB]-dated 23.09.2022]

In a major relief to the Appellant, the Hon’ble CESTAT allowed the area based exemption to the Appellant, which was earlier denied by the department on the ground that the ‘unit’ taken over by the Appellant in 2013 is not a unit availing the benefit of Notification No. 50/2003-CE dated 10.06.2003 as also on the ground that the Appellant was manufacturing altogether different product which required different plant and machinery.

Brief Facts:

The Appellant on 01.03.2013 acquired a manufacturing unit of a company situated in State of Uttarakhand for a consideration from M/s Adhunik Telecom Services (P) Ltd. (“ATSPL”), which had commenced commercial production on or before 31.03.2010 and applied for the area based exemption vide Notification No. 50/2003-C.E. dated 10.06.2003. However, ATSPL withdrew the said exemption immediately and got registered under the Central Excise Act 1944. That later in 2013, ATSPL again applied for the area-based exemption under the said Notification before the transfer of the said unit to Appellant with addition of new products.

The aforesaid notification provided for exemption from whole of the duty of excise in regard to goods manufactured in specified area in the states of Uttarakhand and Himachal Pradesh with certain conditions inter alia including that the manufacturer who intends to avail the exemption under this notification shall exercise his option in writing before effecting first clearance and new industrial unit set up shall commence commercial production but not later than the 31.03.2010.

The Appellant after taking over the said unit in 2013 intimated the Department about of facts of transfer of unit, and filed a declaration before the department for claiming the exemption before effecting first clearance. However, the exemption claimed by the Appellant was denied inter alia on the following grounds:

  1. The unit taken over is not a unit availing the benefit of exemption;
  2. In 2013, the Appellant is manufacturing whole new product with new plant and machinery; and

Decision

The Hon’ble CESTAT by setting aside the aforesaid impugned orders, allowed the claim of exemption to the Appellant under Notification no. 50/2003-CE dated 10.06.2003 and inter alia held that:

a. The Sunset clause (i.e. 31.03.2010) is only relevant for the purpose of eligibility, it places no bar for filing declaration after the sunset clause.

b. The provisions of the notification do not place a bar or restriction on any modification/ addition in the plant/ machinery or on production of new product to the eligible unit after the cut-off date.

Read the order of the Hon’ble CESTAT at: CESTAT Order

GST Law India is a blog on GST and allied commercial laws managed by members of the law firm ALA Legal.

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