ORDER
C.N.B. Nair, Member (T)
1. The duty demand has been made by denying the appellant the benefit of Notification No. 50/03, dated 10-6-2003. The requirement under that Notification was that the manufacturing unit should substantially expand its installed capacity. The claim of the applicant is that capacity has been expanded by 33%. (This claim is not being disputed).
2. The contention of the revenue is that according to a Circular No. 772/5/2004-CX dated 21-1-2004 that “increase in installed capacity should be the result of installation of additional plant and machinery”. In the present case, the finding is that additional installation of plant and machinery and capital involved for the same are not proportionate to the capacity increase. Revenue has also relied on the report-dated 29-9-2004 of expert.
3. The contention of the applicant is that unit was sick earlier and by making necessary addition and modification of existing machinery, the appellant was able to bring about a disproportionate increase in output and the appellant is entitled to the benefit, as it has met the requirement of substantial expansion of capacity.
4. Relevant guideline issued by the Board may be noted.
Increase in installed capacity of an existing unit by not less than 25% should be the result of installation of additional plant and machinery. Any increase in the installed capacity by means other than installation of additional plant and machinery would not qualify for the benefit of exemption under substantial expansion.
5. Prima facie, there is merit in the appellant’s contention. We have been shown a flow-chart of manufacture. It is to be noted that there is substantial capacity increase at each one of the important stages of production and the end result is expansion of 33% in the production of the of the end product (T.V. tubes). Revenue is also not disputing expansion of production capacity as claimed by the appellant. Revenue authorities are not right in taking a view that additional machinery installed should be proportionate to the expansion in production. This is to read additional conditions into the exemption notification. The notification only stipulates in respect of “industrial units existing before the 7th day of January 2003, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five percent, on or after the 7th day of January, 2003.” There is no mention about additional machinery. Expansion may be through modification/substitution of machinery.
6. In view of what is stated above, the stay petition is allowed and recovery stayed until disposal of the appeal.
(Dictated and pronounced in open Court)