Archana Wadhwa, J. - (1.)BEING aggrieved with the order passed by the Commissioner (Appeals), Revenue has preferred the present appeal. We have heard both sides duly represented by Smt. A. Vasudev, Jt. C.D.R. appearing for the Revenue and Shri Abhishek, learned Consultant appearing for the respondents.
(2.)THE respondents are engaged in the manufacture of excisable goods falling under Chapter 48 and 47 of the Schedule to the Central Excise Tariff Act, 1985 in their industrial unit set up in Kutch District of Gujarat after 31.7.2001 and were availing the benefit of (Kutch) area based exemption -CE dated 31.7.2001. In terms of the said Notification, the new unit set up in the Kutch District area of Gujarat on or after 31.7.01 and commencing the commercial production before 31.12.05 are entitled to the benefit of the said Notification. The manufacturer entitled to availing the benefit of the said Notification is first required to utilize the entire Cenvat Credit available to him on the last date of the month under consideration for payment of duty for goods cleared during such months and the balance duty amount is required to be paid in cash through PLA. Duty paid in cash through PLA is liable to be refunded to the manufacturer. The respondents satisfied all the conditions of the Notification in respect of their main products and were availing the benefit of the Notification and were regularly filing refund claims, which were being sanctioned by the authorities.
The dispute in the present appeal relates to the refund of duty paid on the corrugated boxes. The said refund claim made by the respondents was rejected by the original adjudicating authority on the ground that the assessee had commenced the production and clearance of the same only after 31.12.2005 that is the cut off date stipulated in the said Notification. On an appeal against the above order, the Commissioner (Appeals) accepted the assessee's stand that the exemption is in respect of a new "unit" set up in the area, which has started commercial production by 31.12.2005. The Notification does not refer to a new product. In any case, he has observed that corrugated box is not a new product but is only a down stream product of the corrugated sheets made from craft paper manufactured by the assessee from the same plant & machinery installed before the stipulated date and as such, it cannot be held that commercial production was commenced after 31.12.2005. Admittedly, the manufacture of corrugated sheets from craft papers started much before 31.12.2005. The corrugated sheets are manufactured by pasting together a few layers of craft papers and after passing through corrugation machine. The corrugated sheet is then sliced and slotted into desired size to obtain separators or cartons and therefore, corrugated separators and corrugated cartons are the final products; that they had completed the civil work, installation of machinery and commenced commercial production before 31.12.2005; that they have commenced the production of corrugated separators before 31.12.2005 since they had orders for the said product; that thereafter, they got the orders for corrugated cartons and they manufactured and supplied the same to their buyers; that their monthly returns show that they manufactured both corrugated boxes and corrugated separators in their factory; that all the machineries were installed for manufacturing of corrugated boxes and separators before 31.12.2005; that one of the condition to be eligible for the said Notification is commencement of commercial production before 31.12.2005 and no where in the said Notification, it is mentioned that all the finished products should be manufactured and sold on that date; that they have commenced the commercial production before 31.1.2005 and cleared the finished product i.e. separator under C.Ex. invoice; that they have not installed any new machinery for manufacture of a new product after 31.12.2005; that corrugated separator and corrugated boxes are the same line of product and both the products are manufactured from the same plant and machineries. They mentioned the flow chart of manufacturing process of corrugated boards, cartons and separators and requested to set aside the orders of the lower authority with direction to refund the amount in question.

(3.)BY accepting the above stand, the Commissioner (Appeals) held that corrugated boxes are down stream product of corrugated sheets manufactured by the same plant & machinery installed before the stipulated date and as such, it cannot be construed as if the assessees commenced the commercial production only after 31.12.2005. It is not the Revenue's case that sheets were manufactured after the said date or any new machinery is installed after the cut off date. As admittedly, the corrugated boxes are manufactured cut of the corrugated sheets, the production of which commenced before 31.12.2005, no infirmity could be found in the view adopted by the Commissioner (Appeals). In any way, we find that Central Board of Excise & Customs vide their letter F.No. 119/21/2006 -CX.3 dated 10.7.2008 clarifying the position. For better appreciation, we reproduce the relevant part of the said letter:
Point No 1. Whether the benefit of exemption would be available to goods/products that unit starts manufacturing after the cut off date for the commencement of commercial production i.e. 31.12.2005.

Comments: There would be two situations. First is that where a unit introduces a new product by installing fresh plant, machinery or capital goods after the cut off date in such a situation, exemption would not be available to this new product. The said product would be cleared on payment of duty, as applicable, and separate records would be required to be maintained to distinguished production of these products from the products which are eligible for exemption.

The other situation is the one where a unit starts producing some products (after the cut off date) using the plant and machinery installed upto the cut off date and without any addition to the plant and machinery. For example, in case of plastic moulded products a unit may commence the production of different products simply by changing the mould and dies in that case the unit would be eligible for the benefit of Notification because the plant and machinery used for manufacture has remained the same. In this connection, it is further clarified that for the purpose of computing the original value of plant and machinery, the value of plant and machinery installed on the date of commencement of commercial production only shall be considered.

As is seen from above clarification, where the factory is complete before the cut off date and commercial production has started, subsequent emergence of a new product using the same plant & machinery will not make the assessee disentitled to the Notification. As already observed, there is no dispute about the production of sheets before 31.12.2005 and subsequent conversion of such sheets into boxes after the said date will not have effect of making the assessee ineligible to the benefit of the Notification.