Substantial Expansion only on Specified Goods for Area Based Exemption

[CBEC Circular No. 912 dated 22nd January 2010]

Subject: Substantial Expansion by way of increase in installed capacity for the units availing area based exemption.

Area based exemption is available to the units in the specified areas in the North-East region, Jammu & Kashmir, Himachal Pradesh and Uttarakhand under different notifications. The exemption is applicable to the new industrial units set up after the specified date and also to the existing units which have undertaken substantial expansion by way of increase in installed capacity by not less than 25%.

2. References have been received regarding the units manufacturing specified goods as well as non-specified goods as to whether the substantial expansion should take place only for specified goods or of overall capacity of the unit.

Following two situations have arisen in such cases:

(1) 25% expansion is undertaken only in respect of specified goods, and not overall capacity of the unit.

(2) The expansion is undertaken in respect of non-specified goods only, but overall capacity of the unit increases by 25%.

3. The issue was discussed in the Chief Commissioner's Conference held at Shillong on 30th and 31st October, 2009 and thereafter in the Boar on the basis of inputs received from field formations.

4. The matter has been examined. The exemption notification is applicable only to the specified goods. Therefore, the condition of substantial expansion should also be applicable to the specified goods only. Therefore, it is clarified that only when the substantial expansion of the installed capacity of the specified goods is undertaken, then only the benefit of notification would be applicable. To illustrate, if a unit is making tobacco product (say- gutkha, a non-specified goods, which is not allowed benefit of exemption) and also iron and steel articles (specified goods, which are lowed benefit of exemption), in that case, only when units increase installed capacity of iron and steel articles by 25%, benefit would be available. But if it increases production of gutkha by 100%, then it would not get benefit.

5. Trade and Industry as well as field formations may be suitably informed.

F.No.101/22/2008-CX-3