The Hindu Business Line : Excise exemption norms for industries eased — 'Units using second-hand machinery for expansion also eligible'

Industry & Economy - Excise and Customs

Excise exemption norms for industries eased — 'Units using second-hand machinery for expansion also eligible'

K.R. Srivats

New Delhi , Jan. 28

INDUSTRIAL units located in the North-East, Jammu & Kashmir, Himachal Pradesh and Uttaranchal can use second-hand machinery for undertaking "substantial expansion" and still qualify for the area-based excise exemption that has been granted by the Finance Ministry.

The only criterion that has to be satisfied for "substantial expansion" is an accretion in installed capacity by at least 25 per cent with additional plant and machinery. The Finance Ministry has held that "substantial expansion" will not be judged by the value of investment in plant and machinery.

Area-based excise exemptions have so far been granted to the North-Eastern States (July 1999) and States such as Jammu & Kashmir (November 2002) and Uttaranchal and Himachal Pradesh (June 2003).

Such exemptions are applicable to either new industrial units or existing units undertaking "substantial expansion" by way of increase in installed capacity by not less than 25 per cent.

"There is no bar on use of second hand machinery for undertaking substantial expansion so long as it enhances the existing installed capacity by not less than 25 per cent.

What is relevant is the increase in installed capacity by not less than 25 per cent by way of additional installation of plant and machinery," a Finance Ministry circular has clarified.

The revenue department has now come up with guidelines to explain the scope of "substantial expansion" for existing industrial units seeking to avail area-based excise exemptions.

The Finance Ministry has held that "increase in installed capacity by not less than 25 per cent" should be achieved through the installation of additional plant and machinery.

The revenue department has made it clear that any increase in the installed capacity by means other than the installation of additional plant and machinery would not qualify for the benefit of excise exemption under "substantial expansion".

It has also been highlighted that the term "substantial expansion" is not defined in terms of original or depreciated value of plant and machinery.

Further, the revenue department has said that additional investment in plant and machinery for modernisation or for improving the quality of existing products, unless it leads to increase in installed capacity by 25 per cent or more, would not tantamount to "substantial expansion".