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Area-based excise exemption clarified

22nd February, 2012

Area-based exemption as available to units located in specified under-developed areas has been more often subject of dispute vis-à-vis other areas where such exemption is not available. Availability of Central Excise exemption to units set up or expanded before 31-3-2010 in Uttarakhand and Himachal Pradesh has been recently clarified by the Central Board of Excise and Customs. The latest Circular No. 960/3/2012-CX, dated 17-2-2012 clarifies availability of exemption in cases when ownership of the unit changes or the unit is shifted to some other place or it is expanded by way of acquiring adjacent plot.

As per the circular, any change in ownership of the unit would not jeopardize admissibility of exemption for the remaining part of the ten year exemption period. In case of transfer of unit also, exemption is available subject to relocation certificate from Chartered Engineer. The relocation has to be within the specified areas of the particular notification and not to areas specified under other notifications.

Exemption for the residual period is also available when an eligible unit expands by acquiring an adjacent plot of land and new plant and machinery is installed on such land. The circular, taking support from an earlier Circular No. 939/29/2010-CX issued in December, 2010, clarifies that the situation is akin to expansion by installing new plant and machinery inside the existing plot/premises and hence exemption is available.

In the impending Goods and Services Tax (GST) scenario, area-based excise exemptions would probably face the axe as they are considered as breakers of Cenvat credit chain.
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