1. Messrs Ahmedabad Chemicals Pvt. Ltd., Ahmedabad, have filed this Appeal dated 31st January, 1983 against the Order-in-Original No.10/MP/82 dated 11-1-1982 passed by the Collector of Central Excise, Baroda. The appellants are a private limited company owning a factory in Ahmedabad wherein they manufacture S.O. Dyes and Dye Intermediates, namely, Rhodamine and diethul-meta-amino phenol (DEMAP) falling under Tariff Item No. 14D and Tariff Item No. 68 of the Central Excise Tariff. The appellants have stated that they filed the necessary declaration for availing of exemptions from licensing control and also from payment of duty as required under Notifications Nos 111/78, dated 9-5-78,89/79, dated 1-3-79, No. 105/80 dated 19-6 80, No. 71/78, dated 1-3-78 and No. 80/80, dated 19-6-80, before the Central Excise Officers. On I6-9-8I some Central Excise Officers visited the appellants' factory and seized certain documents, including audited belance sheet for the year ending 31-3-80 along with the Director's report. They also recorded the statements of the Chief Executive of the factory on 29-9-81 and 17-11-81. On 23-4-82, the Superintendent, Central Excise issued a Show Cause Notice to the appellants that they were not entitled to the benefit of exemption from licensing control and from payment of duty under Notifications Nos. 111/78, dated 9-5-78, 89/79, dated 1-3-79 which was later replaced by Notification No.105/80, dated 19-6-80 on the ground that the value of plant and machinery as shown in the Schedule of Fixed assets in the balance sheet of the company was more than Rs. 10 lakhs. The Collector of Central Excise, Baroda did not accept the appellants contentions that the amount shown in the Schedule of Fixed assets in the balance sheet did not represent only the value of plant and machinery but it was consolidated amount comprising of the expenses incurred on purchase of machinery, plant and equipment, consumable stores, spare parts, labour charges for installation and erection, technical know how, etc. These expenses qualified for deduction from the total balance sheet amount, namely, Rs. 10,22,057/-. The particulars about these expenses had already been supplied to the officers of Central Excise who had recorded the statements of the Chief Executive of the Company on 17-11-81 and later, by their letter dated 11-11-81. The Collector of Central Excise, Baroda, did not accept the appellants' contention and confirmed the charges levelled in the Show Cause Notice. He ordered recovery of duty on the value of Rs. 17,05,820/- of the DEMAP sold during the year 1980-81 and imposed a penalty of rupees ten thousand on the appellants. In their appeal to the Tribunal, the appellants have stated that the Order-in-Original passed by the Collector of Central Excise, Baroda, is not correct and legal, since it is based on incorrect interpretation of the Notifications Nos. 89/79, dated 1-3-79 and 105/80, dated 19-6-80. They referred to the Explanation appended to the Notification No. 89/79 and 105/80 which reads as "For the purpose of determining the value of any capital investment only the face value of the investment at the time when such investment was made shall be taken into account." They also referred to the relevant instructions issued by the Government of India in relation to the computation of value of investment on plant and machinery. He also relied on the Trade Notice No. 315/75 dated, 6-10-75 issued by the Collector of Central Excise, Baroda, wherein certain guidelines were given regarding the manner in which capital investment on the plant and machinery should be determined for the purpose of levy of central excise duty in respect of Notifi-ation No. 199/75 relating to exemptions for electric wires and cables under Item 73-B of the C.E.T. He also referred to Baroda Collectorate Public Notice No. 152/77, dated 28-6-77 in relation to Notification No. 176/77 dated 18-6-77 relating to Tariff Item No. 68 wherein similar instructions were issued. It was clarified that where an assessee is not in a position to produce books of account or invoices in respect of the value of the capital investment on plant and machinery, the certificate of the Small Scale Industries authorities or of the Chartered Accountant should be accepted. He referred inter alia to the letter No. IC/SSI/Regd. Policy/3067 dated 26-6-79 of the Industries Commissioner, Gujarat, wherein certain consolidated instructions were issued for arriving at the value of plant and machinery installed by a small scale unit. He referred to the Finance Minister's speech in Parliament on 28-2-81 while presenting the Centrel Budget where it was declared "Under the excise duty concessions available at present to small scale manufacturers of some products, notably Item 68 goods and specified electrical goods, one of the criteria for eligibility is the value of investment on plant and machinery". It is clear from this that the monetary limit for the purpose of computation of value of investment on plant and machinery under these various items of the Tariff, namely, Items No. 68, No. 14, Nos. 33A, 37A and 37AA, 33F and No. 33B is fixed by the Government keeping in view the definition of small scale units and the same is to be computed on uniform basis. The Consultant for the Appellants also produced a copy of the certificate issued by the Director of Industries wherein the appellants' factory was registered as a small scale unit.
He produced a certificate from M/s. Mahendra Shah & Associates, the Chartered Accountants of the appellants' company, which certified that the original price of the plant and machinery was only Rs. 8,51,004/- and the balance of expenses were on account of (a) installation and erection charges, (b) transportation charges on the machinery, (c) technical know-how fee and (d) installation expenses prior to production capitalised proportionately to plant and machinery. The total was thus shown in the balance sheet as Rs. 10,22,057/-. The Departmental Representative countered the above contentions of the learned Consultant for the Appellants and stated that the charges in respect of installation and erection etc. should be included in the total value of investment on plant and machinery. He referred to the word 'installed' in the Notification No. 89/79, dated 1-3-79 and argued that the erection and installation charges should be considered as part and parcel of the total investment. He, however, was not sure about the inclusion of other charges, namely, transportation, technical know-how fee and other incidental expenses. He was of the view that even these form part of the total investment. He stated that the balance sheet should be considered as an authentic document and should not be allowed to be contradicted by other evidence.
2. The Bench has considered the submissions made by both the parties carefully. The short issue involved in this appeal relates to whether the value of capital investment from time to time on plant and machinery in the factory of the appellants was more than Rs. 10 lakhs.
The appellants have now produced a certificate dated 23-12-83 from Messrs Mehendra Shah & Associates, their Chartered Accountants, to the effect that the value shown in their balance sheet, namely Rs. 10,22,057 representing the value of the plant and machinery as fixed assets for the year ending 31-3-80 higher than the limit of Rs. 10 lakhs. The Bench also noted that in his statement dated 17-11-81 the Chief Executive of the Company had clarified that the total of fixed assets on plant and machinery, namely Rs 0,22 057 included Rs. 40,000 paid by way of technical know-how and Rs. 55,403| as proportionate incidental expenses capitalised.
3. The Collector in his Order in-Original has stated "for the purpose of Notfn. No. 89/79, dated 1-3-79 while computing the investment on plant and machinery, the investment made in the factory as a while has to be taken into account". He has further stated "the capital investment on plant and machinery of the industrial unit where such goods are manufactured would be inclusive of all expenses including expenditure on installation of plant and machinery". According to the Collector, capital investment on plant and machinery does not mean only the purchase of main machinery but investment on all other accessories, electric installations, erection charges etc. which are necessary for working of the plant and machinery. He has further held that the directions or guidelines issued by other departments are simply of a clasifi-catory nature which have no bearing on the notifications and orders issued by the Central Excise Department. He has held that the Trade Notice No. 315/75 with reference to Notification No. 199/75, dated 8-9-75 pertains to Tariff Item No. 33-B relating to electric wires and cables and has no applicability to this case. Similarly, the Trade Notice No. 50/78, dated 27-2-78 issued by the Ahmedabad Collectorate is not relevant as it gives clarification in respect of Exemption Notfn. No. 39/73, dated 1-3-73 relating to Tariff Item 15-A (2) and has no application for the purpose of computing the value of investment in plant and machinery under Notification No. 89/79, dated 1-3-79. He has, therefore, concluded that the capital investment on plant and machinery in this case is in excess of Rs. 10 lakhs. He has further held that the appellants have suppressed the facts relating to the correct and proper value of the plant and machinery installed by them since these were contrary to the declarations already filed by them with the department. We are afraid that we are not in agreement with the reasonings and the conclusions arrived at by the Collector.
The Trade circulars and other instructions on the subject are clear enough as guidelines for computing the value of capital investment on plant and machinery and the appellants could justifiably assume that certain expenses incurred by them as stated above would not form part of such capital investment on plant and machinery, In this case, even according to the calculations made by the Department, the total excess of such investment is only Rs. 22.057/- over the maximum limit of Rs. 10 lakhs. Even if the expenses on items like transportation and technical know-how fees are excluded the total value would fall below this limit of Rs. 10 lakhs.
4. On consideration of all the facts and circumstances the Bench sets aside the order of the Collector of Central Excise, Baroda, and allows the appeal with consequential relief.