1. The question, falling for determination in this appeal, filed before the Tribunal under Section 35B of the Central Excises and Salt Act, 1944, falls within a very short compass. The appellants, who are manufacturers of link chains, an excisable item under Tariff Entry 68 of the Central Excise Tariff (C.E.T. for short), effected clearances without payment of any excise duty during certain period, availing benefit of exemption notifications, being firstly, Notification No.89/79, dated 1-3-1979, replaced later by Notification No. 105/80 dated 19-6-1980. The period in dispute, so far as the present appeal is concerned, relates to clearances effected between 1-8-1980 to 30-3-1981, during which period the notification under operation, namely, No. 105/80 exempted goods falling under Tariff Item 68 if the total turnover of the manufacturers did not exceed Rs. 30 lakhs, and the total capital investment towards Plant and Machinery installed, did not exceed Rs. 10 lakhs.
2. As a sequel to a visit of appellant's factory by Range Superintendent, on 5-8-1981, a notice to show cause was issued to the appellants, calling upon them to show cause as to why excise duty amounting to Rs. 1,40,304.62 P be not recovered from them for clearances effected during 1-8-1980 to 31-3-1981, on the ground that the inspection of their records during the visit on 5-8-1981, revealed their total capital investment in Plant and Machinery to be in excess of Rs. 10 lakhs, as contemplated by the Notification No. 105/80, and thus, rendering them not entitled to the exemption effected by the said notification.
3. The appellants controverted the allegations by filing reply, but the Assistant Collector by order dated 31-10-1981, held that the capital investment of the appellants made from time to time on Plant and Machinery, exceeded Rs. 10 lakhs, during the financial year 1980-81 and thus clearances effected during that period were liable to excise duty.
4. The appellants filed an appeal to the Appellate Collector of Central Excise and Customs, assailing the findings of the Asstt. Collector, and reiterated that the audited accounts produced by them clearly showed that their total investment fell, well within the ceiling of Rs. 10 lakhs, asserting that they were entitled to the exemption allowed by Notification No. 105/80. This appeal was disposed of by the Collector (Appeals), Central Excise, Calcutta, by order dated 5-3-1983 ; whereby, after reproducing the contentions of the appellants and after taking note of the audited reports, filed by the Appellants, as verified by their Chartered Accountant, he dismissed the appeal.
5. It is this order, which is impugned in the present appeal, and the appellants contend that the Collector (Appeals), had gone wrong in including the cost of the 'buildings' towards the amount of capital investment on 'Plant and Machinery'. They asserted that the term 'buildings' have an entirely different concept than 'Plant' and 'Machinery'. It is further urged that the controversy before the Collector (Appeals), was confined to the question as to whether the amount spent by the appellants towards purchase of materials for construction of, what they describe to be a 'Heat Chamber', could be accounted towards the cost of the investment on "Plant and Machinery installed", within the contemplation of the notification, under reference. It is, thus, pleaded that the Order-in-Appeal, is manifestly erroneous, having gone beyond the subject matter of the appeal before the Collector (Appeals), and in violation of principles of natural justice, inasmuch as this finding has been recorded without any notice to the appellants, and without same being in issue.
6. Shri C.L. Beri, Advocate, appeared for appellants at the time of hearing, whereas the respondent was represented by Shri V.Lakshmikumaran, SDR. Shri Beri, at the outset laid stress on the fact that the finding of the Collector (Appeals), was without jurisdiction, inasmuch as, whereas notice to show cause had reference only to the cost of material purchased for the construction of Heat Chamber, amounting Rs. 1,66,041.39P, and Order-in-Original had confirmed that allegation ; the Collector (Appeals) while impliedly endorsing the appellants' contention that the cost of the material, till completion of actual construction and installation of the Heat Chamber, could not be included in the capital investment, introduced an entirely new factor ; namely, cost of the buildings. Besides arguing, that the term 'building' has a different connotation and could not be equated with 'Plant and Machinery', Shri Beri urged that the Order-in-Appeal otherwise suffered from an infirmity, as having gone beyond the subject matter of controversy, and having introduced a factor which was never before the Collector (Appeals), and for which the appellants had absolutely no notice. He contended that this action of the Collector (Appeals) was violative of the principle of natural justice, resulting in prejudice to the appellants, and that the order was liable to be set aside on this short ground.
7. Shri Lakshmikumaran, SDR, however, defended the order of the Collector (Appeals) inasmuch as the result is concerned ; namely, the finding that the total capital investment exceeded Rs. 10 lakhs. While conceding that the cost of 'buildings' could not be deemed to be part of the 'Plant and Machinery', he urged that the intention of the notification was to take into account total capital expenditure, and in that view of the matter the amounts spent by the appellants on purchase of the material for construction of the Heat Chamber, could also be taken into account, and thus the conclusion arrived at by the Collector (Appeals) was correct, to the effect that total investment, towards Plants and Machinery exceeded the stipulated limit of Rs 10 lakhs.
8. Shri Beri addressed a short adjoinder to this argument by contending that this finding of the Assistant. Collector has been reversed by the Collector (Appeals) and could not now berevived in the absence of the cross-objections to the appeal, and that the only point now surviving, out of the order, under appeal before us, is as to the question with reference to buildings.
9. We have given our careful thought to the matter, and we find ourselves in agreement with the contention of Shri Beri that the original finding of the Assistant Collector has to be taken to have been set aside by the Collector (Appeals), who though not expressly, but by implication, upheld the contention of the appellants that the amounts spent upon purchase of material, which was yet to be utilized towards construction of Heat Chamber in the factory, was not to be treated as part of total capital investment, till the said Chamber has been constructed and commissioned for operation. This is manifest from a plain reading of the appellate order, inasmuch, as after reproducing the arguments of the appellants in this regard, the Collector (Appeals) has gone on to introduce a new ground on the basis of perusal of certain audited reports, certified by the Chartered Accountant of the appellants, and has not expressly rejected the contention as set forth before him. Thus, the plea as to exclusion of cost of material has to be taken to have been upheld. The respondent having failed to challenge that finding by way of cross-objections to this appeal, or otherwise, are precluded from now reviving this controversy. Otherwise also, we find that the emphasis in the notification is on the cost of 'Plants and Machinery 'installed', (emphasis supplied). Thus the mere purchase of material would not amount to capital investment on installation. The facts are not disputed ; namely, that during the relevant period, the Heat Chamber had not been constructed, and that what was the subject matter of show cause notice was only the cost of material.
10. We, therefore, find on a plain reading of the Order-in-Appeal that the original controversy stood concluded in favour of the appellants.
While conceding this contention of the appellants, the Collector (Appeals), however, introduced an entirely new ground, after a perusal of, and reference to the audited accounts, which had been filed by the appellants, took into account the cost of 'building', and added the same to the cost of the 'Plant and Machinery installed', in the factory and finding the total exceeding Rs. 10 lakhs, held the appellants to have forfeited benefit of the exemption notification, and rejected the appeal on the basis of this new factor. Apart from the fact that the learned Senior representative of the respondent conceded that so far as this new concept is concerned, the finding was not sustainable, as cost of buildings could not be made part of the cost of 'plant and machinery installed'; otherwise also we are of our considered view that the Collector (Appeals) not only erred in including the cost of buildings in the cost of capital investment on plant and machinery ; there was a manifest error, in introducing this element for which there was never any show cause notice to the appellants, nor was the same subject matter of the Order-in- Original, challenged before him. This order of the Collector (Appeals) thus suffers from this inherent infirmity, apart from, as discussed above, being erroneous otherwise. We accordingly find it to be a proper case to set aside the Order-in-Appeal. This appeal is accordingly allowed, with consequential relief to the appellants.