ORDER
K.S. Venkataramani, Member (T)
1. The facts leading to this appeal are briefly as follows :-
M/s. Pocono Chemicals, Baroda (hereinafter called as ‘respondent’) are the manufacturer of goods NES falling under T.I. 68 of Central Excise Tariff and having L 4 licence. The respondent has obtained the permission under Rule 56B of Central Excise Rules, 1944 for removal of semi-finished goods at the factory premises of M/s. Bakul Chemicals Ltd., Nandesari for further process and return thereof to their factory premises at Nandesari.
The respondent had filed C.L. bearing No. 69/84-85 with effect from 18-11-1984 claiming exemption under Notification No. 77/83 dated 1-3-1983 on the grounds that their clearance value during the preceding financial year i.e. 1984-85 is Rs. 23,92,975/- and capital investment made on Plant and Machinery was Rs. 5,84,876.96 which did not exceed Rs. 20/- lakhs as per the above-said notification. However, on scrutiny of record it revealed that capital investment made on Plant and Machinery by M/s. Bakul Chemicals Pvt. Ltd. where part of process is carrying out has exceeded Rs. 20/- lakhs. Thus the goods have been fully manufactured after being processed in M/s. Bakul Chemicals where investment in plant and machinery exceeded Rs. 20/- lakhs. As per Section 2(f) of Central Excises and Salt Act manufacturing includes any process ancillary or incidental for completion of manufactured product, resultantly the processes carried out by M/s. Bakul Chemicals are incidental and ancillary for completion of manufactured product and thus the goods has been manufactured in a factory where plant and machinery is more than Rs. 20/- lakhs and thus not entitled to exemption. Hence the goods are not eligible for exemption under Notification No. 77/83 dated 1-3-1983 as per C.L. filed by respondents dated 4-4-1985, 57/84, 69/84 and 24/84-85.
In view of the above, a Show Cause Notice under File No. V(68)(3) 174/MP/84 was issued to the respondent on 19-4-1985 demanding duty from 28-11-84 and onwards at the appropriate rule under Section 11A of Central Excises and Salt Act, 1944.
The Assistant Collector, Central Excise Div. IV, vide his order No. 56/85 dated 28-6-1985 confirmed the demand amounting to Rs. 1,16,902.50 and approved C.L. dated 4-4-1985 making goods chargeble to duty at the rate of 12% Adv. on the grounds that the condition as laid down in Notification No. 77/83 dated 1-3-1983 is not satisfied that the exemption claimed by respondent is not admissible.
Being aggrieved by the order-in-original of Assistant Collector Div. IV, Baroda, the respondent filed an appeal with Collector (Appeals), Bombay and Collector of Central Excise (Appeals), Bombay under his impugned order No. M-636/BD-527/85 dated 12-9-1985 has allowed the respondent’s appeal with the direction to grant consequential relief to the respondents. Hence this appeal. Shri M.K. Jain, learned Senior Departmental Representative made the following submissions :-
As per the proviso to Notification No. 77/83, the capital investment on Plant and Machinery installed in the industrial unit in which the goods are manufactured should not exceed Rs. 20/- lakhs.
In the present case, the goods under clearances have been manufactured in two industrial units as under :
(1) M/s. Pocona Chemicals and
(2) M/s. Bakul Chemicals Pvt. Ltd.
The value of Plant and Machinery of the latter unit is more than Rs. 20/- lakhs.
The final and necessary process for completion of manufactured product has been conducted in Bakul Chemicals whose investment in Plant and Machinery is more than Rs. 20/- lakhs and thus the goods in question which have been finally manufactured in this unit cannot be said to be eligible for exemption under Notification No. 77/85 dated 1-3-1985.(Should be respondent’s – Ed.)
2. Learned Counsel Shri Jitendra Singh appearing for the respondents contended that there is nothing in the Notification No. 77/83 to justify the Department’s interpretation. The Department itself had granted permission for 56B facility showing that the two units were independent. Nor has any evidence been produced to show how the two units are inter-connected to consider them as one and the same unit. The respondents had in fact applied for 56B facility only because they did not have the facility and machinery for carrying out all the processes and also as it was uneconomical for them to make such large investment. Moreover, the learned Counsel urged, even if the investment on plant and machinery of the two units were to be combined, the total will not exceed Rs. 20 lakh. He cited and relied upon the following case law in support of his propositions :
i. 1984 (16) E.L.T. 30 (Bom.) – Devidayal Electronics v. Union of India;
ii. 1990 (47) E.L.T. 274 (T) – KBICCF v. Collector of Central Excise; and
iii. 1991 (54) E.L.T. 330 – Collector of Central Excise v. Petco Chemical Industries.
The submissions made by both the parties, herein, have been carefully considered. The Deptt. has invoked the first proviso to Notification 77/83 to deny the exemption which reads as follows :-
“Provided that an officer not below the rank of an Assistant Collector of Central Excise is satisfied that the sum total of the value of the capital investment made from time to time on plant and machinery installed in the industrial unit in which the said goods, under clearance, are manufactured, is not more than rupees twenty lakhs.”
A perusal of the proviso would show that what is envisaged therein is the value of capital investment on plant and machinery installed in the industrial unit in which the goods under clearance are manufactured It is evident, therefrom that what is relevant is the value of capital investment on plant & machinery of the industrial unit from which the manufactured goods are sought to be cleared. Here, admittedly, the value of capital investment in the appellant’s (Should be respondent’s – Ed.)(sic) industrial unit from which clearances take place is below Rs. 20 lakh. In such a context, there is no justification to combine the value of capital investment in plant and machinery of M/s. Bakul Chemicals in terms of definition of the term manufacture in Section 2(f) of CES Act as is sought to be done because regard has had to the terms of the exemption Notification which, as seen above, is not such as to permit such an interpretation. The Deptt. has also not shown by evidence that the two units are one and the same. On the other hand, permission has been granted to respondents for 56B facility. The Rule says that such facility may be granted to a manufacturer for removal of semi-finished excisable goods for certain processes, “to some other premises of his or to the premises of another person” and for the receipt back of such goods without payment of duty. Now, it is not the Department’s case that they have granted the 56B facility to respondents for removal of the goods to some other premises of the respondents themselves, which again will not support the Deptt.’s case for denying the exemption. Further, the Deptt. has also failed to rebut the respondents’ claim by evidence that even combining the value of capital investment in the two units, the total would be less than Rs. 20 lakh. In the result, there is no reason to interfere with the impugned order of the Collector (Appeals) and the appeal is, accordingly, rejected.