ORDER
V.T. Raghavachari, Member (J)
1. Under notice dated 30-6-1984, the appellants M/s. Sanmati Forest Industries were charged with having manufactured and removed Cutch, in contravention of Rule 9 of Central Excise Rules, without payment of Central Excise duty and thus having intentionally evaded payment of duty to the extent of Rs. 59,497.66p. On receipt of their reply and after adjudication, the Addl. Collector of Central Excise, Indore confirmed the duty demand and imposed a penalty of Rs. 5,000/-. This appeal is against the said order.
2. We have heard Shri Gopal Prasad, Consultant for the appellants and Shri Vineet Kumar for the Department.
3. One of the contentions raised by the appellants before the Addl. Collector, and reiterated in the appeal before us, is that cutch was not liable for duty in terms of exemption notification No. 234/82, dated 1-11-1982. But Shri Gopal Prasad did not press the said defence before us in view of certain meterial produced by himself in pursuance of earlier directions by us, such as the information regarding this product in the publication “Wealth of India”. He conceded that the exemption under the notification applied to katha but not cutch. It is, therefore, unnecessary to consider that contention further.
4. But Shri Gopal Prasad submitted that the appellants were entitled to exemption in terms of Notification No. 105/80 dated 19-6-1980 as amended from time to time and Notification No. 77/83 dated 1-3-1983. Under these notifications, exemption was granted in respect of goods falling under Item 68 CET, in respect of first clearances thereof upto a particular value, provided the total value of the capital investment made from time to time on plant and machinery did not exceed a particular sum. Shri Prasad’s contention is that the said value did not, at any time, exceed the limits mentioned in the two notifications and hence the duty demand is not justified.
5. This contention had been raised before the Addl. Collector also and rejected. The Addl. Collector, in doing so, relied on the material contained in the Chartered Accountant’s certificate dated 30-12-1983 and also the balance sheet of the firm as on 30-5-1983. Shri Vineet Kumar submits that the conclusions of the Addl. Collector, based on the said material, were justified and hence the appellants are not entitled to any relief.
6. So far as the reliance on the contents of the balance sheet, the argument of Shri Gopal Prasad is that the show cause notice did not even indicate that the contents of balance sheet were relied upon and hence the appellants had no opportunity to state their case with reference to the balance sheet or the conclusions drawn therefrom. Shri Vineet Kumar comments that the balance sheet having been prepared by the appellants themselves, there is no question of prejudice caused to them on the ground that the same was not mentioned in the show cause notice as a document to be relied upon. But this submission overlooks the contention of the appellants that since the balance sheet was not even mentioned as one of the documents to be relied upon, the appellants had no opportunity of hearing what inference the Department wanted to draw from the contents thereof and had, therefore, no opportunity to state their own case as to why any such inference was not entitled to be drawn at all. We agree that this contention for the appellants is entirely justified. We, therefore, hold that reliance on the contents of the balance sheet was not justified.
7. So far as the certificate of the Chartered Accountant, this writes 9 items, mentioning against each the value thereof. The total amount of the 9 items is Rs. 39,10,962.86 p. The Addl. Collector has taken this amount as the value of the installed plant and machinery for the purpose of the notification and, therefore, ruled against the appellants regarding their entitlement to benefit under the notification. Shri Prasad submits that except Items 1 and 2, others would not be part of plant and machinery installed and the value of these items ought not to be taken into consideration at all. These 9 items read as follows:-
1. Face value of installed Plant and Rs. 11,59,644.56
Machinery.
2. Boiler and Accessories. Rs. 4,55,311.78
3. Freight, Insurance, Packing and Rs. 1,07,734.73
Forwarding Charges.
4. Erection, Installation and Rs. 3,45,468.19
Commissioning Expenses.
5. Spares for replacement. Rs. 78,973.48
6. Technical Knowhow. Rs. 1,21,100.00
7. Miscellaneous fixed assets (Storage Rs. 9,42,018.99
tanks, weight bridge and scale etc.).
8. Equipment being in spare not installed. Rs. 4,30,981.13
9. Cost of Electric Generating Units. Rs. 2,69,730.00
Total Rs. 39,10,962.86
We are satisfied that items 3 to 6 and 8 would certainly not be part of plant and machinery installed. Even so far as item 7 is concerned, it does appear to us that the whole of the amount mentioned therein would be liable to be included, since we do not know what are all the items mentioned therein and how far each of them was part of plant and machinery. For instance, so far as storage tanks are concerned, Shri Prasad submits that these relate to water tanks for use of the staff etc. We are not quite sure whether it would be wholly correct since it may have been necessary to have storage tanks for storage of the product in question, which appears to be a liquid. The appellants have now produced a certificate from the General Manager of the Distt. Industries Centre to the effect that generating set and weigh bridge and scales are only utility items and do not form part of plant and machinery as these are not directly used in the manufacture of Katha and Cutch. So far as the electricity generating unit (item No. 9 in the list) we not in a position to decide whether it would be part of plant and machinery or should be taken as an auxiliary or utility item only as described by the General Manager, Distt. Industries Centre. We feel that these materials (under item 7 and 9) ought to be considered individually and decision taken on merits after such a consideration. This has not been done under the order of the Addl. Collector.
8. In the circumstances, we are unable to accept the conclusion of the Addl. Collector that there is sufficient material to establish that the value of plant and machinery installed in the factory of the appellants exceeded the relevant monetary limit. We are of opinion that this matter has to be investigated factually and decision taken thereafter only.
9. In the circumstances, we held that the order of the Addl. Collector will have to be set aside but that a proper decision could be arrived at only after factual verification on further adjudication.
10. Accordingly, the appeal is allowed, the order of the Addl. Collector is set aside and the matter is remanded to him for readjudication in the light of the observations earlier.