1988 (1) TMI 146 - AT - Central Excise

Summary

Issues: Classification of liquid nitrogen plant for duty exemption under Notification 105/80 based on capital investment in plant and machinery. Interpretation of "industrial unit" for determining capital investment. Conflict between judgments of Bombay High Court and Andhra Pradesh High Court on allocation of common plant and machinery.

In this case, the appellants had set up a liquid nitrogen plant in a dairy complex where butter and skimmed milk powder were manufactured. The issue revolved around the classification of the liquid nitrogen plant for duty exemption under Notification 105/80, which required that the capital investment in plant and machinery not exceed a certain limit. The appellants argued that only the investment in plant and machinery required for the manufacture of liquid nitrogen should be considered, which they claimed was Rs. 4.71 lakhs, falling below the exemption limit. However, the impugned order had considered the capital investment of the entire dairy complex, leading to a dispute over the interpretation of "industrial unit" as mentioned in the notification.

The appellants contended that "industrial unit" should refer to the investment in plant and machinery specifically for the goods under clearance, which in this case was liquid nitrogen. They relied on a judgment of the Bombay High Court in a similar matter, but were unable to produce a copy of the judgment for consideration. The High Court had interpreted "industrial unit" to mean a separate or isolable part of a complex concerned with industry. On the other hand, the lower authority had taken a different approach, considering the entire value of plant and machinery in the dairy complex for calculation purposes.

The Tribunal noted conflicting judgments from the Bombay High Court and the Andhra Pradesh High Court regarding the allocation of common plant and machinery in cases where multiple goods were manufactured in the same complex. The Andhra Pradesh High Court had emphasized the clear language of the notification, stating that there was no need to allocate machinery between various goods. However, the Tribunal found merit in the Bombay High Court's judgment, which distinguished between "factories" and "industrial units," suggesting different meanings for the terms.

Ultimately, the Tribunal decided to remand the case to the original adjudicating authority for recomputing the capital investment on plant and machinery specifically for the liquid nitrogen plant, as well as for any common plant and machinery in the dairy complex that supported the operation of the nitrogen plant. This decision was based on the factual information provided by the appellants regarding the need for uninterrupted power supply and chilled water from other plants in the complex. The Tribunal emphasized the significance of considering common plant and machinery in such situations to determine the capital investment accurately for goods covered by the exemption notification. As a result, the appeals were allowed by way of remand for further assessment.