1991 (5) TMI 172 - AT - Central Excise

Summary

Issues Involved:

1. Determination of the value of plant and machinery installed in the appellants' factory.
2. Eligibility for benefits under Notification No. 89/79.
3. Whether the demand for duty was barred by limitation.
4. Applicability of penalty under Rule 173Q of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Determination of the value of plant and machinery installed in the appellants' factory:

The appellants, a private limited company, were engaged in manufacturing oil cans, grease guns, barrel pumps, and cycle chains, subject to excise under Tariff Item 68. The factory was taken over in 1972, and the appellants invested in additional plant and machinery. They claimed an investment of Rs. 8,37,037.73, supported by a Chartered Accountant's certificate and an SSI registration certificate. However, the department estimated the value at Rs. 11,04,642.17, based on a physical verification by the Superintendent and market prices of similar machines. The adjudicating authority upheld this valuation, leading to a demand for differential duty and a penalty. The Tribunal found that the valuation of old and used machinery based on market prices was irrelevant for Notification No. 89/79, which required the face value of the investment at the time it was made. The Tribunal emphasized that the department should accept certificates issued by Chartered Accountants or State Industries Departments to avoid disputes.

2. Eligibility for benefits under Notification No. 89/79:

Notification No. 89/79 exempted goods under Tariff Item 68 from duty for the first Rs. 15 lakhs of clearances, provided the capital investment on plant and machinery did not exceed Rs. 10 lakhs. The appellants claimed eligibility based on their declared investment. The department's higher valuation led to the denial of this benefit. The Tribunal, however, held that the appellants' declaration, supported by a Chartered Accountant's certificate, was acceptable for determining eligibility. The department's rejection of the certificate due to the unavailability of purchase vouchers for old machinery was deemed unreasonable.

3. Whether the demand for duty was barred by limitation:

The show cause notice was issued on 5-6-1981 for clearances from 1-4-1979 to 28-4-1980. The department alleged misdeclaration by the appellants. The Tribunal noted that the appellants had furnished the required list of machinery and detailed information on investments promptly after the factory inspection on 31-10-1979. The Tribunal found no evidence of deliberate suppression or misstatement by the appellants. Therefore, the extended period for issuing the demand was not applicable, and the demand was barred by limitation.

4. Applicability of penalty under Rule 173Q of the Central Excise Rules, 1944:

The adjudicating authority imposed a penalty of Rs. 1,00,000/- under Rule 173Q. The appellants argued that no evidence of deliberate suppression was presented by the department. The Tribunal agreed, noting the absence of any proof of intentional misdeclaration. Consequently, the penalty was deemed unjustified.

Conclusion:

The Tribunal set aside the order appealed against, allowing the appeal. The appellants' declaration of investment, supported by a Chartered Accountant's certificate, was accepted. The demand for duty was barred by limitation, and the penalty was deemed unwarranted.