1993 (1) TMI 156 - AT - Central Excise

Issues Involved:
1. Eligibility of aerated waters manufactured by the appellants for exemption under Notification 175/86-CE.
2. Classification of the appellant company as a Small Scale Industry (SSI).
3. Valuation of plant and machinery.
4. Valuation of clearances for the preceding financial year.
5. Compliance with procedural requirements under Central Excise Rules.
6. Imposition of penalty under Central Excise Rules.

Detailed Analysis:

1. Eligibility for Exemption under Notification 175/86-CE:
The core issue was whether the aerated waters produced by the appellants were eligible for the exemption under Notification 175/86-CE. The appellants were initially registered as a small scale unit but later re-registered as a medium scale unit when their plant and machinery value exceeded the prescribed limit. They sought to re-register as a small scale unit to avail the exemption under the said notification.

2. Classification as a Small Scale Industry (SSI):
The appellants argued that their original SSI registration from 1970 was never cancelled but was in a state of suspended animation when they were registered as a medium scale unit. The Tribunal agreed, citing the case of Sahuwala Cylinders Ltd., stating that the benefit of Notification 175/86 cannot be denied if the SSI certificate authority declares the unit as SSI from a specific date, even if the certificate is issued later. Thus, the appellants were considered duly registered as SSI from 10-3-1986.

3. Valuation of Plant and Machinery:
The Collector initially found the value of the appellants' plant and machinery to be Rs. 36,80,119.79, exceeding the Rs. 35 lakhs limit for SSI classification. However, the Tribunal noted that Notification 175/86 did not specify a capital investment limit for plant and machinery. Upon re-evaluation, excluding the value of a scrapped Carbon Dioxide Plant, the Tribunal found the value to be Rs. 34,93,541, below the Rs. 35 lakhs threshold.

4. Valuation of Clearances:
The Collector disallowed certain deductions from the gross value of clearances, including 50% of transportation expenses and bottle breakages. The Tribunal found these disallowances contrary to established decisions in Indian Oxygen v. CCE and Real Drinks. After allowing full deductions, the net value of clearances was Rs. 1,34,20,253, below the Rs. 1.5 crores limit, thus qualifying the appellants for the exemption.

5. Compliance with Procedural Requirements:
The appellants were accused of contravening several provisions of the Central Excise Rules by clearing goods without proper classification approval and failing to declare the correct aggregate value. The Tribunal found that the appellants had complied with the necessary procedural requirements by applying for re-registration and obtaining the necessary certificates within the stipulated time.

6. Imposition of Penalty:
Given the Tribunal's findings that the appellants met the conditions for SSI classification and exemption under Notification 175/86, the imposition of a penalty of Rs. 3 lakhs by the Collector was deemed unjustified. The Tribunal set aside the penalty, emphasizing that the appellants acted in compliance with the regulatory framework.

Conclusion:
The Tribunal concluded that:
- The appellants' plant and machinery value was below Rs. 35 lakhs.
- The value of clearances did not exceed Rs. 1.5 crores.
- The appellants were duly registered as an SSI.
- The appellants were eligible for the exemption under Notification 175/86-CE.

The impugned order was set aside, and the appeal was allowed with consequential relief to the appellants.

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