Capital investment exemption excludes dismantled machinery removed from the unit when computing the plant-and-machinery ceiling.

For eligibility under Notification No. 89/79-C.E., machinery that had been dismantled and permanently removed from the industrial unit was not to be included in the total capital investment on plant and machinery. The later explanation in Notification No. 105/80-C.E. was treated as clarificatory of the earlier position, because equipment no longer forming part of the plant at the relevant time could not be counted in the investment ceiling. Counting both removed machinery and replacement machinery would distort the actual capital investment. The exclusion of dismantled machinery therefore entitled the unit to the exemption benefit.

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Issues: Whether, for the purpose of Notification No. 89/79-C.E., the value of machinery dismantled and permanently removed from the industrial unit was to be included in the total value of capital investment on plant and machinery for determining eligibility to exemption.

Analysis: The notification limited the benefit to industrial units whose sum total of capital investment on plant and machinery did not exceed the prescribed ceiling. The later Notification No. 105/80-C.E. introduced an explanation stating that machinery permanently removed from the unit or rendered unfit for use was to be excluded from the computation. The explanation was treated as clarifying the true meaning of the earlier notification, because machinery that had already been dismantled and was no longer part of the plant at the relevant time could not logically be counted in the capital investment for that unit. Including both the dismantled machinery and the replacement machinery would distort the actual capital investment position.

Conclusion: The value of machinery dismantled and not forming part of the plant at the material time was to be excluded while computing capital investment under Notification No. 89/79-C.E., and the assessee was entitled to the consequential benefit of the exemption.

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