Capital investment exemption turns on actual removal or unusability of machinery; mere non-use does not justify exclusion.

For small-scale exemption based on capital investment, machinery can be excluded only if it has been permanently removed from the unit or rendered incapable of use; mere non-use is insufficient. The Bisphenol plant and machinery remained installed and had been disclosed as part of the unit's product line, so its value had to be included in capital investment, defeating the exemption claim. Misleading valuation certificates and non-disclosure of the machinery supported a finding of suppression with intent to evade duty, so the extended limitation period applied and the demand was not time-barred.

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Issues: (i) Whether plant and machinery kept out of use could be excluded from the computation of capital investment for the small-scale exemption notification. (ii) Whether the demand for duty was barred by limitation or saved by suppression of facts and the extended period.

Issue (i): Whether plant and machinery kept out of use could be excluded from the computation of capital investment for the small-scale exemption notification.

Analysis: The relevant exemption depended on the total capital investment in plant and machinery being within the prescribed limit. The exclusion contemplated by the notification applied only to machinery permanently removed from the industrial unit or rendered unfit for any use. Mere non-use for some years did not amount to machinery being rendered unfit for use. The evidence showed that the machinery relating to Bisphenol remained installed and the assessee had itself declared Bisphenol as a product in its classification list. The valuation certificates relied upon by the assessee were found to reflect depreciated or current market value and not the face value of the investment at the time of installation.

Conclusion: The capital investment on the Bisphenol machinery had to be included, and the assessee was not entitled to the claimed exclusion.

Issue (ii): Whether the demand for duty was barred by limitation or saved by suppression of facts and the extended period.

Analysis: The record did not establish that the excise authority had independently verified the capital investment before granting exemption. The certificates furnished by the assessee were found to be misleading and to describe the machinery value in a manner inconsistent with the face-value requirement. On that material, the non-inclusion of the Bisphenol machinery was treated as deliberate suppression with intent to evade duty. In such circumstances, the extended limitation period was available.

Conclusion: The demand was not time-barred and the extended period was correctly invoked against the assessee.

Final Conclusion: The appeal failed because the disputed machinery had to be counted in capital investment and the demand survived on account of suppression, resulting in confirmation of duty and penalty.

Ratio Decidendi: For exemption based on capital investment, only machinery permanently removed or rendered incapable of use can be excluded; non-use alone is insufficient, and deliberate misstatement of valuation particulars can justify invocation of the extended limitation period.

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