Capital investment for SSI exemption excludes dismantled machinery and non-plant charges, keeping the unit within the limit.

For computing capital investment under a small scale industry exemption notification, plant and machinery permanently removed from use is excluded, and supervision and technical know-how charges are not part of plant and machinery. Departmental SSI certificates and guidelines were entitled to due weight, and the record did not show that the disputed civil works necessarily formed part of plant and machinery. After excluding the dismantled driers and other non-qualifying items, and correcting arithmetical errors, the investment remained below the exemption ceiling, so the assessee qualified for the exemption and the demand could not stand.

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Issues: Whether, for the purpose of Notification No. 77/83-C.E. dated 01-03-1983, the value of capital investment on plant and machinery had to exclude dismantled driers, certain civil works and electrical installations, and technical know-how charges, so as to keep the unit within the exemption limit.

Analysis: The notification and its Explanation I required exclusion of plant and machinery permanently removed from the industrial unit or rendered unfit for use. On that basis, the value of the six dismantled driers was not includible. The charges paid for supervision and technical know-how were also not part of the capital investment on plant and machinery. The departmental certificates and guidelines relating to small scale industrial units were entitled to due weight in computing the investment, and the record did not establish that the disputed civil works necessarily formed part of plant and machinery. After excluding these items and correcting arithmetical errors, the investment remained below the prescribed ceiling.

Conclusion: The assessee was entitled to the small scale industry exemption under Notification No. 77/83-C.E. The inclusion of the disputed items was unsustainable and the computation had to be reduced accordingly.

Final Conclusion: The exemption limit was not crossed on a correct computation of capital investment, so the demand could not stand.

Ratio Decidendi: For computing capital investment under a small scale industry exemption notification, machinery permanently removed from use and charges not forming part of plant and machinery, such as technical know-how and supervision charges, are excludible, and departmental SSI certification and guidelines must be considered unless rebutted.

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