Plant-and-machinery valuation for exemption depends on face value at investment, not later market revaluation.

For exemption linked to a ceiling on investment in plant and machinery, the relevant measure is the face value of the investment when made, not a later market-based revaluation of old machinery. The department's attempt to deny the exemption by revaluing used machinery was rejected because the appellants had disclosed the machinery, supported their figures with a Chartered Accountant's certificate, and there was no evidence of record manipulation. On limitation, inspection of the factory and disclosure of particulars meant wilful misstatement or suppression was not established, so the extended recovery period was unavailable and the demand was time-barred.

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Issues: (i) Whether the value of plant and machinery installed in the appellants' factory exceeded Rs. 10 lakhs so as to deny the benefit of Notification No. 89/79-C.E. dated 1-3-1979; (ii) Whether the duty demand was barred by limitation.

Issue (i): Whether the value of plant and machinery installed in the appellants' factory exceeded Rs. 10 lakhs so as to deny the benefit of Notification No. 89/79-C.E. dated 1-3-1979.

Analysis: The exemption depended on the capital investment on plant and machinery, and the notification required the face value of the investment at the time it was made. The department's method of revaluing old and used machinery on the basis of market price of similar goods was held to be irrelevant for this purpose. The appellants had disclosed the machinery, produced a Chartered Accountant's certificate, and there was no evidence of manipulation of records. In these circumstances, the declared investment was accepted for determining eligibility under the notification.

Conclusion: The appellants were eligible to the benefit of Notification No. 89/79-C.E. and the finding that the plant and machinery exceeded Rs. 10 lakhs was not sustained.

Issue (ii): Whether the duty demand was barred by limitation.

Analysis: The show cause notice was issued after the department had already inspected the factory and received particulars of the machinery and investment from the appellants. The dispute was only about valuation, and the finding that the department's estimate was arbitrary meant that wilful misstatement or suppression of facts could not be established. The extended period for recovery was therefore unavailable.

Conclusion: The demand was barred by limitation and could not be sustained.

Final Conclusion: The duty demand and penalty were set aside, and the appeal succeeded.

Ratio Decidendi: For exemption conditioned on a ceiling of investment in plant and machinery, the relevant test is the face value of the investment at the time made, not a later market-based revaluation of old machinery; absent wilful misstatement or suppression, the extended limitation period for recovery cannot be invoked.

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