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TMI Blog2015 (9) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... -2012 intimated to the competent authority their intent to avail exemption, provided under Notification No. 1/2010-C.E., dated 6-2-2010 (the notification for short) as they have undertaken substantial expansion of their unit by making new investment by more than 25% in the existing plant and machinery which also resulted into generation of employment by 50%. The adjudicating authority, vide impugned order accepted expansion case in terms of provisions of the notification. 3. Being aggrieved, the Revenue has filed the instant appeal, on the following grounds :- (i) That examining the order from the point of view of requirements under para 8(b)(i) of the notification, it is seen that adjudicating authority in his order has observed that the investment in plant and machinery has gone up from Rs. 50.79 lacs to 66.72 lacs. The original value of Rs. 50.79 lacs of plant and machinery before expansion has been stated to be depreciated value as on 31-3-2012 and the additional investment of Rs. 15.93 lacs made by the respondents has resulted in increase by 31.36% in their fixed capital assets. Since the notification is primarily aimed at increasing the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating authority has also not called for any records regarding original value of investment in plant & machinery and has determined their claim of substantial expansion on the basis of depreciated value of Rs. 50.79 lacs as on 31-3-2012, which is not appropriate. The adjudicating authority has also accepted the depreciated value as on 31-3-2012 whereas the installation of additional machinery is on 25-10-2012 as per certificate issue by the GM, DIC, Jammu. (v) That examining the order from the point of view as to whether the benefit of exemption available under para 8(b)(ii) of the notification that the new investment made by the respondents is directly attributed to the generation of additional regular employment of not less than 25% over and above the base employment limit, it is noticed that the respondents have submitted a certificate of Labour Officer, Jammu dated 22-10-2012 certifying that the unit has increased 4 employees w.e.f. 8-10-2012 after installation of additional machinery and the total number of employees is increased to 12 numbers. Based on this certificate of Labour Officer, the G.M. DIC, Jammu vide letter No. 9973-IND/8082-83, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. They were asked to submit copies of statutory Balance Sheets for the financial years 2011-12 and 2012-13 showing the value of plant and machinery before as well after the expansion. They were also asked to submit copy of C.A.'s certificate dated 24-3-2013, which the respondents have submitted and have been taken on record. In the cross objections against department's appeal, the respondents inter alia, made the following submissions :- (i) That the revenue has misconstrued the statutory provisions of the notification as amended by Section 138 read with fifth Schedule to the Finance Act, 2012. The notification under para 8(b) provides existing industrial units before the 6th day of February, 2010, the benefit of central excise duty exemption, subject to conditions therein. (ii) That with a view to ensure smooth implementation of the exemption schemes guidelines are circulated vide CBEC Circular No. 772/5/2004-CX, dated 21-4-2004, to explain the scope of "substantial expansion" so far it relates to the applicability of exemption notifications. (iii) That substantial expansion has been granted by District Industrial Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commenced commercial production from such expanded capacity on or after the 6th day of February, 2010 Or (ii) made new investments on or after the 6th day of February, 2010, and such new investment is directly attributable to the generation of additional regular employment of not less than twenty-five per cent over and above the base employment limit, subject to the conditions that, - (1) the unit shall not reduce regular employment after claiming exemption, and once such employment is reduced below one hundred and twenty-five per cent, of the base employment limit, such industrial unit shall be debarred from claiming the exemption contained in this notification in future : Provided that, the exemption availed by such industrial unit, prior to such reduction, shall not be recoverable from such industrial unit. (2) the manufacturer shall produce a certificate, from General Manager of the concerned District Industries Centre to the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery or building. The adjudicating authority has taken the depreciated value to calculate the percentage increase/expansion in the Capital. However, such an interpretation would defeat the very purpose to the context in which it has been used both technically as well as logically. 5.3.1 Technically because the words used are Capital Investment that means the money spent for purchase of capital assets and not the book value/depreciated value. Logically because if such a interpretation meaning is brought in, then as per the Central Excise Law and the Income Tax Law, the value of 'Capital Investment would be zero after ten year, as the depreciation is allowable by following the straight line method. However, this is not what investment means. My these views find support from the decisions relied upon by the revenue in the case Bhai Jaspal Singh & Assistant Commissioner of Commercial Taxes (Civil Appeal No. 4277 of 2002) on the issue whether investment should be considered at original value or depreciated value for grant of tax concessions based on investment limit. The contention of the revenue is also that in para 8(b)(i) of the notification uses the word investment and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. (Wimbledon) Ltd., [1946] 2 All E.R. 609, that the question whether a particular source of income was an investment or not must be decided as it would be by businessmen according to ordinary commonsense principles. (18) In our view, for the purpose of the Rules and the notification, "investment" must be understood according to its common business and commercial usage. While an exact definition to suit all requirements will not be appropriate, but it may be said that investment in general would be spending money for the purpose of acquiring property or commodities that in turn generate further income. (19) In the Notification issued by the State Government and the Rules framed, the requirement is that the investment made by the dealer in plant and machinery in the Small Scale Industrial Unit should be less than 5 lakhs. It is obvious that money spent on upgrading or replacing machinery is investment that would increase the productivity of the machinery and consequently generate further income. It would thus be equivalent to acquiring of commodities that generate further income. Furthermore, there is no question of reducing depreciation value, as the determination is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification. 6. I further observe that the benefit of the Notification would still be admissible to the respondents in case they satisfy the condition laid down under Para 8(b)(ii). The adjudicating authority has held that the new investment made by the respondents is directly attributed to the generation of additional regular employment of not less than 25% over and above the base employment limit. However, it is contention of the revenue that respondents have submitted a certificate of Labour Officer, Jammu dated 22-10-2012 certifying that the unit has increased 4 employees w.e.f. 8-10-2012 after installation of additional machinery and the total number of employees is increased to 12 numbers on the basis of which G.M. DIC, Jammu vide letter No. 9973-IND/8082-83, dated 17-5-2013 has also issued a certificate that the respondents have created more than 25% additional employment over the base employment but the Labour Officer's certificate nowhere stated about the base employment. I observe that base employment in the notification has been defined as the maximum number of regular employees at any point of time by the concerned industrial unit during the last five years. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption contained in this notification in future : Provided that, the exemption availed by such industrial unit, prior to such reduction, shall not be recoverable from such industrial unit. (2) the manufacturer shall produce a certificate, from General Manager of the concerned District Industries Centre to the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, to the effect that the unit has created such additional regular employment." 6.2.1 I find that the respondents have made new investments in the plant & machinery amounting to Rs. 15.93 lacs which is evident from the copy of Balance Sheet for the F.Y. 2012-13 and revenue has not disputed the same. I may add here that the conditions specified under Para 8(b)(i) for existing units to avail of the exemption under the Notification, conditions under Para 8(1) and 8(2) are the methods/procedures to be followed by such units. Having said that I do not say that the department has no authority to verify/investigate at their own level, veracity of various claims of the respondents for claiming exemptions but if DIC has accepted that the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X
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