K.S. Venkataramani, Member (T)

1. This appeal is directed against the order dated 10-7-1987 passed by the Collector of Central Excise (Appeals), Madras, by which he had upheld the order of the Assistant Collector of Central Excise, Coimbatore, I Division, demanding a duty of Rs. 24,935.50 on the ground that the appellants had crossed Rs. 30/- lakhs exemption limit for small scale industries in respect of the products cleared by them in terms of Notification No. 175/86 and also imposing on them a penalty of Rs. 100/- under Rule 9(2) of the Central Excise Rules, 1944.

2. The appellants under their management have two units which are small scale industrial units. They are licensed to manufacture Electric Motor and parts thereof. They are engaged in the manufacture of four commodities falling under various headings of the Central Excise Tariff Act, 1985 - 8503.00, 8485.90,8481.80 and 7308.90. In the Unit No. II they are manufacturing excisable goods under Heading 8503.00 only. For computing the aggregate value of clearances, the total value of clearances of the goods of individual heads of the Tariff are clubbed together. The appellants first cleared goods falling under Heading 8503.00 without payment of duty upto a value of Rs. 15 lakhs as on 29-5-1986 and then they started paying duty on the clearances of goods falling under that Heading 8503.00 from 30-5-1986 onwards in terms of Notification No. 175/86. The Department contends that the appellants had crossed the first Rs. 30/- lakhs clearances of all Excisable goods from both the units No. I & II on 30-5-1986 which includes clearance value of Rs. 20,06,195/- (exemption of Rs. 14,95,585/- and duty paid clearance value of Rs. 5,10,610/-) under Heading 8503.00 plus the clearance value of Rs. 9,96,025/-under the other three heads totalling Rs. 30,02,220/- and that thereby there was an excess clearance of value of Rs. 2,220/- under the three headings. Besides this, the Department also included the value of clearance of Rs. 4,96,489/- being the clearances under the other three headings at Nil rate and demanded the duty of Rs. 24,935.50 at 5% ad valorem, on a total value of clearance of Rs. 4,98,709.50. After issue of the Show Cause Notice and considering their defence thereon the Assistant Collector confirmed the demand and imposed the penalty which was upheld by the Collector (Appeals).

3. Shri P.S. Sadagopachari, the learned Consultant appearing for the appellants, contended that the exemption Notification No. 175/86 permits exemption upto the aggregate value of Rs. 30 lakhs for the first clearances. Another condition in the Notification for the exemption is that under one heading number, the exemption granted should not exceed Rs. 15 lakhs. According to the learned Consultant, the second condition does not restrict the number of sub-items which can get the benefit of exemption. It only speaks of the value which is limited to Rs. 15 lakhs. The only condition is that each one of the items should be less than Rs. 15 lakhs. According to the learned Consultant, therefore, no duty is payable on the other goods manufactured except that taken together they exceed Rs. 15 lakhs.

4. Shri K.K. Bhatia, the learned S.D.R. appearing for the Department contended that Notification No. 175/86 lays down that when once clearances in respect of one of the specified goods exceeds Rs. 15 lakhs, the manufacturer has to pay duty on further clearances because the exemption is available only to the first clearances in a financial year of the specified goods under the Notification.

5. On a careful consideration of the submissions made by the learned Consultant and the learned S.D.R., it is seen that Clause (a) of Notification No. 175/86 grants exemption of the specified goods in the case of first clearances upto an aggregate value not exceeding Rs. 30 lakhs and it also has a proviso which says that the aggregate value of clearances of the specified goods under Sub-clause (ii) thereof, which is relevant to th