1. The subject three appeals arise out of the common Order-in-Appeal which was passed in respect of three Orders-in-Original Since a common issue is involved in all the three appeals, they were heard together.

2. The facts in brief are that the appellants have a Research & Development Department in their factory. They erected a pilot plant in this department for R & D work. They manufactured about 70% of the components of this pilot plant in their own factory and bought the remaining 307 or so of the components from outside The point to be decided in these three appeals is whether the appellants are liable to pay any Central excise duty on the pilot plant or on the components of the said plant manufactured by themselves In order to facilitate a proper understanding of the issue involved, we reproduce below the relevant exemption notification :- reproduce

"In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Excise Rules 1944, and in supersession of the notification No. dated 1-3-1975, the Central Govt. hereby exempts goods falling under Item No.68 of First Schedule to the under Item No.68 of the First Schedule to the Central Excises and Salt Act 1944 (1 of 1944) manufactured in a factory and intended for use in the factory in which they are manufactured, or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon ;

Provided that where such use is in a factory of a manufacturer different from his factory where the goods have been manufactured exemption" contained in this notification shall be allowable subject to the Proper officer being satisfied that the goods are intended for such use

Provided further that nothing contained in this notification shall apply to complete machinery manufactured in a factory and meant for producing or processing any goods, even if they are intended for use in the same factory in which they are manufactured or in any other factory of the same manufacturer."

[Notification No. 118/75-C.E., dated 30-4-1975.]

3. The appellants were heard on the 2nd and 18th March 1983 The appellants maintained that no duty was payable either on the pilot plant' or on the components for the following reasons:-

(1) The pilot plant is a chemical plant fixed to the ground and hence it cannot be treated as "goods". In support of their argument they produced an affidavit and a photograph of the subject pilot 'plant and relied on Govt. of India's order in revision in respect of Otis Lifts (1981 ELT 290).

(2) The parts manufactured by them for the pilot plant were just components and not complete machinery. These components were exempt under the main part of the exemption notification and the second proviso to the said notification was not applicable to these components since this proviso applied only to complete machinery.

(3) Assuming that the components manufactured by them were to be considered as complete machinery, they were, in any case, not "meant for producing or processing any goods" as they had been used in the erection, of the subject pilot plant the designed or intended purpose of which was only research and development activity. No doubt, some quantity of the goods was produced in this pilot plant but that was incidental to the R&D activity. In support of their argument, the appellants gave an affidavit stating that the cost of the subject pilot plant was Rs. 44.31 lakhs while the total value of the goods produced in this plant during three years (1978-79 to 1980-81) was only Rs. 67,000/-. Besides, the goods so produced were of sub-standard quality. They stated that for this reason also the second proviso to the notification was not applicable to the components or to the pilot plant manufactured by them.

4. The Department's representative agreed that the subject pilot plant was a chemical plant and not machinery and hence the second proviso to the notification was not applicable. However, he did not feel that the appellants were entitled to the exemption