Customs, Excise and Gold Tribunal - Mumbai
Reliance Industries Ltd., H.R. Shah And ... vs Commissioner Of Central Excise, ... on 12 July, 2001
ORDER
Gowri Shankar, Member (Technical)
1. The applications are for waiver of deposit of duty by Reliance Industries Ltd, of Rs. 8.08 crores approx and a penalty under Rule 173Q of Rs. 8.00 crores. The other two applications are for waiver of deposit of penalties under Rule 209A of Rs. 40.00 lakhs on H.R. Shah and of Rs. 20.00 lakhs on M.B. Patel, employees.
2. We have heard both sides at length.
3. The applicant manufactures, in the yarn division of its factory at Naroda, viscose yarn and wollen blended yarn. No part of such yarn is sold and all of it is entirely consumed in the manufacture in the same factory of fabrics. The value, for the purpose of assessment therefore had to be determined in terms of the Valuation Rules. The duty has been demanded, and penalty imposed, on the finding of the Commissioner that, for the period from April 1994 to August 1996, the applicant under declared the value by not including for 1994-95 the element of profit, and by reducing in the other years, the amount of profit, bonus and gratuity and interest on capital goods. There is no dispute that the profit was not included, and the argument of the applicant in this regard is on limitation, which we shall deal with later. The demand for the remaining two years is based on the fact that the reports of the cost audit conducted of this unit in accordance with the terms of Section 233B of the Companies Act, 1956 showed the elements in question to be much higher than what has been included.
4. The first argument of the common counsel for the applicants is that the demand is barred by limitation. We are prima facie not able to accept this contention for 1994-95. The contention that the price declaration filed by the applicant did not specifically indicate that profit had not been included, and there was therefore no misdeclaration is difficult to accept. The price list did refer to the words "profits if any." We however note to the contention for the appellant that the actual profit for that year was around 3.5%, and it is actual profit that it should be included and not the profit based on the previous years.
5. For the remaining period, it is contended that the applicant had submitted a certificate of a chartered accountant certifying the correctness of the cost of manufacture under Rule 6(b) of the Valuation Rules submitted by the applicant. This was not questioned for a period of three years and the department had finally assessed the RT 12 returns. It is only subsequent to the receipt of a circular of the Board relating to consideration of elements involved in determining the cost of manufacture and profit that investigation were commenced in 1998, resulting in issue of show cause notice in May 1999 to many manufacturers generally.
6. It is further contended that the cost audit report in any event for a particular financial year is finalised and submitted to the company law department six months after the close of that financial year. It is only at the end of the financial year that the final figures will be available. The valuation for purpose of assessment to excise duty is based therefore on notional figures determined on an approximation at the beginning of the financial year. It is therefore not possible for any person to go by cost audit report and there is therefore no suppression of this justifying the invocation of the extended period of limitation. It is on these grounds that the Commissioner of Central Excise at Mumbai has dropped the proceedings initiated on the notices issued to various manufacturers such as Bombay Dyeing Ltd, Century Spinning Ltd etc. The counsel for the applicants offers to deposit, in respect of the duty for the period 1994-95, and as the evidence of goodwill, a sum of Rs. 2.00 crores. He also prays for out of turn hearing.
7. The departmental representative emphasises that no element of profit at all was included in 1994-95. As for the remaining period, he says, the fact that a certificate of a chartered accountant was submitted is no answer. It is the manufacturer's responsibility to ensure that the correct figures are submitted. The cost audit report to be submitted to the company law department finds mention in sub-rule (6) of Rule 173G. There was an oral request made to the applicant to produce this report which was not produced. It was incumbent on the applicant to furnish to the department the figures in the cost audit report. Therefore, the claim of time bar of limitation will not be clearly available to the assessee.
8. As we have noted, the benefit of limitation will prima facie not be available for the period 1994-95. The position appears different for the remaining period. We agree that the cost audit report would not be available at the beginning of the financial year and it would therefore prima facie be unreasonable to except the assessee to declare these figures to the department at that point in time. This however raises the question as to why the cost audit report for one year should not form the basis for the declaration of the next year. There is no clear answer. We are prima facie not able to accept the claim that the department made an oral request for the cost audit report prior to the commencement of the investigation in 1998. The conduct of the department in not questioning till then the values claimed by the applicant, and in fact by applying these values to finalise the RT12 Returns, strongly suggest that it was no wiser at that time then the applicant. The contention of the departmental representative that investigations were proceeding all along is difficult to accept in the light of the facts. It is significant to note that the department has not, in the notice or in the order, questioned the bona fides of the chartered accountant who issued the certificate. Taking all these aspects into account, we accept the offer made by the counsel for the applicants and direct deposit of Rs. 2.00 crores within a month from to day thereupon we waive deposit of the balance of duty and penalty on the manufacturer and on the two employees.
9. Compliance on 13.8.2001.
10. Having regard to the duty involved, we list the appeals for out of turn hearing on 28.8.2001.