Customs, Excise and Gold Tribunal - Delhi
Bausch And Lomb (India) Ltd. vs Cce on 9 June, 2000
Equivalent citations: 2000(71)ECC117
ORDER
K. Sreedharan, J. (President)
1. Appellant, M/s. Bausch & Lomb (India) Ltd. are engaged in the manufacture of contact lenses, sun glasses, metallic frames, etc. in their factory at Bhiwari in Rajasthan. They also manufacture and captively consume three parts of sun glasses, namely, plated fronts, plated temples and glass lenses. These three parts are separate excisable items attracting duty under Chapter 90 of Central Excise Tariff Act. During the period 1992-93 to 1995-96, sun glasses were exempt from excise duty. The intermediate products, namely, plated fronts, plated temples and sun glasses were excisable items. Valuation of these parts during the above period is the dispute involved in this appeal.
2. For the different financial years, namely, 1992-93 to 1995-96, the plated fronts, plated temples and sun glass lenses were valued by the appellant and duty paid. The respective valued fixed by the manufacturer for the above periods can be discerned from the annexure to the Order-in-Original. First column in the annexure makes mention of the value fixed by the manufacturer on which duty was paid per unit. This payment of duty was made, admitedly, provisionally, because the department was not accepting the value/cost as submitted by the manufacturer. Consequently, the department by invoking the powers provided by Section 14A of the Central Excise Act, 1944, appointed Rakesh Singh & Company, Cost Accountants to examine the cost of production of various items manufactured by the appellant which went into the production of sun glasses. Pursuant to authorisation by the department, Cost Accountants submitted a report dated 27.5.1997. Paragraph 3 of the report stated:
Cost of production and the assessable value relating to the excisable parts of sun glasses/metallic frames manufactured and captively consumed for the manufacture of sun glasses/metallic frames have been calculated with reference to audited financial books of accounts, excise records and other details as maintained by the company.
Before proceeding further, we have to state that the Cost Accountant was not expected to find out the assessable value of the goods. His duty was to find out the actual cost of the products and the probable profit that might have been gained by the manufacturer. When the Cost Accountant's report goes to show that he was finding out the assessable value of the excisable goods, it is to be noted that he was not acting as a Cost Accountant but was taking the role of an officer under the Central Excise Act as well. This was not what was expected of the Cost Accountant. Be that as it may, the report dated 27.5.97 was virtually in consonance with the cost given by the manufacturer, as could be seen from the annexure to the Order-in-Original passed by the adjudicating authority. Curiously, the Additional Commissioner, Jaipur (an officer senior in rank to the adjudicating authority, the Assistant Commissioner) remitted the report to M/s. Rakesh Singh & Company stating that the report submitted is not correctly reflecting the cost of production. The Additional Commissioner requested the Cost Accountant to suitably recast to reflect the correct cost of production. The reason for remitting the report back to the Cost Accountant is not discernible from the letter written by the Addl. Commissioner on 7.7.97. In obedience to the direction given by the Addl. Commissioner, Cost Account resorted to a methodology for working out the assessable value in the interest of Revenue (vide annexure 1 to the second report submitted by the Cost Accountant on 29.9.97). As was done in the earlier instance, in the second report also the Cost Accountant found out assessable value of the products which was not within his powers. Over and above the seven items of documents referred to in the first report, four more items are stated to have been verified by the Cost Accountant for filing the second report. They are stock valuation report, technical agreement entered into with the collaborators by the manufacturers, expenses allocation sheets maintained by the manufacturer for stock valuation and royalty computation statement. Royalty, according to the learned Counsel representing the manufacturer, was only in relation to three items of products. That, according to the learned Counsel, will not cover the parts of sun glasses to which the issue related.
3. The valuation given by the Cost Accountant was improved upon by the Asstt. Commissioner by adding 5% towards royalty. According to the learned Counsel representing the appellant, when royalty was payable only in respect of the complete sun glasses and not on parts, the Asstt. Commissioner was clearly in error in resorting to procedure of adding royalty. In the course we are adopting in this appeal we do not think it necessary to pronounce on this argument at this state.
4. From the annexure to the Order-in-Original it is seen that the value given by the manufacturer for different components has been substantially increased relying on the second report of the Cost Accountant. The Cost Accountant has not given the actual cost of each item manufactured by the appellant to enable the department to find out their assessable value. So, the value that is given in the annexure, namely, the second column "value as per special audit report" should not have been adopted by the adjudicating authority. In spite of the strenuous effort made by the learned Departmental Representative, we are clear in our mind that the special audit report submitted by the Cost Accountant is not of any assistance in finding out the assessable value of the intermediate products.
5. Appellate authority while disposing of the appeal, has not adverted to any of the above-mentioned aspects. That authority dismissed the appeal before it, without applying its mind to the dispute raised by the party.
6. In the above circumstances, the only course that is now open to us is to set aside the orders of the adjudicating authority and the appellate Commissioner. We do so. The demand of duty made under the impugned orders will stand quashed. The matter is remitted back to the adjudicating authority to find the cost of the intermediate products manufactured by the appellant during the period 1992-93 to 1995-96 with the help of a competent Cost Accountant of repute. Appellant suggested the names of two firms, Price Water House Cooper and Arthur Anderson. Department will be at liberty to choose one of them. This course we are adopting, because we are throughly dissatisfied with the manner in which the first Cost Accountant dealt with the issue to oblige the department. Since this is a long pending matter, adjudicating authority is directed to pass final order as expeditiously as possible, at any rate, within two months from the date of receipt of a copy of this order. This period of two months will exclude the period that will be taken by the Cost Accountant. The bank guarantee encashed will be returned to the appellant on their furnishing a fresh bank guarantee for the amount for which originally they furnished the bank guarantee, namely, Rs. 55 lakhs.
7. Appeal is disposed of in the above terms.
8. Before parting with the case, we express our anguish in the manner in which the power under Section 14A of the Act has been misused by the departmental authorities in this case. Section 14A was enacted with the intention to have the controversy between the manufacturer and the department resolved with the help of an independent competent professional Cost Accountant. How that power is subject to misuse is evidenced in the instant case. The report filed by the Cost Acountant was remitted back to him without giving any valid reason. The Cost Accountant obliged the department by submitting a report which is favourable to the department without the backing of any fresh data or material. This should not have been the way in which the excise department and the professional like a Cost Accountant would have aproached the issue. The excise authorities must, therefore, use proper discretion in selecting competent cost accountant and the cost accountants should also act independently of the excise authorities once they are appointed to discharge their professional obligation.
Pronounced and dictated in the open Court.