Custom, Excise & Service Tax Tribunal
M/S. Hindustan Unilever Ltd. vs Commissioner C Ex- Dibrugarh on 22 September, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
(1) Excise Appeal No.197 of 2010
(On behalf of Appellant)
(Arising out of Order-in-Original No.01/SPECIAL RATE/CE/DIB/2009 dated
22.09.2009 passed by the Commissioner of Central Excise & Service Tax, Dibrugarh)
M/s Hindustan Unilever Limited
(Personal Products Factory, Unit I, Doomdooma Industrial Estate, District-Tinsukia,
Pin-786151)
Appellant
VERSUS
Commissioner of Central Excise & Service Tax, Dibrugarh
Milan Nagar, Lane "F", P.O.-C.R.Building, Dibrugarh-786003
Respondent
WITH
(2) Excise Appeal No.198/2010
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.02/SPECIAL RATE/CE/DIB/2009 dated 22.09.2009
passed by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(3) Excise Appeal No.477/2012
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.01/TECH/2012 dated 24.04.2012 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(4) Excise Appeal No.478/2012
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.02/TECH/2012 dated 24.04.2012 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(5) Excise Appeal No.71266/2013
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.02/TECH/2013 dated 17.07.2013 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
2
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(6) Excise Appeal No.71267/2013
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.03/TECH/2013 dated 17.07.2013 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(7) Excise Appeal No.75637/2014
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.05/TECH/2013-14 dated 05.02.2014 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(8) Excise Appeal No.75638/2014
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.06/TECH/2013-14 dated 07.02.2014 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(9) Excise Appeal No.75639/2010
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.07/TECH/2013-14 dated 07.02.2014 passed by the
Commissioner of Central Excise & Service Tax, Dibrugarh)
(10) Excise Appeal No.76131/2014
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.01/DIB/TECH/2014-15 dated 29.04.2014 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(11) Excise Appeal No.76132/2014
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.02/DIB/TECH/2014-15 dated 29.04.2014 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(12) Excise Appeal No.75765/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
3
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
Arising out of Order-in-Original No.05-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(13) Excise Appeal No.75766/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.04-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(14) Excise Appeal No.75767/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.06-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(15) Excise Appeal No.75768/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.08-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(16) Excise Appeal No.75769/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.07-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(17) Excise Appeal No.75770/2016
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.03-DIB-TECH-2015-16 dated 17.02.2016 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(18) Excise Appeal No.77120/2017
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.01-DIB-TECH-2017-18 dated 21.08.2017 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
4
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(19) Excise Appeal No.77121/2017
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.07-DIB-TECH-2017-18 dated 21.08.2017 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
(20) Excise Appeal No.77122/2017
(M/s Hindustan Unilever Limited Vs. Commissioner of Central
Excise & Service Tax, Dibrugarh)
Arising out of Order-in-Original No.03-DIB-TECH-2017-18 dated 21.08.2017 passed
by the Commissioner of Central Excise & Service Tax, Dibrugarh)
APPERANCE :
Shri M.H.Patil, Mr.Viraj Reshamwala & Ms.Satabdi Chatterjee, all Advocates for
the Appellant
Shri S.Mukhopadhyay, Authorized Representative for the Respondent
CORAM:
HON'BLE MR.ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE MR.K.ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO...76741-76760/2023
DATE OF HEARING : 23 .08.2023
DATE OF PRONOUNCEMENT : 22.09.2023
Per Ashok Jindal :
As all the appeals are having a common issue, therefore, all the
appeals filed by the appellants are being disposed off by a common
order.
2. The facts of the case are that the appellants are engaged in the
manufacture of Oral Preparations, Cosmetics, Hair Care & Skin Care
5
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
Preparations at their factories at Doomdooma Estate, Dist. Tinsukia,
Assam.
2.1 On 20.11.1997, the Central Government announced an
Industrial Policy, inviting entrepreneurs to set up new industrial Units
in North-Eastern States and promised that such Units would be exempt
from payment of central excise duty and income tax for a period of 10
years from the date of commencement of their commercial production.
The Ministry of Industry notified the Industrial Policy on 24th
December 1997. In order to aid industrial growth in various non-
developed areas of the country, including north-eastern States, Central
Govt. issued Notifications granting exemption from payment of central
excise duty on the goods manufactured in such areas.
2.2 Accordingly, a Notification No.32/1999-CE dated 08.07.1999 was
issued granting exemption from duty of excise or additional duty of
excise equivalent to the amount paid from PLA, by way of refund of
such duty paid from PLA, after exhausting the Cenvat credit balance.
2.3 In this regard, another Notification No.56/2002-CE and
Notification No. 57/2002 both dated 14.11.2002 for Jammu & Kashmir,
Notn. No. 56/2003-CE dated 10.06.2003 and Notification No.71/2003-
CE dated 09.09.2003 for Sikkim, etc. were issued.
2.3 In order to avail of the benefits under the said Notifications, the
appellants set up the following factories at Doomdooma Industrial
Estate in Tinsukia District of Assam State:
6
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(i) Unit No.1 in August 2001
(ii) Unit No.2 in April 2003
(iii) Unit No.3 in March 2013
The appellants were manufacturing the following goods in their
Units:
Unit No.1 Unit No. 2 Unit No.3
Sr. Name of the products Chapter
No.
1. Hair Care Hair Care Hair Care 33
2. Talcum Talcum Powder --- 33
Powder
3. Skin Cream Skin Cream Skin Cream 33
4. Vaseline --- --- 27
Petroleum
Jelly
5. Oral Oral Care --- 33
Care/
Toothpast
e
2.4 Notification No.17/2008-CE dated 27.03.2008 was issued, for
amending the Notification Notn.No.32/99-CE dated 08.07.1999, for
providing for exemption of duty payable on value addition, subject to
payment thereof from PLA (after exhausting Cenvat credit). The
exemption from duty payable on value addition or to the extent of duty
actually paid from PLA, whichever is less, was admissible; for which an
application to the Commissioner was to be made within 60 days from
the beginning of the financial year, if the manufacturer finds that four-
7
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
fifth of the ratio of actual value addition in the production or
manufacture of the goods to the value of the goods, was more than
the rate specified in the amending Notification.
2.5 The said Notification No.32/99-CE was further amended
through Notification No.31/08-CE dated 10.06.2008, providing for
fixation of special rate, if the manufacturer finds that actual value
addition of the goods is more than 115% of the percentage prescribed
in the Notification; for which, an application to the Commissioner was to
be made, not later than 30th September of the respective financial
years.
2.6 The Explanation to Para 2.1(4) of Notification No.32/99-CE
prescribed the following formula to arrive at actual value addition
based on financial records of the preceding financial year, which is as
reproduced below:
"xxxxx xxxxx xxxxx
(iv) Sale value of the said goods excluding excise
duty, Value Added Tax and other indirect taxes, if
any, paid on the goods;
(v) Less: Cost of raw materials and packing materials
consumed in the said goods;
(vi) Less: Cost of fuel consumed if eligible for input
credit under CENVAT Credit Rules, 2004;
(vii) Plus: Value of said goods available as inventory in
the unit but not cleared, at the end of the financial
year;
(viii) Less: Value of said goods available as inventory in
the unit but not cleared, at the end of the financial
8
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
year preceding that under consideration.
xxxxx xxxxx xxxxx"
2.7 Value addition for all goods falling under Chapter 33 i.e.
"Cosmetics & Toilet Preparations", being manufactured by the
Appellants, was fixed at 56%, at Sr. No. 3 of the Table under Para 2A of
the Notification No. 32/99-CE, as amended by the said Notifications. In
other words, the Appellants were entitled to exemption/refund of 56%
of the total duty payable on the goods manufactured and cleared by
them, subject to the amount paid from PLA.
2.8 In view of actual value addition to the sales value was more
than 115% of the prescribed percentage of 56% (i.e. 64.4%), the
Appellants made separate applications for Units No. 1, 2, & 3 for each
of the Financial Years from 2008- 09 to 2016-17, supported by
requisite documents, including certificates from their Statutory
Auditors, M/s. Lovelock & Lewes, for the Financial Year 2008- 09 to
2013-14 and M/s. B.S.R & Co LLP, for Financial Years 2014-15 to 2016.
2.9 The said Statutory Auditors issued certificates based on the
audited Balance Sheets and Profit & Loss Accounts for the financial
years 2008-09 to 2016-17. The Appellants, in each of the financial
years, claimed value addition ranging between 62% and 83%, product
wise, as summarized below:
9
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
Sr. Name of the Financial Value Percentage 115% of Value
No. product year addition of value addition &
as per addition percentage
Statutory specified in specified in
Auditors Notifications Notifications
(1) (2) (3) (4) (5) (6)
1. Hair Care 74% 56% 64%
2. Talcum 2008-09 62% 56% 64%
Powder
3. Skin Cream 81% 56% 64%
4. Oral Care 69% 56% 64%
5.. Hair Care 66% 56% 64%
6. Skin Cream 2009-10 79% 56% 64%
7. Oral Care 65% 56% 64%
8. Hair Care 70% 56% 64%
9. Skin Cream 2010-11 83% 56% 64%
10. Oral Care 68% 56% 64%
11. Hair Care 65% 56% 64%
12. Skin Cream 2011-12 83% 56% 64%
13. Vaseline 56% 36% 41%
Petroleum
Jelly
14. Oral Care 67% 56% 64%
15. Hair Care 67% 56% 64%
16. Skin Cream 82% / 84% 56% 64%
17. Vaseline 66% 36% 41%
Petroleum
Jelly 2012-13
18. Oral Care 66% 56% 64%
19. Hair Care 79% 56% 64%
20. Hair Care 68% / 75% 56% 64%
21. Skin Cream 82% / 83% 56% 64%
22. Vaseline 66% 36% 41%
Petroleum 2013-14
Jelly
10
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
23. Oral Care 65% 56% 64%
24. Hair Care 67% 56% 64%
25. Skin Cream 83% 56% 64%
26. Vaseline 2014-15 69% 36% 41%
Petroleum
Jelly
27. Oral Care 67% 56% 64%
28. Skin Care 68% 56% 64%
29. Hair Care 2016-17 70% 56% 64%
30. Skin Care 86% 56% 64%
31. Vaseline 78% 36% 41%
Petroleum
Jelly
32. Oral Care 67% 56% 64%
2.10 The Appellants filed separate applications for fixation of
special rate for each Unit financial year-wise for the disputed period,
along with relevant documents, including certificates issued by
Statutory Auditors.
2.11 The aforesaid applications have been rejected by the
Commissioners, on the following grounds:
(a) that the Balance Sheet, based on which the computation
of value addition has been done by the Appellants, is not in
conformity with Section 211 of Companies Act, 1956;
(b) that Section 211 of Companies Act, 1956 does not contain
any provision to prepare Balance Sheet or financial records for
the same company, for different purpose;
(c) that the gross sales value (GSV) arrived at by the
Appellants by multiplying the quantity of the goods
manufactured and cleared from the Unit with All India
Average Rate of sales realization at the Depots. The GSV
represents an amount which relates to goods manufactured
11
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
by the number of manufacturing units located at different
parts of the country and not solely the Units in NESA.
Therefore, it is incorrect, as the actual cost of production of
the said Units is not considered;
(d) that as per Explanation to Para 4 of Notification
No.32/99-CE, the computation of value addition does not
include work-in-progress;
(e) that GSV was arrived at by taking All India average
rate of sales realization of the company and the average rate
of VAT at the rate of 12.5% has been deducted from the
gross sales value. This does not show the true picture of
value addition considering the fact that the products
manufactured by the Appellants attract various rates of taxes
under VAT;
(f) that the Appellants have valued the inventory physically
lying at the Units including the WIP at the cost of raw materials
and packing material consumed. As per accounting standards,
the valuation of the inventory has to be made on the basis of
cost of raw material, packing, factory overheads,
administrative overheads, etc. Therefore, the value of
inventory of stock does not represent fair and true value;
(g) Some of the applications have been rejected on
merits and some of the applications have been rejected both
on merits and time bar.
2.12 Aggrieved from the said orders, the appellants are before us.
12
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
3. The Ld.Counsel appearing on behalf of the appellant submits that
the products manufactured at the above mentioned units, the
Appellants are delivered to their depots from where the same are sold at
a uniform selling price. The term uniform selling price indicates that
there is uniform all India average rate prevalent at all the depots of the
Appellants and hence, multiplying the number of units cleared from the
unit with the said all India average rate of selling price is the only and
correct way of computing the gross sales value. The fact of actual cost
of product at each unit being considered or relevant in computation of
sales value as elaborated above. He further submits that different
states have different rates of sales tax. It is not possible for Appellants
who being multi-product, multi-locational company to identify as to
what quantity of which product, stock transferred to their Depot, is
sold in which state, in order to claim the amount of sales tax against
that particular clearance. In view of this, the Appellants' claim of the
total sales tax paid, on average basis, is computed as under:
Total sales tax paid
all over India on a
particular product,
--------------------------------------x 100 = Average Sales Tax
Total sales value of that product, paid in terms of Percentage.
The above would give the actual sales tax payable and paid as
percentage of the sales value. It may be clarified that the total sales
tax paid and that claimed is equal. The only difference is that it has
13
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
been claimed on equalised basis. Since the Appellants are not claiming
Sales Tax Deduction more than what was paid (i.e. paid to various
States under the name and style sales tax), the same is admissible
deduction, irrespective of whether it is claimed on equalised basis or
otherwise. Claiming of admissible deductions like Sales Tax, etc. on
equalized basis is permissible as has been held by Hon'ble Tribunal and
Supreme Court in Appellants' own following cases:
(b) Hindustan Unilever Ltd. - 2016 (334) ELT 95(T)
(c) Hindustan Unilever Ltd. - 2016 (341) ELT 434 (T)
In view of the above, the finding in the impugned Order to the effect
that by taking all India average rate of sales tax as well as sales
realization, actual value addition cannot be arrived at, is not
sustainable.
3.1 He further submits that by resorting to valuation based on
conservative method of valuing inventory at cost of raw materials and
packing materials is correct. In any case, the same method of valuation
has been resorted to for both, opening stock and closing stock. It is
not a case of undervaluing opening stock and overvaluing closing stock
to arrive at higher percentage of valuation addition. Further, for the
period from 2012 to 2017, there are no finished goods inventory. In
2012, automatic conveyor system was installed in the NESA Plant, from
where goods after being manufactured was directly transferred to the
14
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
godown on real time basis. Hence, no inventory was available in the
factory during this period.
3.2 He further submits that the Commissioner's finding that the
Balance Sheet is not in conformity with the Companies Act, 1956, is
incorrect, based on the following submissions:
(i) that a Certificate from Statutory Auditors, containing
the calculation of value addition based on the audited Balance
Sheet of the preceding financial year has to be submitted in
support of the claim for fixation of special rate.
(ii) that for the purpose of calculation of actual value
addition, as per the prescribed format, relevant figures from
the audited Balance Sheet have been extracted, which has
been enclosed along with each application. Hence, it is not a
case that a separate Balance Sheet was prepared for the
purpose of special rate fixation, as contended by the Learned
Commissioner, in the impugned Orders. In other words, an
extract of Balance Sheet containing figures required for
computation, in a format exclusively to suit the calculation of
value addition was enclosed, which gets evidenced from the
Notes accompanying the said extract of Balance Sheet, to the
effect that the said extracted Balance Sheet has been
prepared solely for the purpose of and as basis for claim of
fixation of special rate.
15
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(iii) that nowhere the Notification stipulates that copy of the
Balance Sheet is to be enclosed. Instead, it just mandates
that the value addition must be calculated based on the
audited Balance Sheet and in the present case, the
computation of value addition has been done based on the
figures taken from such audited Balance Sheets only.
(iv) that considering the financial details of the year in
question, instead of considering preceding financial years'
details, in the applications made for fixation of special rate,
would be more accurate and, hence, should not be
questioned by Department.
3.3 He further submits that Section 211 of Companies Act, 1956
prescribes the form in which the Balance Sheet and Profit & Loss
Account of every Company registered under the said Act is to be
prepared, showing the true financial position of the said Company. It
stipulates that in order to give true and fair picture of the state of
affairs of the Company at the end of the financial year, the format as
prescribed in Part-I of Schedule VI has to be adopted for preparation of
the Balance Sheet and Profit & Loss Account. The Balance Sheet
prepared by the Appellants is in a consolidated form, in the sense that
all its Units located all over the country have been brought under the
common Balance Sheet and Profit & Loss Account. In other words, the
said consolidated Balance Sheet of the Company gives the true picture
16
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
of the functioning or the financial position of the Company (the
Appellants) as the whole. Hence, the Balance Sheet prepared is very
much in conformity with the provisions of Companies Act and the
findings of the Commissioner that statement of value addition based on
the said Balance Sheet and Profit & Loss Account does not bear any
legal sanctity is not correct and not sustainable. Adopting any other
method for preparing the Balance Sheet would lead to violation of the
provisions of Companies Act and Income Tax Act. In a nutshell, the
figures in the Extract of Balance Sheets, based on which the value
addition has been calculated, is very much in conformity with
Companies Act as well as with the Income Tax Act. Under these factual
circumstances and compliance of provisions of law, rejecting the
application for special rate fixation on a ground that the Balance Sheet
is not in conformity with the Companies Act, 1956, is incorrect and
unsustainable.
3.4 He further submits that the Explanation to Para 4 of
Notn.No.32/99-CE prescribes the formula to arrive at actual value
addition, based on financial records of the preceding financial year:
(i) Sale value of the said goods excluding excise duty,
Value Added Tax and other indirect taxes, if any, paid
on the goods;
(ii) Less: Cost of raw materials and packing materials
consumed in the said goods;
17
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(iii) Less: Cost of fuel consumed if eligible for input credit
under CENVAT Credit Rules, 2004;
(iv) Plus: Value of said goods available as inventory in the
unit but not cleared, at the end of the financial year;
(v) Less: Value of said goods available as inventory in the
unit but not cleared, at the end of the financial year
preceding that under consideration.
From the above, it is clear that what is to be added is the inventory of
goods available at the end of each of the Financial Years and not
cleared. Similarly, the value of inventory not cleared at the end of the
financial year preceding to the Financial Year under consideration has
to be deducted. It may be relevant to note that the term "inventory"
would include stock of finished goods as well as stock of unfinished
goods in as much as some stock of goods may be incomplete or just
few steps/process away from the stage of completed finished product.
The said stock of incomplete/ unfinished goods, which have passed
through some processes and are yet to be subjected to some
processes to reach the final stage of production, are termed as 'work-
in-progress', which are also the part of the inventory, as per the
accounting standards. The aforesaid contention also gets support from the
following Accounting Standard (AS) 2 - Valuation of Inventories, issued by
the Institute of Chartered Accountants of India:
"Inventories are assets:
(a) held for sale in the ordinary course of business;
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76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in
the production process or in the rendering of services.
3.5 He further submits that it is a settled position of law that once the
Department has not rebutted the evidences like Statutory Auditor's
certificates, as required under the Notification, the evidences brought
by assessee have to be accepted, based on the following judgments:
(a) Crane Betel Nut Powder Works - 2011 (274)
ELT 113 (T)
(b) (bi) Crane Betel Nut Powder Works - 2012
(279) ELT 487 (A.P.)
(c) -do- Dept's appeal dismissed by SC- 2014 (305) ELT A-
109 (SC)
3.6 He further submits that financial records as certified by the
Statutory Auditors would be the basis for calculation of actual value
addition for fixation of special rate. Hence, the actual value addition,
computed based on the figures from the audited financial records, is
correct and the special rate calculated based on the said value addition
is to be allowed. It is a settled position of law that Statutory
Auditor's/CA's certificate is valid for arriving at the value addition,
based on the following judgments:
(a) Shree Narmada Khand Udyog - 2015 (329) ELT 820
(Tri)
(b) Bombay Dyeing & Mfg. Co. Ltd. - 2008 (223) ELT 514 (T)
19
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
3.7 He further submits that the inventory has to be considered as
per Explanation to Para 2.1 of Notn.No.32/1999-CE and, hence,
Commissioner's findings that inventory in Depots and goods in transit
are not considered has got no relevance to the present case.
3.8 He further submits that In a similarly circumstanced facts and
issue, Hon'ble Tribunal, vide its Final Order No.60151/2023 dated
20.04.2023/06.06.2023, reported in 2023-TIOL- 548-CESTAT-CHD in
the case of Kokuyo Camlin Ltd., has held that resorting to and invoking
uniform sales price; considering equalized sales tax; preparing
adjusted Balance Sheet/adjusted Profit & Loss Account, based on
whole company's Balance Sheet and Profit & Loss Account, etc., etc. is
proper and legal for arriving at value addition under area based
exemption Notification No. 56/2002-CE dated 14.02.2002. It has also
been held that Statutory Auditors' certificate cannot be questioned by
the Commissioner. Appreciating that applications made for fixation of
special rate under para 2.1 was accompanied with Statutory Auditors
certificate, which is the basis for computation of value addition, Hon'ble
Tribunal in Kokuyo Camlin was pleased to fix special rate, as certified
by the Statutory Auditors and claimed by the assessee therein. Kokuyo
Camlin's claim of fixation of special rate considering MRP based
assessment, however, was rejected. The Hon'ble Tribunal judgment in
Osaka Alloys and Steels - [2015 (328) ELT 625 (Tri.-Del.)] also renders
persuasive support to the Appellants' contention of special rate based on
value addition.
20
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
3.9 He further submits that the findings of the Commissioner that
filing of applications for fixation of special rate was not done within the
time stipulated in the Notification would not be correct and also not
sustainable, in view of Hon'ble Guahati High Court judgment dated
12.08.2021 in the case of Jyothy Labs Ltd. - 2021 (378) ELT 269
(Gau) [para 16 to 21], wherein it has been held that the requirement
of making application for fixation of special rate has arisen after Hon'ble
Supreme Court judgment in V V F judgment dated 22.04.2020. It has
been held that the requirement of making such application not later than
30th September of a given financial year was a streamlining procedure
and, hence, the request made on 18.05.2020 (after V V F's judgment
dated 22.04.2020) was held to be not time barred. In the present case,
applications were made, from time to time, for each of the disputed
financial years, as detailed in list of events. Assuming, whilst denying,
that there is delay in filing the applications, the application filed in any
year would hold good for each of the subsequent financial years. For
example, the application filed in September 2009, for financial year
2008-09, can be considered as the application for financial year 2009-
10 and so on. In any case, the applications decided after three months
prescribed in Para 2.1(2) of the said Notification is not sustainable.
3.10 Finally, he submits that the Hon'ble Supreme Court in the
judgment & Order dated 22.04.2020 in the case of VVF (supra) has
specifically held that Notifications (No.17/2008-CE dated 27.03.2008
21
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
and 31/2008-CE dated 10.06.2008) are clarificatory in nature, since it
declares the refund of excise duty paid genuinely and paid on actual
manufacturing of goods and not on the duty paid on the goods
manufactured only on paper and without undertaking any
manufacturing activities of such goods. The above contention further
gets substantiated from the findings in the said judgment.
3.11 He further submits that the recovery proceedings initiated by
the Dept., in view of the said Hon'ble Supreme Court judgment, were
challenged by the Applicants through Writ Petition WP(C) 3162/2019
and Hon'ble Gauhati High Court, in its Order dated 24.06.2020, has
directed the Respondents (i.e. UOI and jurisdictional Commissioner
and Assistant Commissioner) to re-visit the issue regarding the claims
sought for by the Petitioner in view of the judgment and order dated
22.04.2020 rendered by the Hon'ble Apex Court in the case of Union of
India v/s VVF Limited and, thereafter, take into consideration all the
claims made by the Petitioner as regards their entitlements to refund as
sought for in terms of the excise notification. He submits that invoking
the ratio laid down by the Hon'ble Supreme Court and Hon'ble Gauhati
High Court, the eligibility and quantum of refund has to be re-
determined.
3.12 He, therefore, prays that based on the above submissions and
those made in the grounds of appeals, all the 20 appeals, as has been
22
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
settled by the Tribunal in the case Kokuyo Camlin's case (supra), may
be allowed by setting aside the impugned orders.
4. On the other hand, the ld.A.R. for the Revenue supported the
impugned orders and submitted that the applications of fixing of
special rate were filed after 3oth September of the same year beyond
time limit prescribed under the Notification and admittedly, the
appellants have filed these applications for special rate fixing in the
very next year. Therefore, the applications for special rate of fixing of
rates are not sustainable. In regard to balance sheet, he submits that
the balance sheets are not in conformity with Section 211 of the
Companies Act, 1956. He further submits that the gross sale value on
the average rate is not acceptable and the average rate of VAT is also
not acceptable. He further submits that the work in process cannot be
a part for taking value of sales and therefore, the appeals deserve to
be dismissed.
5. Heard both the parties and considered the submissions.
6. We find that the application for special rate fixing for the period
2009-10 to 2016-17 were initially held that they have filed the
applications for fixing special rate after 30th September of the same
year and is barred by limitation.
6.1 The said issue has been examined by the Hon'ble Apex Court and
the Hon'ble Apex Court in the case of Union of India Vs. V.V.F. Limited
reported in 2020 (372) ELT 495 (S.C.), has held that the pending
23
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
refund application shall be decided as per the subsequent
notification/industrial policies, which were impugned before the
respective Hon'ble High Courts and they shall be decided in accordance
with the law and on merits and as per the subsequent
notifications/industrial policies impugned before the respective Hon'ble
High Courts. The extracted of orders of the Hon'ble Apex Court is as
under :
"........... subsequent notification / amendment in the
original notification did not in any way alter the basis
of the original first notification of 2001."
".......... once it is held that the subsequent
notifications/industrial policies impugned before the
respective High Courts are clarificatory in nature and it
does not take away any vested rights conferred under
the earlier notifications/industrial policies, .......".
".........that by the subsequent notifications/industrial
policies, the rights which have been accrued under the
earlier notifications had been taken away "
" On a fair reading of the earlier notifications/industrial
policies, it is clear
that the object of granting the refund was to refund the
excise duty paid on genuine manufacturing activities.
.................................................. ".
24
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
"....... it is clarified by the subsequent notifications that
the refund of the excise duty shall be on the actual
excise duty paid on actual value addition made by the
manufacturers undertaking manufacturing activities".
"........ they do not take away any vested right conferred
under the earlier notifications".
6.2 Further,the Hon'ble Guwahati High Court in the case of Jyoty
Labs reported in 2021 (378) ELT 269 (Gau.), has held that making
such application for fixation of special rate under Notification
No.32/99-CE and Notification No.31/2008-CE, after the judgement of
Hon'ble Supreme Court in the case of V.V.F. (supra) were in time.
6.3 In view of the above, we hold that as all the applications were
filed by the appellants before 20.04.2020. In that circumstances, all
the applications were filed within time, therefore, the applications in
question cannot be rejected on limitation.
6.4 The remaining issue in all the appeals are common, therefore, all
are disposed off by a common observations as under :
6.5 The first issue is that the balance sheet is not in conformity with
Section 211 of the Companies Act, 1956. For better appreciation, the
facts of the relevant provisions under Notification No.32/99-CE dated
08.07.1999, are extracted herein under :
25
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
6.6 The clarification was given that in the area based exemption and
the refund of duty vide letter No.354/34/2004-TRU (Pt) dated
27.03.2008, the same is incorporated herein under :
26
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
27
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
6.7 The first ground for denial of special rate of fixation is that the
balance sheet is not in conformity with Section 211 of the Companies
Act, 1956 and there is no provision to prepare the balance sheet or
financial records under the provision of 211 of the Companies Act,
1956.
28
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
6.8 The said Section is incorporated herein under :
As per the said provisions, the profit and loss accounts and the balance
sheet of the Company shall comply with the accounting standards.
6.9 We find that a certificate from the Statutory Auditors, containing
the calculation of value addition based on the audited balance sheet of
the preceding financial year has to be submitted in support of the claim
29
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
for fixation of special rate.
6.10 We further take note of the facts that Section 211 of Companies
Act, prescribes the form in which the Balance Sheet and Profit & Loss
Account of every Company registered under the said Act is to be
prepared, showing the financial position of the said Company and the
balance sheet prepared by the appellants is in consolidated form, in the
sense that all its Units located all over the country have been brought
under the common Balance Sheet and Profit & Loss Account, but in
other words, the said consolidated Balance Sheet of the Company gives
the picture of the functioning or the financial position of the appellants
as the whole. Hence, the Balance Sheet prepared is very much in
conformity with the provisions of Companies Act and the findings of the
Ld.Commissioner that statement of value addition based on the said
Balance Sheet and Profit & Loss Account is not acceptable are in
conformity of law.
6.11 Further, we find that the figures in the Extract of Balance Sheets,
arem based on which the value addition, has been calculated, is very
much in conformity with Companies Act and the Income Tax Act.
6.12 Therefore, we hold that rejection of application for special rate
fixation on the balance sheet is not in conformity with the Companies
Act, 1956, is not correct. On the said ground, the said application
cannot be rejected.
6.13 We take note of the fact that whether the statutory auditor's
report is acceptable or not ? We hold that that the statutory auditor's
30
Excise Appeal Nos.197,198/2010, 477,478/2012,
71266,71267/2013, 75637-75639/2014,
76131,76132/2014, 75765-75770/2016 &
77120-77122/2017
report is acceptable in terms of the decision of this Tribunal in the case
of Commissioner of Central Excise & Customs, Guntur Vs. Crane Betel
Nut Powder Works reported in 2011 (274) ELT 113 (Tri.-Bangalore),
wherein this Tribunal has observed as under :
"5.1........................................... It is also undisputed that the
respondent-assessee had produced a detailed Chartered
Accountant certificate before the Adjudicating Authority, when the
Adjudicating Authority issued a show cause notice to them for
rejection of the refund claim. It is also undisputed and on records
that the revenue had not produced any contrary evidence to
evidence produced by the respondent-assessee in form of
Chartered Accountant certificate for coming to such a conclusion
that the respondent-assessee had passed on the burden to the
customers.
........................................................................................................................
5.3 ................................................... It is seen from the records that as against the above detailed Chartered Accountant's certificate, revenue has not produced any contrary evidence to rebut the same except for claiming that the said certificate is devoid of any details. We find that the said Chartered Accountant's certificate as reproduced hereinabove clearly indicates that the Chartered Accountant (who was also the statutory auditor of the respondent-assessee) has given the certificate after going through the entire records of the respondent-assessee. In the absence of any effective rebuttal of the said Chartered Accountant certificate by leading a contrary evidence, we are of the considered view that the Chartered Accountant's certificate which indicates that the duty liability has not been passed on and has been absorbed 31 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 by the assessee, cannot be rejected as an evidence in support of non-passing of the burden of incidence of duty. The said decision is affirmed by the Hon'ble Apex Court. We, therefore, hold that the statutory auditor's report is acceptable as an evidence.
7. Now, another issue raised by the ld.Commissioner that the gross sales value based on all India average rate is not acceptable.
8. We find that the products manufactured by the appellants were delivered to their depots from where the same were sold at a uniform selling price. The term uniform selling price indicates that there is uniform all India average rate prevalent at all the depots of the appellants and hence, multiplying the number of units cleared from the unit with the said all India average rate of selling price is the only and correct way of computing the gross sales value. The GSV was arrived at by taking all India Average rate of sales realization of the Company and the average rate of VAT at the rate of 12.5% has been deducted from the gross value. Since different States have different rates of Sales Tax, it is not possible for the appellant to identify as to what quantity of which product, stock transferred to their Depot, is sold in which State, in order to claim the amount of Sales Tax against that particular clearance. In view of this, the appellant has adopted the formula for computation to arrive at the average Sales Tax, which is as under :
Total sales tax paid all over India on a particular product,
-------------------------------------- x 100 = Average Sales Tax Total sales value of that product, paid in terms of Percentage.
9. We find that for the purpose of calculation of actual value addition, as per the prescribed format, relevant figures from the audited Balance Sheet have been extracted, which has been enclosed along with each application. Hence, it is not a case that a separate Balance Sheet was prepared for the purpose of special rate fixation, as held by the adjudicating authority. An extract of Balance Sheet containing figures 32 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 required for computation, in a format exclusively to suit the calculation of value addition was enclosed, which gets evidenced from the Notes accompanying the said extract of Balance Sheet, to the effect that the said extracted Balance Sheet has been prepared solely for the purpose of and as basis for claim of fixation of special rate and nowhere the Notification stipulates that copy of the Balance Sheet is to be enclosed. Instead, it mandates that the value addition must be calculated based on the audited Balance Sheet and in the present case, the computation of value addition has been done based on the figures taken from such audited Balance Sheets only.
10. Further, an another reason for rejection of application is that the average rate of VAT at the rate of 12.5% is not acceptable.
11. The said issue has been settled by this Tribunal in the appellants' own case reported in 2016 (334) ELT 93 (Tri.-Chennai), wherein this Tribunal has held as under :
"3. After hearing both sides, and on perusal of records, we find that the appellants are engaged in the manufacture of Shampoo, Pure Petroleum Jelly (Vaseline) etc. The issue involved in these appeals is whether the appellants are eligible for abatement of equalized/averaged sales tax from transaction value under Section 4 of the Central Excise Act. According to the Revenue, the appellants have to claim sales tax abatement on actual basis. We find that Tribunal in the appellant's own case by Final Order No. A/1956/WZB/Mum/05/C-III/EB, dated 25-8-2005 following the decision of the Tribunal in the case of Zandu Pharmaceuticals v. CCE, Thane-II in Order No. A/370/WZB/2005- C-I, dated 5-4-2005 held that such deduction is permissible and set aside the impugned order.33
Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017
4. It is seen that the Tribunal subsequently vide Final Order No. A/361 & 362/13/EB/C-II, dated 16-4-2013 in the appellant's own case set aside the order and allowed the appeal. The relevant portion of the said decision is reproduced below :-
5. This issue came up before this Tribunal in appellant's own case wherein vide Order No. A/1956/WZB/Mum/05/C-III/EB, dated 25-8-2005 this Tribunal held that the Equalised Sales Tax can be allowed to be deducted. This issue again came up before this Tribunal in the case of Dabur India Ltd. - 2009 (247) E.L.T. 335 wherein this Tribunal observed as under :
7. We have carefully considered the submissions from both sides. There is no dispute about the eligibility for deduction on account of octroi and additional sales tax. The original authority has accepted this in principle. He has disallowed the deduction only based on the grounds that the respondent have claimed the same on a weighted average basis as mentioned earlier. The Commissioner (Appeals) have allowed the deduction without specifically giving a finding on each of the above three grounds raised by the original authority. We are of the considered view that in the given facts and circumstances of the case, the deduction towards additional sales tax and octroi can be allowed on equalised basis as has been done in the case of Apollo Tyres Limited cited supra. However, we are in agreement with the submissions of the learned DR that the said expenses have to be segregated exclusively in respect of excisable goods cleared by the respondent for the respective year. Therefore, to enable the same, we set aside the orders of the Commissioner (Appeals) and those of the original authority and remand the matter to the original authority to allow the deduction on the lines indicated above after granting reasonable opportunity of hearing to the 34 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 party. The party shall produce relevant details within two months from the date of receipt of this Order and original authority shall dispose of the matter within four months thereafter.
6. Again this issue came up before this Tribunal in the case of Dabur India Ltd. [2013-TIOL-125-CESTAT-DEL = 2013 (295) E.L.T. 257 (T)] wherein also the same view was taken by this Tribunal.
7. Following the precedent decisions cited hereinabove of this Tribunal, which was accepted by the Revenue, we do not have any hesitation to hold that the appellant are entitled to claim deduction of Equalised Sales Tax from the transaction value to arrive at the assessable value."
5. In view of the above discussion, we hold that the appellants are entitled to claim the abatement of equalized sales tax from the transaction value. Accordingly, both the impugned orders are set aside and both the appeals are allowed with consequential relief. Stay applications are disposed of."
the said order has been affirmed by the Hon'ble Apex Court.
12. Therefore, we hold that the average rate of VAT at the rate of 12.5% is equalized the basis and the same is permissible for fixation of special rate. Hence, rejection of special rate of fixation, the applications cannot be rejected on that ground.
13. The next issue is that inclusion of work in progress is not correct.
14. The Explanation to Para 4 of Notn.No.32/99-CE is very much clear, which is as under :
35Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017
(i) "Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods;
(ii) Less: Cost of raw materials and packing materials consumed in the said goods;
(iii) Less: Cost of fuel consumed if eligible for input credit under CENVAT Credit Rules, 2004;
(iv) Plus: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year;
(v) Less: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year preceding that under consideration.
Special rate would be the ratio of actual value addition in the production or manufacture of the said goods to the sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods."
From the above, it is clear that what is to be added is the inventory of goods available at the end of each of the Financial Years and not cleared. Similarly, the value of inventory not cleared at the end of the financial year preceding to the Financial Year under consideration has to be deducted. It may be relevant to note that the term "inventory"
would include stock of finished goods as well as stock of unfinished goods in as much as some stock of goods may be incomplete or just few steps/process away from the stage of completed finished product. The said stock of incomplete/ unfinished goods, which have passed through some processes and are yet to be subjected to some processes to reach the final stage of production, are termed as 'work-in-progress', which 36 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 are also the part of the inventory, as per the accounting standards, which is as under :
"Inventories are assets :
(a) held for sale in the ordinary course of business ;
(b) in the process of production for such sale ; or
(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services."
which means that the process of production on such materials i.e. work in process is the part of inventory and the appellants have correctly included the work in process in their stock. Therefore, we hold that the work in process is to be included in the opening stock and closing stock in computation of actual value addition.
15. In a nutshell, we take note of the fact that the issue of rejection of fixation of special rate on the above ground, came up before this Tribunal in the case of M/s Kokuyo Camlin Limited Vs. Commissioner of Central Excise & Service Tax, Jammu & Kashmir reported in 2023-TIOL-
548-CESTAT-CHD, wherein this Tribunal has observed as under :
"4. Heard both sides and perused the records of the case. Brief issue that requires consideration in the instant case is as to whether the Adjudicating Authority was correct in rejecting the appellant's claim for value addition in terms of Notification No. 56/2002-CE dated 14.11.2002 as amended. We find that on an application, dated 29.09.2009, made by the appellants, Commissioner vide letter dated 20.04.2010 informed the appellants that the value addition comes to 45.73% as against the claim of 58.6% or 62.65% by the appellants. We find that the 37 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 appellants have submitted a detailed written reply and a Statutory Auditor's certificate to establish their claim.
5. We find that after giving a personal hearing on 11.05.2010, learned Commissioner has proceeded to adjudicate the case. Whereas in the letter dated 20.04.2010, Commissioner arrived at a value addition of 45.73%, while passing the final order, he rejected the claim completely. Commissioner has given the following findings: · In terms of Para 2.1 (l) of the Notification, it is the obligation of the manufacturer to stake their claim along with necessary documents and certificates and the appellants have failed to do so; burden to prove the claim is squarely on the appellants. 5 Excise Appeal No. 2630 Of 2010 · The word "Sale" is not defined under notification and therefore, the definition requires to be taken from Section 2 of Central Excise Act; the appellants claim of two value additions cannot be accepted; MRP value as contemplated under Section 4A of Central Excise Act, 1944 is a notional value and the same cannot be considered as a value for the purpose of the notification. · The application made by the appellants is dated 29.09.2009 and whereas the audited balance sheets are 30.09.2009 and therefore, cannot be accepted to be accurate in respect of various figures submitted. · As taken in the adjusted balance sheet, gross revenue cannot be considered as sale value; sale value requires to exclude Central Excise, VAT and other taxes; distribution of cost plus 10% on an average basis to all the sales is not acceptable.
6.We find that Commissioner has not discussed, in the impugned order, as to whether the appellants have arrived the calculations as above. However, he has discussed the same in the letter dated 20.04.2010 and made some additions and reductions in the claim of the appellants and arrived at the value addition of 45.73%. The appellants submit that: · Deduction the count of commission/ 38 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 discount/ service charges; transport and forwarding charges; selling and distribution cost aggregating to Rs.38,52,223.18/- was incorrect as they have already come under profit & loss account. 6 Excise Appeal No. 2630 Of 2010 · Deduction of export value of Rs.5,84,119/- from the sale value is incorrect. · Cost of inter-unit transfer of semi-finished goods to Samba Unit which was already included in the cost of raw materials has been again included. · Commissioner erred in arriving at inventory values and adding freight inward to the cost of raw materials was incorrect. However, learned Commissioner has not discussed any of the above calculations in the impugned order and therefore, we do not find that there is any reason for us to go into the same in detail more so, when a Statutory Auditor's certificate is on record.
7. On-going through the records, we find that the learned commissioner, vide letter dated 20.04.2010, which is a show cause notice for the purposes of the impugned case, proposes to fix the value addition at the rate of 45.73% and vide final order totally rejects the claim of the appellant. Thus, we find that the Adjudicating Authority has gone beyond the scope of the Show Cause Notice. In case the learned Commissioner was to reject the claim totally, he should have put the appellants to proper notice in terms of principles of natural justice. As the proposal and final order are contrary to each other, we find that, in the instance case, the principles of natural justice have been grossly violated. Moreover, the Adjudicating Authority has not given any finding, whatsoever, on the Statutory Auditor's certificate, rebutting the certificate on the basis of cogent and reliable data and reasoning. The only finding that the Adjudicating Authority gives is that whereas the application is dated 29.09.2009, 7 Excise Appeal No. 2630 Of 2010 the Statutory Auditor's report is dated 30.09.2009 and therefore, it cannot be relied upon. The reasoning given by 39 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 the learned Commissioner is not acceptable for the reason that the Statutory Auditor report was submitted before finalisation of the value addition by the Commissioner. We find that in terms of second Proviso to Para 2.1 (1), the manufacturer has to support his claim for a special rate with a certificate from his Statutory Auditor containing a calculation of value addition in the case of goods for which claim is made, based on the audited balance sheet of the unit for the preceding financial year. We find that the appellants have submitted the necessary certificate, it was therefore, incumbent upon the Adjudicating Authority to go through the Statutory Auditor's report; to question the figures adopted by the Statutory Auditor; to ask for clarification of the appellants before rejecting the same. Therefore, we find that Commissioner had no justified reasons to reject the Statutory Auditor's certificate. For this reason, we find that the Adjudicating Authority has completely ignored the provisions of the notification and therefore, such an order is liable to set aside.
8. We find that Explanation under Para 4 of the Notification reads as under: "For the purpose of this paragraph, the actual value addition in respect of said goods shall be calculated on the basis of the financial records of the preceding financial year, taking into account the following:
(i) Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods;
(ii) Less: Cost of raw materials and packing material consumed in the said goods;
(iii) Less: Cost of fuel consumed if eligible for input credit under CENVAT Credit Rules, 2004;
(iv) Plus: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year; 8 Excise Appeal No. 2630 Of 2010 (v) Less: Value of said goods available as 40 Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017 inventory in the unit but not cleared, at the end of the financial year preceding that under consideration. We find that learned Adjudicating Authority has not given any findings on the above as to whether the calculations arrived by the appellants followed the above principles. The impugned order does not show any reasons to controvert the Statutory Auditor's report. Therefore, the calculations and figures as given by the Statutory Auditor require to be considered as held in Crane Betel Nut Powder Works (supra) and other cases cited above.
9. Having held that the rejection of the appellant's claim in the impugned order is incorrect, we are required to fix the percentage of value addition. We find that the appellants vide application dated 29.09.2009 and during the course of personal hearing on 11.05.2010, submitted that the value addition as applicable to them would be 58.60% ,if actual sale value is taken or 62.65%, if sale value is taken on MRP basis. We are in agreement with the findings of the Adjudicating Authority that MRP is a notional value and such value cannot be considered for the purposes of arriving at "Sale Value" in terms of the Notification No.56/2002-CE dated 14.11.2002. The actual sale value is to be considered. Therefore, we are inclined to accept the value addition at the rate of 58.60% as arrived by the appellants in their letter dated 29.09.2009 on the basis of figures that were certified by the Statutory Auditor. During the course of the argument and vide the written submissions, the appellants have arrived at a special rate of 60.38%. However, looking into the records of the case and the application dated 29.09.2009 submitted by the appellants and 9 Excise Appeal No. 2630 Of 2010 the Statutory Auditor's report, we find that the appellants are eligible for special rate of 58.60% as against the rate of 36% provided in the table of the said notification.
41Excise Appeal Nos.197,198/2010, 477,478/2012, 71266,71267/2013, 75637-75639/2014, 76131,76132/2014, 75765-75770/2016 & 77120-77122/2017
10. In view of the above- the impugned order is set aside and the appeal is allowed fixing the special rate at 58.60%.
16. In view of the above discussions and observations, we hold that the rejection of the applications of fixation of special rate by the adjudicating authority is not correct and are in violation of law.
17. Therefore, we set aside the impugned orders and allow all the appeals by fixing the special rates as prayed by the appellants.
(Pronounced in the open court on 22.09.2023) Sd/ (Ashok Jindal) Member (Judicial) Sd/ (K.Anpazhakan) mm Member (Technical)