Custom, Excise & Service Tax Tribunal
M/S. Shyam Textile Mills vs Commissioner Of Central Excise & S.T., ... on 27 April, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/491/2010, E/398-399/2012 (Arising out of OIO-20-COMMR-96 ZNA-01 dated 25.10.2001, OIO-10-17-COMMISSIONER-RAJU-AHD-I-2012 dated 29.3.2012 and OIA-15-2012-AHD-I-CE-MM-COMMR-AAHD dated 09.3.2012, Passed by Commissioner/ Commissioner (Appeals) Central Excise & Service Tax Ahmedabad) M/s. Shyam Textile Mills : Appellant (s) VERSUS Commissioner of Central Excise & S.T., Ahmedabad : Respondent (s)
Represented by :
For Appellant (s) : Shri P.M. Dave, Advocate For Respondent (s) : Shri K. Sivakumar, Authorised Representative For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No 3 Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) Date of Hearing : 11.03.2015 Date of Decision : 27.04.2015 ORDER No. A/10400-10402/2015 Dated 27.04.2015 Per : Mr. H.K. Thakur;
Appeal No. E/491/2010 has been filed by appellant M/s. Shyam Textile Mills against OIO No. 20/Commr/96 ZNA/01 dated 25.10.2001 on 30.3.2010. Under this OIO adjudicating authority rejected the appellants option to pay duty under Compounded Levy Scheme as per Rule 96 ZNA of the erstwhile Central Excise Rules, 1944 introduced under Notification No. 16/2001-CE (NT) dated 30.4.2001. Appeal Nos. E/398 and 399/2012 have been filed by the appellant against the subsequent orders passed by the Adjudicating authority with respect to demands of differential duty arisen as a result of OIO No. 20/Commr/96 ZNA/01 dated 25.10.2001.
2. Shri P.M. Dave, (Advocate) appearing on behalf of the appellant during the hearing and through written submissions argued that after receipt of OIO dated 25.10.2001 appellant went to the Gujarat High Court through a writ petition and Hon'ble Gujarat High Court vide order dated 25.2.2012 in SCA No. 10588 of 2001 with SCA No. 10590 of 2001 in the case of Mangal Textile Mills Pvt. Limited and others vs. UOI [2002 (49) RLT 265 (Guj.)] decided the case in favour of the appellant on merits. That Revenue took the matter to the Supreme Court and the Apex Court vide order dated 18.2.2010 in CA No. 1850-1851 of 2003 remanded the case to CESTAT to decide the issue on merits. Learned Advocate made the bench go through the judgments dated 25.2.2002 and 18.2.2010 passed by the Hon'ble Gujarat High Court and Hon'ble Supreme Court respectively.
2.1 Shri P.M. Dave, (Advocate) argued that appellant filed an application under Chapter E-xA [Rule ZNA to 96ZND] of the Central Excise Rules, 1944 introduced under Notification No. 16/2001-CE (NT) dated 30.4.2001. That the required declaration under Rule 96ZNB regarding original value of the investments made in the plant and machinery installed in the factory, in prescribed format was made duly certified by a Chartered Accountant. That the said declaration was filed before the appropriate authority before 20.5.2001. That amending notification No. 23/2001-CE (NT) dated 28.6.2001 was effective only from 01.7.2001 and can not be made applicable to the conditions prescribed earlier. That even after the amendments carried out under Notification No. 23/2001 dated 28.6.2001 appellant filed a certificate dated 20.9.2001 from the same Chartered Accountant that valuation of fixed assets was done as per the Accounting Standard 10 (AS-10) prescribed by Institute of Chartered Accountants of India. Learned Advocate made the bench go through the certificates issued by the Chartered Accountant which were also produced before the adjudicating authority.
2.2 Learned Advocate further argued that as per the legal requirement under Rule 96 ZNB(1) of the Central Excise Rules, 1944, appellant was required to declare the original value of investments in the prescribed format duly certified by a Chartered Accountant or Cost Accountant. That as per the prescribed conditions of the Compounded Levy procedure Commissioner can not reject the valuation done by a Chartered Accountant as per his own interpretation and best judgment. Learned Advocate relied upon the following case laws in support of his arguments:-
(i) Dayang Tea Estate vs. CCE, Shilong [2005 (186) ELT 342 (Tri. Kolkata)]
(ii) Farm Fresh Foods Pvt. Limited vs. CCE, Chandigarh [2009 (241) ELT 74 (Tri. Del.)]
(iii) Inter Continental (India) vs. UOI [2003 (154) ELT 37 (Guj.)]
(iv) Gujarat State Fertilizers & Chemicals Limited vs. CCE, Vadodara [2014 (309) ELT 94 (Tri. Ahmd.)]
(v) Eastern Shipping Agency vs. CST, Ahmd. [2013 (32) STR 630 (Tri. Ahmd.)
(vi) Swadesh Khadi Gramudyog Seva Sangh vs. CCE, Ahmd. [2009 (245) ELT 323 (Tri. Ahmd.)]
(vii) Abraham J. Tharakan vs. CCE, Cochin [2007 (210) ELT 112 (Tri. Bang.)] 2.3 With respect to Appeal Nos. E/398 & 399/2012, it was also argued by the learned Advocate that if on merits their case is not accepted then they will be eligible to the credit of deposit already made and duty will be required to be re-worked out. It was also the case of the learned Advocate that copy of verification made though the field formation was not furnished to the appellant. It was further contended by the Learned Advocate in the written submissions that in the decision of Rajasthan High Court in the case of Sulzer Processors Pvt. Limited vs. CCE -[2010 (262) ELT 641], heavily relied upon by the learned Authorised Representative, the Commissioner had appointed a Cost Accountant under Section 14A of the Central Excise Act for disputing the certification made by the assessees Chartered Accountant; the Cost Accountant so appointed by the Commissioner visited the factory of the assessee and then submitted a report about value of investment in plant and machinery linking his physical verification with the figures in the assessees balance-sheet; and the Cost Accountant so appointed by the Commissioner was also allowed to be cross examined in adjudicating proceedings before the Commissioner held that the valuation certificate by the assessees Chartered Accountant was incorrect and that the valuation report of the Cost Accountant appointed by the Department was more accurate and acceptable. But in the present case, the Commissioner has taken it upon himself to submit a report about valuation of pant and machinery and also about applicability of AS-10 without appointing any qualified Chartered Accountant or Cost Accountant and therefore, as held by this Honble Tribunal in the case of Dayang Tea Estate (supra), the opinion and knowledge of the Adjudicator cannot be the final words and to be applied in the face of an expert opinion. The order of the Commissioner which is in the nature of a certification of value of investment in plant and machinery installed in the appellants factory is without jurisdiction because the Commissioner had no authority in law to undertake such exercise himself, and therefore the order passed him is void.
3. Shri K. Sivakumar (AR) appearing on behalf of the Revenue and through the written submissions made the following submissions:-
(i) That as per the detailed reasoning given by the Adjudicating authority the Original value of the assets was more than Rs. 3 Crore, therefore, appellant was not eligible to Compound Scheme.
(ii) That subsequent amendments to Notification No. 16/2001-CE dated 30.4.2001, introduced through Notification No. 32/2001-CE dated 28.6.2001 and 41/2001-CE dated 21.9.2001 were retrospective in nature and the Original Value of plant and machinery was required to be done as per Accounting Standard issued by the Institute of Chartered Accountants of India.
(iii) That adjudicating authority got the original value of plant and machinery verified from the jurisdictional Deputy Commissioner based on the balance sheets of the appellant.
(iv) Learned AR relied upon the Rajasthan High Courts judgment in the case of Sulzer Processors Pvt. Limited vs. CCE-II [2010 (254) ELT 559 (Raj.)] and argued that amending Notifications 41/2001-CE and 32/2001-CE were clarificatory and will be applicable for the earlier period also making application of Accounting Standards must for determining original value of plant and machinery. He also relied upon the following case laws:-
(a) CCE Coimbatore vs. Jawahar Mills Limited [2001 (132) ELT 3 (SC)]
(b) Indian Cements Limited vs. CCE, Trichy-I [2013 (297) ELT 508 (Mad.)]
4. Heard both sides and perused the case records. The issue involved in these appeals is whether the original value of investment in plant and machinery of the appellant is above Rs. 3 Crore or not for being eligible to voluntary Compounded Levy Scheme under the provisions of Rule 96ZNA to 96ZND (Section ExA) of the Central Excise Rules, 1944. As per the provisions contained in Rule 96 ZNB(1) of Central Excise Rules, 1944, reproduced below, if this value is less than Rs. 3 Crore then appellant is entitled to avail Compounded Levy Scheme for the textile manufactured by them:-
96ZNB. Conditions for availing of special procedure. (1) The original value of the investment in the plant and machinery installed in the factory of the independent textile processor of the said goods, as on the 1st March, 2001 or on the 1st day of May, 2001, whichever is higher, for an existing factory of the independent textile processor or on the date of making the application under Rule 96ZNA in the case an independent textile processor commencing production for the first time in a new factory coming into existence after the 1st day of May, 2001, shall not exceed three crore rupees, irrespective of whether such plant and machinery is in use or not, or is in working condition or not, and the independent textile processor shall declare the original value of investment in such plant and machinery installed in his factory, on the dates mentioned above, in the prescribed format duly certified by a Chartered Accountant or cost Accountant. The Commissioner of Central Excise may require any such documentary evidence as he considers appropriate in respect of such original value before granting the application. 4.1 Further by Notification No. 32/2001-CE dated 28.6.2001 the following condition was prescribed for the applications filed under Section E-XA of the Central Excise Rules, 1944 as per Clause 7(2) of this notification:-
(2) Notwithstanding anything contained in sub-paragraph (1), in respect of a processing factory existing as on 1st May, 2001, the application made by an independent textile processor, on or before the 20th May, 2001, to the Commissioner of Central Excise under sub-Rule (2) of Rule 96ZNA for availing the special provisions contained in Section E-XA of the Central Excise Rules, 1944, for the period on and from 1st May, 2001 to 31st March, 2002, shall be deemed to be an application made under sub-paragraph (1). If such application had been granted by the Commissioner of Central Excise on a date prior to 1st day of July, 2001, the same shall be deemed to have been granted under sub-paragraph (1), subject to all the conditions and limitations as laid down in this notification. Otherwise, the Commissioner shall dispose of the application as if it is an application made under sub-paragraph (1). 4.2 By another amending notification No. 41/2001-CE dated 21.9.2001, the following explanation was added to paragraph 8 of Notification No. 32/2001-CE dated 28.6.2001:-
Explanation. For the removal of doubt, it is hereby clarified that the original value of the investment in the plant and machinery installed in the factory of the independent textile processor, shall be the original value as determined in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India of Accounting for Fixed Assets.
5. The above amendments carried out have been interpreted by Hon'ble High Court of Rajasthan in the case of Sulzer Processors Pvt. Limited vs. CCE-II (supra), relied upon by the learned Authorised Representative, as follows:-
39. Now to the question about the? import and effect of the Notification No. 41/2001 whereby explanation has been inserted to paragraph-8 (1) of Notification No. 32/2001. It has been contended that changing the mode of valuation by Notification No. 41/2001 had been of materially altering the Scheme after a right came existing in the appellant. The submission is not correct. The contents of the Notification No. 41/2001 have been reproduced above and evident it is that thereby only an explanation has been added so as to remove the doubts regarding method of assessment of value of investment in plant and machinery. Such an amendment, essentially being clarificatory in nature, cannot be considered taking away any of the vested rights of the appellant. It being a matter of exemption, if anything in the original Exemption Notification called for clarification or explanation, the exercise in that direction was unexceptionable. By the said Notification No. 41/2001, nothing more has been done except providing that the valuation shall be as per the accounting standards (AS10). Such an explanation was only engaged to remove the ambiguity or doubts and to avoid fanciful valuation from either side. Noticeable further it is that even under the original Scheme, the Commissioner was entitled to require any documentary evidence as considered appropriate in respect of valuation before granting the application.
40. It is not correct to say that the department has changed the system of valuation after some rights have crystallized in the appellant under Notification No. 32/2001. When one of the pre-condition had been with reference to the extent of value of investment in the plant and machinery, a reasonable explanation for the method of working out such valuation cannot be said to be beyond the terms of the original Notification itself. By way of such an explanation only the doubts, if any, in the original Notification were quelled and removed. In the given circumstances, Notification No. 41/2001 cannot be held inapplicable to the appellant.
6. The above interpretation made by the Hon'ble Rajasthan High Court only gave a ruling that subsequent Notification No. 32/2001-CE dated 28.6.2001 and 41/2001-CE dated 21.9.2001 are only clarificatory and will also be applicable to the original notification regarding deciding the value of plant and machinery. There can not be any two opinions on the interpretation so made.
7. It is revealed from the records that the appellant filed application in proper form ASP-I duly certified by the Chartered Accountant as required under Rule 96ZNB (I) of the erstwhile Rule 1944. By a letter dated 02.7.2001, the appellant was asked as to why their application under Rule 96ZNA should not be rejected as the Deputy Commissioner of Central Excise verified and reported on the basis of Balance Sheet the original value of plant and machinery was more than three crores. The appellant submitted reply to the said letter and enclosed another certificate dated 20.09.2001 of the same Chartered Accountant, which reads as under:-
In continuation of our Certificate dated 25.6.2001, we have to inform that we have followed the Contents of Accounting Standard -10 (AS-10) regarding Accounting for fixed Assets, issue by the institute of Chartered Accountants of India, while Certifications of Particulars of Plant & Machinery installed in Factory of M/s. Shyam Textile Mills, Ahmedabad, as on 01.3.2001 and 01.5.2001 is amounting to Rs. 2,77,80,069/- and Rs. 2,84,30,693/-, respectively.
8. The adjudicating authority, on the basis of verification report of the Deputy Commissioner, on his own, estimated the original value of plant and machinery as more than Rs. three crores. The findings of Adjudicating authority is as under:-
This leaves me with no alternative but to estimate the original value on my own. This machinery have to be presumed to have been purchased in the year 1990 when the unit was established and therefore, at least 25% depreciation for the 4 years can be safely presumed.
9. We are unable to accept the findings of the adjudicating authority for the reasons that adjudicating authority can not sit over the certification done by the Chartered Accountant, as per the Accounting Standards and decide the value of the plant and machinery as per his own verifications got made and best judgment. Appellant filed the required declaration as per the provisions of Rule 96ZNB(1) of the Central Excise Rules, 1944, which was duly certified by the Chartered Accountant. After the issue of Notification 32/2001-CE and 41/2001-CE, appellant gave a certificate dated 20.9.2001 in continuation of earlier certification from the same Chartered Accountant that valuation of the fixed assets was done as per Accounting Standard 10 (AS-10). It is observed from the provisions of Rule 96ZNB (1) of Central Excise Rules, 1944 that there is no mention of valuation to be done by Accounting Standards by the Chartered Accountant. Subsequent certificate given by the Chartered Accountant to that effect can not be brushed aside by the adjudicating authority to hold that he will determine the value of the plant and machinery himself. Nowhere in the proceedings it has been pointed out by another competent expert opinion that certificates issued by Chartered Accountant does not conform to the Accounting Standards-10 as laid down by Institute of Chartered Accountants of India. If the adjudicating authority was not satisfied by the certificates given by the Chartered Accountant, then he could have asked the appellant to furnish such a certification as prescribed from another Chartered Accountant but can not himself decide the valuation of plant and machinery on the basis of presumptions, when statute demands such a certification to be done by a Chartered / Cost Accountant. Alternatively he could have also got the cost auditing done from an appropriate authority, where appellant could also explain his view point before the expert, as correctly brought out by the Learned Advocate of the appellant when contesting the case law of Sulzer Processors Pvt. Limited [2010 (262) ELT 641] relied upon by the learned Authorised Representative.
10. On the above issue, the ratio of law laid down by jurisdictional Gujarat High Court in the case of Inter Continental (India) vs. UOI [2003 (154) ELT 37 (Guj.)] is very relevant. Para 19 of this judgment is reproduced below:-
19. Mr. Patel during the course of discussion referred? to the provisions of Prevention of Food Adulteration Act, 1954 as well as Rules thereunder with special reference to Sec. 6 of the said Act and Rule 5 which defines standards of quality on various articles as specified in Appendix B to the Rules. Our attention was invited to various standards set out in Appendix B to urge that only slight difference was there between the different kinds of oils for the purpose of ascertaining whether oil was of edible grade or not. It is not necessary for our purpose to deal with the various technical aspects laid down in Appendix B for the simple reason that it is an admitted position between the parties that when the imported goods entered territorial waters of India, the Boarding Officer had drawn samples of the product for test in the presence of the representative of the Master of Vessel, the Shipping Agent and representative of the Importer; and such samples had been sent for testing to the Chemical Examiner, Customs House, Kandla, who has opined that the same does not conform specification for crude palm oil (edible grade) as per IS-8323-E-1977. It appears that the said sample was also forwarded through the Referal Hospital and Community Health Centre, Mundra-Kutch, to the Public Analyst, Food and Drug Laboratory, Vadodara for opinion. He has opined to the effect that the sample conforms to the standards and provisions laid down under the Prevention of Food Adulteration Rules, 1955, for palm oil and cannot be used as such for human consumption. Therefore, once the competent authority who is technically qualified to tender opinion in relation to the technical standards prescribed under the provisions of Food Adulteration Act and Rules thereunder has tendered his opinion it would not be open to any one to take a contrary stand, unless and until such technical opinion is displaced by specific and cogent evidence in the form of another technical opinion. Merely by approaching the matter by stating that the goods could be converted into palm oil of edible grade by carrying out certain processes, the respondent No. 3 who is an officer of the department cannot displace the report of technical expert, nor can he insist that inspite of such report the importer must establish that end-use of the product shall not be other than one as regards entry in which the goods admittedly fall at the time of import. (emphasized supplied) 10.1 Similar view has been expressed by the other co-ordinate benches in the following case laws:-
(a) Abraham J. Tharakan vs. CCE, Cochin [2007 (210) ELT 112 (Tri. Bang.)]
(b) Dayang Tea Estate vs. CCE, Shilong [2005 (186) ELT 342 (Tri. Kolkata)]
11. In view of the above observations, adjudicating authority was not justified in rejecting the valuation done by a Chartered Accountant when it is subsequently also certified that the valuation is done as per Accounting Standards-10. The adjudicating authority was not right in deciding the original valuation of plant and machinery himself, in the absence of any contrary expert opinion. Accordingly the appeals filed by the appellant are required to be allowed. We have not gone into the other aspects of the Appeal No. 398 and 399/2012 raised by the appellant as on merits we are allowing the appeals.
12. Appeals filed by the appellant are allowed.
(Pronounced in the open Court on 27.04.2015) (P.K. Das) (H.K. Thakur) Member (Judicial) Member (Technical) ..KL 12