TMI Blog2010 (5) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the plant, the appellant cannot be acceded a right to exclude such investment while computing the total value of investment in plant and machinery - ineligible to avail the Compound Levy Scheme - 9 of 2010 - - - Dated:- 3-5-2010 - Jagdish Bhalla and Dinesh Maheshwari, JJ. Shri Rishabh Sancheti, for the Appellant. [Order per : Dinesh Maheshwari, J.]. - This appeal under Section 35-G of the Central Excise Act, 1944 is directed against the final order dated 13-8-2009 whereby the Customs, Excise and Service Tax Appellate Tribunal, New Delhi ['the Tribunal'] has dismissed the appeal [Excise Appeal No. 3308/2004 - Ex(BR)] filed by the appellant-assessee against the order dated 31-3-2004/6-4-2004 as passed by the Commissioner, Central Excise, Jaipur-II ['the Commissioner'] insofar relating to the demand of duty and interest while affirming the finding that the appellant was not eligible to avail of the special procedure of Compound Levy Scheme under Notification No. 32/2001. 2. Briefly put, the relevant facts and the background aspects of the matter are that by way of Notification No. 16/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed fabric is up to and including Rs. 30 per sq. mtr., Rs. 2.5 lakhs per chamber per stentor per month; and (b) in the case of a processing factory whose average value of processed fabric exceeds Rs. 30 per sq. mtr., Rs. 3 lakhs per chamber per stentor per month, installed in the processing factory, irrespective of whether such stentor or chamber is in use or not, or is in working condition or not. 2 to 6 xxxx xxxx xxxx 7. (1) The independent textile processor, who is engaged exclusively in the manufacture or production of the said goods, shall make an application prior to the commencement of commercial production, in the form specified in the APPENDIX to this notification, to the Commissioner of Central Excise for the purpose of availing of the special procedure for payment of excise duty as contained in this notifica tion. The Commissioner of Central Excise, on such application being made, shall grant permission, subject to such conditions and limitations as laid down in this notification, so as to cover the period commencing from the date of making the application and ending on the 31st March, 2002. Pending grant of such permission by the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a processing factory, of an independent textile processor, ex isting on 1st May, 2001 and in respect of which no application was made under rule 96ZNA of the Central Excise Rules, 1944, on or before 20th May, 2001, shall not be eligible to avail of the benefit of this notification. Provided further that an application made prior to the com mencement of commercial production by an independent textile proces sor, commencing production for the first time in a new processing factory coming into existence after the 1st May, 2001 but prior to 1st July, 2001, under the proviso to sub-rule (2) of rule 96ZNA of the Central Excise Rules, 1944, so as to cover the period up to the 31st March, 2002, shall also be deemed to be an application under sub-paragraph (1) and shall be disposed of under that sub-paragraph. If such application had been granted by the Commissioner of Central Excise under rule 96ZNA of the Central Excise Rules, 1944, so as to cover the period up to 31st March, 2002, such disposal shall be deemed to be the disposal of the application under sub-paragraph (1), subject to all the conditions and limitations as laid down in this notification. 8. (1) The original value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise, dated the 28th June, 2001, namely :- In the said notification, in paragraph 8, after sub-paragraph (1), the fol lowing shall be inserted, namely :- '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 on Accounting for Fixed Assets.' 5. Its application for availing the Compound Levy Scheme having remained pending, the appellant proceeded to discharge the duty liability in accordance with the said Scheme as permitted by Rule 96-ZNA(2) ibid. As per clause (2) of paragraph 7 of Notification No. 32/2001, the application made by the appellant was required to the dealt with as if made under this Notification and hence, the Commissioner proceeded to deal with the same in his detailed order dated 20-9-2001. The learned Commissioner, at the outset, pointed out the following four pre-condition to be fulfilled by the applicant to avail the said Compound Levy Scheme :- "2. As per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully dyed piece of fabrics. It is also an admitted fact that printing of fabrics is not being carried out by the assessee on any type of fabrics, as per their own submission. Thus I am satisfied that none of the processes specified in the Notification for availing Compound Levy System is carried out on fiber/top dyed fabric. Whereas one or more specified processes are carried out on piece dyed fabrics only". (emphasis supplied) 8. Thus, the very basic condition regarding the nature of activity/process was held not fulfilled by the appellant-assessee. In the face of this fundamental adverse finding on the nature of activity, a request came to be made on behalf of the appellant that the unit may be allowed to avail the Scheme in relation to 'piece dyed fabrics' and the other goods may be subjected to ad valorem rate of duty but the same was declined by the Commissioner with the observations that the Scheme could not be extended to the part goods being manufactured by the assessee. The Commissioner said,- "7.6 A request was made that the unit may be allowed to avail provision of the Compound Levy Scheme in respect of piece dyed fabrics and other goods namely Fiber/Top Dyed fab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ledger of Capital Accounts Work in progress' of the assessee, the total investment in plant and machinery installed in their factory works out to be Rs. 339.15 lacs which is much above the prescribed investment limits of rupees three Crores. Thus the assessee does not fulfill this condition laid down in sub-rule (1) of rule 96ZNB, to be eligible for the special procedure of compound levy scheme." (emphasis supplied) 11. Accordingly, the Commissioner found the appellant ineligible to avail the Compound Levy Scheme particularly for not fulfilling the aforesaid pre-conditions (i) and (iv); and rejected the application with the following order :- "10. In view of the above findings I hereby hold that the assessee does not fulfill the above conditions at para 2 (i) 2 (iv) to be eligible for the special procedure of compound levy duty scheme prescribed for independent textile processors engaged in the manufacture of specified textile fabrics. Therefore in exercise of the powers conferred under sub-rule (2) of Rule 96ZNA (now Rule 15 of Central Excise Rules, 2001 read with Notification No. 32/2001 - C.E. dated 28-6-2001), I hereby reject the application of M/s. Sulzer Processors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to the appellants to produce the certificate in accordance with the requirement of the law from the Chartered Accountant instead of out-rightly rejecting their claim for the benefit of the Compounded Levy Scheme. Therefore, in our view the matter deserves to be re-examined especially in the light of the ratio of the law laid down by the Gujarat High Court in the case referred to above. 5. Consequently, the impugned order in both these appeals is set aside and the matter is sent back to the adjudicating authority for de novo consideration regarding the availability of Compounded Levy Scheme benefit to the appellants after affording reasonable opportunity of hearing to both the sides with a liberty to the appellants to produce evidence, if any, in support of their case." 14. Pursuant to the remand order aforesaid, the Commissioner took up the matter for consideration afresh. The department had not accepted the facts and figures stated in the certificates sought to be relied upon by the appellant; and a Cost Accountant was deputed to carry out special audit. The Cost Accountant submitted the report dated 30-12-2003 opining that value of investment by the appellant on plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the investment exceeded Rs. 3 crores. The Commissioner also referred to the certificates issued by the Chartered Accountant and found the same not making out a case in favour of the appellant for not answering to the fundamental requirement of determination of value according to the accounting standards (AS10). The learned Commissioner rejected the contention urged on behalf of the appellant that valuation be made with reference to the aforesaid Notification dated 10-12-1997 as issued by the Ministry of Industry; and, while observing that the special procedure provided under the relevant Notifications of Central Excise was not linked with the Notification of the Ministry of Industry and the benefits provided under the later could not be extended to the Compound Levy Scheme, particularly referred to the decision of the Hon'ble Supreme Court in the case of Commissioner of C.Ex., Trichy v. Rukmani Pakkwell Traders - 2004 (165) E.L.T. 481 on the point that the Exemption Notifications have to be strictly construed, they must be interpreted on their own wordings, and the wordings of some other Notification are of no benefit in construing a particular Notification. 17. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the original value of investment in the plant and machinery installed by the appellant as on 1-3-2001 and so also on 1-5-2001 exceeded Rs. 3 crores; and the appellant was not entitled to avail the benefit of the special procedure. The learned Commissioner, accordingly, held the appellant liable to pay Rs. 73,44,424/- being the differential duty payable from 1-5-2001 to 6-10-2001 and interest thereupon; and also imposed a penalty of Rs. 5 lacs. 20. Dissatisfied with the aforesaid order dated 6-4-2004, the appellant preferred the appeal to the Tribunal that has been decided by the order dated 13-8-2009, sought to be challenged in this Central Excise Appeal before us. 21. The Tribunal in its order dated 13-8-2009 proceeded to decide, again, two appeals together involving more or less similar and akin issues, including the one by the appellant. The Tribunal observed that the basic dispute had been about the value of investment in plant and machinery i.e., as to whether it exceeded Rs. 3 crores as on 1-3-2001 or 1-5-2001 where, on one hand, the appellants contended it to be below Rs. 3 crores relying on the certificates of Chartered Accountants produced by them and, on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim on behalf of the appellant that the transformers need not be treated as plant and machinery is clearly not acceptable as it is against the common understanding as well as against the accounting norms as mentioned earlier. Even the guidelines of Central Govt., dated 10-7-97 for determining small scale industries and ancillary industry refers to exclusion of extras transformers installed by the company. We have not been shown that the exclusion claimed by the appellants relate to extra transformers. Similarly, we are not convinced that the DG sets should be treated as other than plant and machinery. The effluent treatment plant which are mandatory in certain industries cannot be treated anything other than the plant and machinery. 7.6 The certificate given by the CA on behalf of the appellants do not indicate that the valuation has been done in terms of AS 10 method. It merely mentions that they have taken into consideration the AS 10 norms. Nowhere, it is mentioned that the valuation has been actually done by adopting the said norms. The claims of the appellants are for excluding the value of items like DG sets compressors, effluent treatment plant machinery and these claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions that the Compound Levy Scheme is precisely in relation to "an independent textile processor" who is processing the specified textile fabrics that have been referred as the "said goods"; and it is the machinery requisite for processing of the said goods that would be relevant towards "the value of the investment in the plant and machinery" for the purpose of the said Exemption Notifications and not all the machinery that might have been installed in the factory. The learned counsel elaborated on the submissions that "manufacturing" or "producing" are the acts different than "processing" that the only relevant aspect being of "processing", and that too only of "the said goods", the entire of the machinery used in production or installed in the factory is not to be included for the purpose of valuation under the Notification in question. The learned counsel, in his emphasis on the difference between production and processing, has referred to and relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Kerala v. Tara Agencies - 18 2007 (214) E.L.T. 491. The learned counsel yet further referred to the decision of the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, we are constrained to observe that the entire of the repeat exercise on the question of valuation, taken up only because of the remand order passed by the Tribunal in the first round of litigation on 9-4-2002, had been unwarranted and unnecessary; and ineligibility of the appellant to avail of the Scheme in question stood concluded for a different but significant reason. 30. As noticed above, there had been a categorical finding by the Commissioner in the initial order dated 20-9-2001 that the nature of activity as undertaken by the appellant did not answer to the basic pre-condition for applicability of the Compound Levy Scheme. The findings of the Commissioner in the order dated 20-9-2001 (as reproduced hereinbefore) had been unambiguous and unequivocal that the appellant had not been carrying out any of the processes specified in the Notification for availing Compound Levy Scheme on fiber/top dyed fabrics; and had been carrying out one or more of the specified processes only on piece dyed fabrics. In fact, in the face of such a position, the appellant made an alternative attempt with a feeble suggestion that the Scheme might be allowed in relation to piece dyed fabrics and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings on the nature of activity/process and ineligibility qua the pre-condition (i) appears in the impugned order dated 13-8-2009. Moreover, no question of law in this regard has even been suggested before us in this appeal. In fact, no question of law would arise in this regard because the findings on the process undertaken by the appellant are essentially those of facts. 34. Thus, the resultant position is that the repeated findings of the Commissioner to the effect that none of processes specified in the Notification for availing Compound Levy System was carried out on fiber/top dyed fabric and thereby the appellant was not answering the very fundamental requirement of eligibility under the Notification in question, remain uncontroverted, unchallenged, and unassailable. These finding, by themselves, are sufficient to conclude that the appellant is not eligible to avail of the Scheme in question; and in the face of these concluded findings, the appellant would remain ineligible, irrespective of value of investment in plant and machinery, whether above or below Rs. 3 crores. In this view of the matter, the issue of value of investment in plant and machinery becomes rather aca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 29B of the Act of 1951, it is crystal clear that the said Notification dated 10-12-1997 operates in an entirely different arena and field; and we are unable to find even a remote reason or basis wherefor and whereupon the same could be imported for the purpose of the Notifications with which we are concerned in this matter. 38. Having examined the relevant Notifications, we are inclined to agree with the Tribunal that the guidelines as stated in the said Notification dated 10-12-1997 as issued by the Ministry of Industry for the purpose of Sections 11B and 29B of the Act of 1951 were not at all relevant for the purpose of the Notifications involved in the present matter particularly when the Notification dated 10-12-1997 had been issued in an entirely different context and for an entirely different purpose; and when the exclusion of the items as stated therein for the purpose of calculating the value of plant and machinery were at variance with the accepted accounting norms like the costs of installation of plant and machinery, transportation charges, the technical know-how etc. were excluded. The contention urged on behalf of the appellant that the value of investment in plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons has been advanced before us that the Compound Levy Scheme has been in relation to "an independent textile processor" who is processing the specified textile fabrics that have been referred as "the said goods"; and, with reference to the difference between the concept of production and processing, it has been contended that only the machinery requisite for 'processing' of 'the said goods' ought to be taken into consideration towards 'the value of investment' in the plant and machinery for the purpose of the said Exemption Notifications and not all the machinery installed in the factory of the appellant. The submissions made on behalf of the appellant are entirely baseless and rather ill-conceived. 42. The Compound Levy Scheme under Notification No. 32/2001 (and so also under the earlier Notification No. 16/2001) has been in respect of the such processed textiles fabrics, falling under the given headings and sub-headings, which are "manufactured or produced" by an independent textile processor exclusively with the aid of a hot-air stenter. This manufacturer or producer has been referred for the purpose of the Notification as "an independent textile processor"; and the goods sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such plant and machinery is in use or not or in working condition or not. 44. Looking to the terms of Notification No. 32/ 2001, the decision of the Hon'ble Supreme Court in Himalayan Cooperative (supra) is also of no assistance to the appellant; rather, on principles, the said decision operates against the appellant. In Himalayan Cooperative, the respondent-assessee had been manufacturing butter and skimmed milk powder in its industrial complex; and, for the purpose of the chilling plant of its dairy unit, had installed a plant manufacturing liquid nitrogen, which admittedly fell under Item 68 of the excise tariff. The excise authorities were of the view that since the respondent had been using all the plants and machinery for the purposes of manufacturing different excisable goods falling under different tariff items, the total value of capital investment of all plants an machineries installed in its factory was to be taken into account for determining the limit prescribed in Notification No. 105/80-C.E. However, the Tribunal upheld the assessee's plea that the value of investment on liquid nitrogen plant alone was relevant, the exemption being in relation to the said goods onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples, the decision in Himalayan Cooperative (supra) could only be read against the appellant. 46. On the substance of the matter, we have examined the suggestions as made on behalf of the appellant for the purpose of assessment of the original value of investment in plant and machinery and what we find is that the appellant, in order to bring its case as that of investment below Rs. 3 crores, proceeded to exclude various items like DG Set, transformers, air compressors, effluent treatment plant, water softeners, filter press, trolleys, fire fighting equipments, sewing machine and weighing scale, chemical tank, chimney, and even the electric installation and water lines from the value of investment. A major part of such exclusion had been incorrect; and against the fundamental accounting standards. 47. It has been suggested that the items like DG Set (initial investment about Rs. 16.62 lacs) and effluent treatment plant etc. (initial investment about Rs. 21.00 lacs) are not the essential components of machineries for the purpose of the processing in question. The suggestion is baseless. The place of setting up of its factory had been the choice of the appellant. When certain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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