9911796707
TMI Blog2023 (10) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... tes 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of the financial 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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, administrativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of VVF (supra) has specifically held that Notifications (No. 17/2008-CE dated 27.03.2008 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 excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations/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. .................................................. ". "....... 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 jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option under clause (a) shall exercise his option in writing for availing such option before effecting the first clearance in any financial year and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year; (d) the manufacturer shall submit a statement of the total duty payable as well as the duty paid by utilization of CENVAT credit or otherwise and the credit taken as per clause (a), on each category of goods manufactured and cleared under the notification and specified in the said Table, to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, by the 15th of the month in which the credit has been so taken; (e) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed necessary, shall determine the amount correctly refundable to the manufacturer and intimate to the manufacturer by the 15th day of the next month to the month in which the statement under clause (d) has been submitted. In case the credit taken by the manufacturer is in exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., dated 25-6-2003, No. 71/2003-C.E., dated 9-9-2003 and No. 20/2007-C.E., dated 25-4-2007. 2. In all these cases, the exemption operates through a refund mechanism. Thus, the manufacturer availing of the exemption is required to fully utilise the Cenvat credit available with him at the end of the month and pay the balance duty payable either in cash or through PLA. The duty paid in cash or through PLA is then refunded to the manufacturer. Analysis of data collected from the field formations in respect of units availing of the exemption indicates that the scheme in its present form does not necessarily link the quantum of incentives to the value addition undertaken by the unit. The underlying objective of these exemptions is to incentivize genuine value addition in these backward areas. In order to achieve this in a more effective manner some changes/amendments have been carried out in these exemptions. These have been incorporated in Notification No. 16/2008-C.E. to 23/2008-C.E. all dated 27-3-2008. 3. The salient features of these amendments are as follows - (i) Goods covered by the scheme and manufactured by eligible units in the specified areas are currently exempt from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted accordingly. (vi) These changes shall be effective from 1st April, 2008. 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. 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds, 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/2005C-I, dated 5-4-2005 held that such deduction is permissible and set aside the impugned order. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : (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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 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. * 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent and reliable data and reasoning. The only finding that the Adjudicating Authority gives is that whereas the application is dated 29.09.2009, the Statutory Auditor's report is dated 30.09.2009 and therefore, it cannot be relied upon. The reasoning given by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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