2010 (5) TMI 344 - HC - Central Excise

Appeal dismissed for not meeting eligibility criteria & exceeding investment limit. Tribunal upholds findings.

The appeal was dismissed as the appellant did not meet the eligibility criteria for the Compound Levy Scheme and the valuation of investment in plant and ... Compounded levy scheme – Basic eligibility condition - Not carrying out specified processes and investment in plan and machinery is not less than Rs. 3 crore - assessee fulfilled the requisite conditions on the quantum of investment; and it was also observed that the Chartered Accountants’ certificate showing the capital investment - certificates issued by the Chartered Accountant not answering to the fundamental requirement of determination of value according to the accounting standards (AS10) - department had not accepted the facts and figures stated in the certificates - Cost Accountant was deputed to carry out special audit - Cost Accountant submitted the opining that value of investment by the appellant on plant and machinery was more than Rs. 3 crore - DG Set and effluent treatment plant are not the essential components of machineries for the purpose of the processing – Held that: - When certain machinery is required to be installed, as per the law and regulations governing the factory in question and as per the requirements of running 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 Issues Involved:1. Eligibility to avail the Compound Levy Scheme under Notification No. 32/2001.2. Compliance with pre-conditions for the Compound Levy Scheme.3. Valuation of investment in plant and machinery.4. Applicability of Notification No. 41/2001.5. Relevance of Notification dated 10-12-1997 for valuation.6. Inclusion of specific items (DG Sets, Transformers, Effluent Treatment Plant, etc.) in the valuation.Detailed Analysis:1. Eligibility to Avail the Compound Levy Scheme:The appellant-assessee's eligibility to avail the Compound Levy Scheme under Notification No. 32/2001 was challenged. The Commissioner found that the appellant was not eligible because it did not fulfill two essential pre-conditions: the nature of the process undertaken and the value of investment in plant and machinery.2. Compliance with Pre-conditions for the Compound Levy Scheme:The Commissioner identified four pre-conditions for availing the Compound Levy Scheme:- Undertaking bleaching, dyeing, or printing processes.- Having the facility for heat setting or drying exclusively in a Hot Air Stenter.- No proprietary interest in any factory engaged in spinning or weaving.- Investment in plant and machinery not exceeding Rs. 3 crores.The appellant failed to meet the first pre-condition as it did not perform the specified processes on fiber/top dyed fabric, only on piece dyed fabrics. This fundamental ineligibility was reiterated by the Commissioner and remained unchallenged.3. Valuation of Investment in Plant and Machinery:The appellant's valuation of investment in plant and machinery was disputed. The Commissioner and Tribunal found that the appellant's investment exceeded Rs. 3 crores, based on a Cost Accountant's report, which was in accordance with AS-10 accounting standards. The appellant's attempt to exclude significant items (e.g., DG Sets, Transformers, Effluent Treatment Plant) from the valuation was rejected.4. Applicability of Notification No. 41/2001:Notification No. 41/2001 clarified the method of valuation, specifying it should be according to AS-10. The Tribunal found this amendment to be clarificatory and applicable to the appellant, as it did not alter any vested rights but merely removed ambiguities.5. Relevance of Notification dated 10-12-1997 for Valuation:The appellant argued for the application of the Notification dated 10-12-1997, which provided guidelines for excluding certain items from the valuation. The Tribunal and the High Court found this Notification irrelevant for the purpose of the Compound Levy Scheme, as it was issued for a different context under the Industries (Development and Regulation) Act, 1951.6. Inclusion of Specific Items in the Valuation:The appellant's contention to exclude items like DG Sets, Transformers, and Effluent Treatment Plant from the valuation was rejected. The Tribunal and Commissioner held that these items are essential components of the plant and machinery and must be included in the valuation.Conclusion:The appeal was dismissed as the appellant failed to meet the eligibility criteria for the Compound Levy Scheme and the valuation of investment in plant and machinery exceeded the prescribed limit. The Tribunal's and Commissioner's findings were upheld, and the appellant's contentions regarding the application of Notification No. 41/2001 and the relevance of Notification dated 10-12-1997 were rejected.