1991 (5) TMI 172 - AT - Central Excise

Appeal granted, order set aside. Investment declaration accepted with accountant's certificate. Duty demand time-barred, penalty unwarranted.

The Tribunal allowed the appeal, setting aside the order appealed against. The appellants' declaration of investment, supported by a Chartered ... Face value of capital investment - valuation of old and used plant and machinery - acceptance of Chartered Accountant's certificate for entitlement to statutory exemption - limitation and extended period for recovery where wilful suppression is alleged - eligibility for benefit under Notification No. 89/79-C.E.Face value of capital investment - valuation of old and used plant and machinery - acceptance of Chartered Accountant's certificate for entitlement to statutory exemption - eligibility for benefit under Notification No. 89/79-C.E. - Whether the appellants' declared investment on plant and machinery was to be accepted for determining entitlement to Notification No. 89/79 and whether departmental valuation based on prevailing market prices of old/used machines was relevant. - HELD THAT: - The Court held that for purposes of Notification No. 89/79 the relevant measure is the face value of capital investment at the time each investment was made, and not the present market price of old or used machines. Determination of such face value ordinarily requires scrutiny of the unit's books of account, and where purchase vouchers are unobtainable for very old machinery it is unreasonable to expect production of every invoice. The practice of the department to accept certificates issued by Chartered Accountants or State Industries Departments to avoid disputes and discriminatory treatment was noted. As the department adduced no evidence of manipulation and its market-price-based estimates for old/used items were held arbitrary and not relevant to the Notification, the Chartered Accountant's certificate confirming the appellants' declared investment was accepted for determining eligibility to the exemption. [Paras 10, 11, 12, 13, 14]The appellants' declaration of investment as evidenced by the Chartered Accountant's certificate is accepted and the departmental valuation based on market prices of old/used machines is not relevant for entitlement under Notification No. 89/79.Limitation and extended period for recovery where wilful suppression is alleged - wilful suppression - Rule 10 of the Central Excise Rules, 1944 - Whether the demand for duty was barred by limitation. - HELD THAT: - The show cause notice dated 5-6-1981 related to clearances for the period 1-4-1979 to 28-4-1980. The departmental visit occurred on 31-10-1979 and the appellants supplied the list and details in early November 1979. The department did not allege that the appellants failed to list machinery; the dispute was over valuation. Having held the department's valuation arbitrary and in absence of evidence of wilful mis-statement or suppression by the appellants, the Court concluded that the extended limitation period predicated on wilful suppression was not available. Consequently the demand issued on 5-6-1981 was time-barred. [Paras 10, 15]The demand for duty is barred by limitation because the department has not proved wilful suppression; the extended period for recovery is not available.Final Conclusion: The appeal is allowed: the appellants' declared face value of investment as supported by the Chartered Accountant's certificate is accepted for entitlement under Notification No. 89/79, the departmental demand is quashed, and the demand is further held to be barred by limitation. Issues Involved:1. Determination of the value of plant and machinery installed in the appellants' factory.2. Eligibility for benefits under Notification No. 89/79.3. Whether the demand for duty was barred by limitation.4. Applicability of penalty under Rule 173Q of the Central Excise Rules, 1944.Issue-wise Detailed Analysis:1. Determination of the value of plant and machinery installed in the appellants' factory:The appellants, a private limited company, were engaged in manufacturing oil cans, grease guns, barrel pumps, and cycle chains, subject to excise under Tariff Item 68. The factory was taken over in 1972, and the appellants invested in additional plant and machinery. They claimed an investment of Rs. 8,37,037.73, supported by a Chartered Accountant's certificate and an SSI registration certificate. However, the department estimated the value at Rs. 11,04,642.17, based on a physical verification by the Superintendent and market prices of similar machines. The adjudicating authority upheld this valuation, leading to a demand for differential duty and a penalty. The Tribunal found that the valuation of old and used machinery based on market prices was irrelevant for Notification No. 89/79, which required the face value of the investment at the time it was made. The Tribunal emphasized that the department should accept certificates issued by Chartered Accountants or State Industries Departments to avoid disputes.2. Eligibility for benefits under Notification No. 89/79:Notification No. 89/79 exempted goods under Tariff Item 68 from duty for the first Rs. 15 lakhs of clearances, provided the capital investment on plant and machinery did not exceed Rs. 10 lakhs. The appellants claimed eligibility based on their declared investment. The department's higher valuation led to the denial of this benefit. The Tribunal, however, held that the appellants' declaration, supported by a Chartered Accountant's certificate, was acceptable for determining eligibility. The department's rejection of the certificate due to the unavailability of purchase vouchers for old machinery was deemed unreasonable.3. Whether the demand for duty was barred by limitation:The show cause notice was issued on 5-6-1981 for clearances from 1-4-1979 to 28-4-1980. The department alleged misdeclaration by the appellants. The Tribunal noted that the appellants had furnished the required list of machinery and detailed information on investments promptly after the factory inspection on 31-10-1979. The Tribunal found no evidence of deliberate suppression or misstatement by the appellants. Therefore, the extended period for issuing the demand was not applicable, and the demand was barred by limitation.4. Applicability of penalty under Rule 173Q of the Central Excise Rules, 1944:The adjudicating authority imposed a penalty of Rs. 1,00,000/- under Rule 173Q. The appellants argued that no evidence of deliberate suppression was presented by the department. The Tribunal agreed, noting the absence of any proof of intentional misdeclaration. Consequently, the penalty was deemed unjustified.Conclusion:The Tribunal set aside the order appealed against, allowing the appeal. The appellants' declaration of investment, supported by a Chartered Accountant's certificate, was accepted. The demand for duty was barred by limitation, and the penalty was deemed unwarranted.