TaxTMI 
TaxTMI 
2009 (3) TMI 812
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....ication No. 32/2001-C.E., dt. 28-6-2001 as amended, for the period up to 28-2-02. The assessees were paying duty at the rate of Rs. 3 lakhs per chamber per stenter per month as per the provisions of Rule 96ZNB and Notification No. 32/2001-C.E. They filed A.S.P.1 application on 17-5-2001 for fulfilment of condition laid down in Rule 96ZNA, the main condition being that the original value of investment in plant and machinery installed in the factory of the independent textile processors as on 1-3-2001 or 1-5-2001 whichever is higher, must not be in excess of Rs. 3 crores as per Rule 96ZNB (The Rule further provided that in case of installation of any additional plant and machinery, the same should be intimated to the Commissioner of Central Excise within 7 days from the date of installation and that the original value of investment in plant and machinery together with the original value of investment in additional plant and machinery should not exceed Rs. 3 crores). The application duly certified by the Chartered Accountant showed that the total value of the plant and machinery as on 1-3-2001 was Rs. 2,92,05,560.46 and that on 1-5-01, it was Rs. 2,78,97,044.21 - the difference in the....
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....or 1-5-2001, whichever is higher, (emphasis supplied) must not be in excess of Rs. 3 crores as per Rule 96ZNB. The original value of investment in plant and machinery as on 1-3-01 was Rs. 2.91 crores approximately. The contention of the respondents is that as per clause 14.1 of the Accounting Standards AS 10 for accounting of fixed assets (the scheme provides for computing the value of investment in plant and machinery based on Accounting Standards), an item of fixed asset is eliminated from the financial statements on disposal and therefore, the reduction due to sale of 3 chamber float drier has to be taken into account for the purpose of computing the value of plant and machinery. 6. We see merit in this plea for the reason that, although the phrase "value of investment in additional plant and machinery" occurring in paragraph 8(2) of Notification 32/2001 is also preceded by the word "original", it is obvious that it cannot relate to the period 1-3-01, since the additional investment is subsequent to that date. The explanation to para 8 which was inserted by Notification No. 41/01 dated 21-9-01 providing that "the original value of investment in plant and machinery instal....
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....I have carefully perused the Order proposed by Hon'ble Vice-President in this case. With utmost respect, I am unable to subscribe to the views expressed by her in the proposed order. 9. The facts of the case have been clearly brought out in the Order of Hon'ble Vice-President. These need no reiteration. 10. The issue for consideration in this appeal is whether the assessee (Respondent herein) was eligible for paying duty under the compounded levy system. An assessee was eligible for payment of duty under the said system only when he fulfilled the conditions enumerated under the erstwhile Rules 96ZNA, 96ZNB, 96ZNC and 96ZND of the Central Excise Rules, 1944 read with Notification No. 20/2001 dated 30-4-2001 for the period from March 2001 to June 2001 and thereafter if the assessee fulfilled the conditions of Notification 32/2001-C.E., dated 28-6-2001. 11. As the controversy is directly a consequence of interpretation of the terms used in Rule 96ZNB of the erstwhile Central Excise Rules, 1944 and Para 8(1) and 8(2) of the Notification 32/2001-CE dated 28-6-2001, it will be relevant to go through the text of those provisions. Rules 96ZNA to 96ZND were introduce....
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....y the 20th May, 2001. If such application made by the 20th May, 2001, is granted by the Commissioner of Central Excise, the facility to avail the provisions under this section shall be deemed to be available from 1st May, 2001. Pending grant of such application by the Commissioner of Central Excise, the independent textile processor may avail the provisions of this section on a provisional basis. However, if the application is rejected by the Commissioner of Central Excise, then he shall not be eligible to avail the provisions of this section from the 1st May, 2001 and he shall discharge the duty liability as per the provisions contained elsewhere than in this section and the duty, if any, paid under the provisions of this section or the notifications issued thereunder, shall be adjusted against the duty payable on such goods : Provided that an independent textile processor commencing production for the first time in a new processing factory coming into existence after the 1st May, 2001, shall make the application prior to the commencement of commercial production so as to cover the period up to 31st March, 2002. Explanation I. - For the purposes of this section, "independent....
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.... section shall not apply from the first day of the month in which such investment exceeded the said limit of three crore rupees. (3) to (5) Not Relevant (6) The provisions of this section shall apply to the said goods which are manufactured or produced on or after the 1st day of May, 2001. OTHERS NOT RELEVANT 12. The said amending Notification also prescribed FORM A.S.P.1 for the purpose of submitting the information. (II) after Series No. 85 and the entries relating thereto, the following shall be inserted, namely :- Series No. Description of Form Rule No. Short Title "85A Application for permission to avail of the special procedure relating to processed textile fabrics 96ZNA A.S.P.1"; (b) under the Specimen Forms, after Central Excise Series No. 85 and Form sub-heading (II) relating thereto, the following Central Excise Series No. and Form shall be inserted, namely :- "Central Excise Series No. 85A" FORM A.S.P. 1 Application for permission to avail of the special procedure relating to processed textile fabrics (Rule 96ZNA) Name of factory/factories............................... Address........................ I/We......
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....emsp;                    (Emphasis Supplied) 13. The provisions of Rule 96ZNB make it very clear that - (a) In case of an existing independent textiles processor, he has to declare the original value of the investment in the plant and machinery installed in the factory as on the 1st March, 2001 and on the 1st of May, 2001 in the prescribed format duly certified by a Chartered Accountant or Cost Accountant. (b) Irrespective of whether such plant and machinery is in use or not, or is in working condition or not, for calculating the value of investment in the plant and machinery for the purpose of examining the eligibility of the processor under the said Rule 96ZNB, the higher of the values declared on 1st March 2001 and 1st May 2001 shall be considered. (c) In the case an independent textile processor commencing production for the first time in a new factory coming into existence after the 1st of May, 2001, the said declaration is to be given on the date of making the application under rule 96ZNA. ....
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.... the purpose of ascertaining the eligibility of the processor for the facility under the Rules 96ZNA to 96ZND of the CE Rules, 1944. There is no other date on which the Original value of investment on the plant and machinery is required to be calculated. 16. At the cost of repetition, it is made clear that a harmonious reading of Rule 96ZNB(1) and Rule 96ZNB(2) will lead to the conclusion that if there was any addition in the existing plant and machinery after 1st May 2001, the original value of such addition arrived at by applying appropriate Accounting Principles has to be included in the higher of the values declared on 1st March 2001 or 1st May 2001. 17. The aforesaid view is further fortified if we go through the columns prescribed in Form A.S.P.1 which is a part of the Rule. In Column 7 of the said Form (extracted earlier), the existing processor has to give the original value of plant and machinery only on two dates that is on 1st March 2001 and 1st May 2001. There is no other date which is relevant for ascertaining the Original value of existing plant and machinery. 18. With effect from 1-7-2001, the Central Excise Rules, 1944 were rescinded. However....
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....The average value of the said goods (per square meter) for the factory of the independent textile processor shall be arrived at by dividing the total value of the said goods cleared from the said factory in the immediately preceding financial year by the total quantity of the said goods cleared during that preceding financial year : Provided that where the said goods are manufactured or produced by a new unit or a closed unit of such factory for which the average value as specified above cannot be calculated, the average value of such goods shall be the average value declared by the independent textile processor at the time of making the application under rule 96ZNA of the Central Excise Rules, 1944 or under this notification; but the amount of duty payable on the said goods shall be re-worked at the end of the financial year on the basis of actual average value of the said goods manufactured or produced in that financial year. 4. The duty levied and collected on the said goods shall be the aggregate of the duty leviable under the Central Excise Act, 1944 (1 of 1944) and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and shall be app....
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....red 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. (2) If any additional plant and machinery is installed by the independent textile processor at any point of time, he shall intimate the same to the Commissioner of Central Excise within seven days of such installation and the original value of investment in plant and machinery together with the original value of investment in such additional plant and machinery shall not exceed three crore rupees. Where such original value of investment exceeds the limit of three crore rupees, the provisions of this notification shall not apply from the first day of the month in which such investment exceeded the said limit of three crore rupees. APPENDIX FORM A.S.P.1 Application for permission to avail of the special procedure relating to processed textile fabrics Name of factory/factories....................Address.................................. I/We..............manufacture (s) of processed textile fabrics residing at........ and holder(s) of Central Excise Licence N....
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....mber of the stentors will entail higher duty, decrease in number of the stentors is of no consequence as far as the quantum of duty is concerned. 21. In Paras 5 and 6, the Hon'ble Vice-President has referred to Accounting Standards AS 10 for relying on the proposition that an item of fixed asset is eliminated from the financial statements on disposal. I am in total agreement with her. However, the Adjudicating Authority in Para 1.3 of the impugned Order-in-Original has clearly mentioned that "The A.S.P. 1 filed by the assessee duly certified by their Chartered Accountant shows that the total value of Plant and Machinery as on 1st March 2001 was Rs. 2,92,05,560.46 and that on 1st May 2001 as Rs. 2,78,97,044.21/-. The difference in value of Rs. 13,08,513.25/- was because of sale of three chamber float drier to Harish Enterprises Gujarat on 28th April 2001." Therefore as stipulated in Rule 96ZNB(1), the assessee had declared the two values as certified by their Chartered Accountant after taking into consideration the Accounting Standards AS 10. This has not been disputed by the assessee or their advocate during the course of hearing. 22. In his written submission given....
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.... the Notification. 24. As per the statistics provided by the respondent and their advocate based on Chartered Accountants Certificate considering accounting standards A.S.10 regarding the value of plant and machinery on 1st March, 2001 and 1st May 2001, it is clear that the value of plant and machinery as on 1st March, 2001 was over Rs. 2.92 crores and as on 1st May 2001 was Rs. 2.7892 crores. Applying Rule 96ZNB(1), the original value of investment in plant and machinery shall be higher of the two, which will be over Rs. 2.92 crores. It is admitted by the respondent that they added machineries worth over Rs. 12.35 lakhs during the months of May, 2001 and June, 2001. Therefore, the total value of investment on plant and machinery in the month of June 2001 in terms of Rule 96ZNB(1) and (2) and also Clause 8(1) and 8(2) of Notification 32/2001 Central Excise will be Rs. 3,04,35,000/-. Therefore, the respondent will not be eligible for compounded levy scheme from the month of June, 2001. 25. At this stage, it will be relevant to deal with arguments of the respondent in the "Written Submissions" given after the hearing of the case. As rightly pointed out, the obje....
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....spondent in para 9 of the written submission is not sustainable. As per the provisions of Rule 96ZNB of the CE Rules, 1944 and Notification 32/2001-C.E., the Accounting Principles are to be applied for ascertaining the value of investment as on 1st March 2001, 1st May 2001 and the additional value of investment on the date of such additional investment during the currency of the Notification. The department has not disputed the certificate of the chartered accountant certifying the investments on these dates. Thus the decision in the case of Ganesh Texfab v. CCE reported in 2002 (143) E.L.T. 383 is of no help to the respondent. 27. The respondent has placed reliance on the decision of Hon'ble Supreme Court in the case of Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353 (S.C.). The subject matter in that case was inclusion of Cenvat Credit in the assessable value and not the interpretation of Rule 96ZNB of the CE Rules, 1944 or clauses of the Notification 32/2001 as amended. Similarly, the reliance placed by the respondent in the case of Mangal Textile Mills Pvt. Ltd. [2004 (171) E.L.T. 160] is also misplaced as in the present case the conditions laid down vide Claus....
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....se 8 of the Notification 32/2001-CE and Rule 96ZNB(1) and (2) are "original value of investment in plant and machinery" and "original value of investment in such additional plant and machinery". The phrase "original value of investment in plant and machinery" appears in both sub-clause (1) of Clause 8 and sub-clause (2) of clause 8, corresponding to Rule 96ZNB(1) and 96ZNB(2) of the CE Rules, 1944. A meaning has been assigned to the said phrase in clause 8(1). This expression in Clause 8(2) is not preceded or succeeded by the words 'at the time of additional investment'. Therefore, the meaning assigned to the phrase "original value of investment in plant and machinery" in Clause 8(1) of the Notification has to be same for the similar phrase appearing in Clause 8(2). If the arguments advanced by the respondent are accepted, it will result in adding the expression 'at the time of additional investment' in Clause 8(2) after the phrase "original value of investment in plant and machinery". Such an interpretation will result in doing violence to the wordings of the Notification 32/2001-CE or Rule 96ZNB(2) of the erstwhile Central Excise Rules, 1944. Such an interpretation has to be avoi....
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.... chambers so replaced has been shown to be Rs. 7,23,840/- as per the invoices of the suppliers. The fact of the above replacement was not informed to the Department and only at the time of investigation, while recording the statement of the concerned official of the Company, the above facts were admitted by the assessee. The department's contention is supported by the voluntary statement of Shri Neeraj Gupta, Chief Executive of the assessee-company. The claim for deduction by the respondent in respect of sale of machinery amounting to Rs. 13,08,000/- is not admissible as there is no such provision for the same under Rule 96ZNB or Notification No. 32/2001 as amended. 32. The basic flaw in the impugned Order-in-Original passed by the Commissioner is that he has reduced the value of the plant and machinery considering the disposal of the machinery before June 2001. He has not mentioned as to under what provisions, such deductions are allowed for computing the Original investment or for ascertaining the original value of investment of additional plant and machinery. As the decision of the Commissioner is not based on law, the same deserves to be set aside and the appeal o....
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....repeated the same arguments which were advanced by them before the referral Bench. I find that the whole issue revolves around the interpretation of the word "original value of investment in plant and machinery" occurring in Rule 96ZNB(2) or clause 8(2) of notification 32/01, as to whether such original investment is to be reckoned as on the date when some addition and alterations were made in the plant and machinery or it would be the original value as determined under Rule 96ZNB(1) or Clause 8(1) of Notification 32/01. It would be therefore useful even for repetition sake to reproduce the two clauses which are identical in wordings. "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 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 of May 2001, shall ....
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....estment between the two dates in order to claim the benefit of the compounded levy. Rule 96ZNB provides that if any additional plant and machinery is installed after declaring the original value, then additional investment has to be intimated to the department and is required to be included in the original value of the investment in plant and machinery. This original value of the investment in plant and machinery has to be one which is determined under sub-rule (1) of Rule 96ZNB that is the higher of the values as on 1-3-01 or 1-5-01. Once the original value of plant and machinery is determined under sub-rule (1) of Rule 96ZNB, the same shall remain constant throughout the financial year and cannot be determined afresh. It is the original value of the additional investment which only is required to be determined afresh and not the original value of the investment on plant and machinery 37. The provisions of Rule 96ZNB and notification 32/01 nowhere provide for reduction in the value of investment and only provide for increase in the value. Therefore, no cognizance is to be taken of the reduction if any in the value of plant and machinery. It was submitted that Clause (5) of....
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..... It was submitted that the respondent is fully covered by this proviso, as he was granted permission to work under compounded levy scheme in respect of application made by him before 20-5-01 and therefore value of additional new plant and machinery is not required to be added to the original value of the investment in plant and machinery as determined under sub-para (1) and accordingly, he cannot be ousted from the compounded levy scheme. 40. In the rejoinder, it was submitted by the ld. DR that the phrase "original value of investment in plant and machinery" appear in both sub-clause (1) of Clause 8 and sub-clause (2) of Clause 8 corresponding to Rule 96ZNB(1) and (2) of the Central Excise Rules, 1944. A meaning has been assigned to the said phrase in Clause 8(1). This expression in Clause 8(2) is not preceded or succeeded by the words "at the time of additional investment". Therefore, the meaning assigned to the phrase "original value of investment in plant and machinery" in Clause 8(1) of the notification has to be the same for the similar phrase appearing in Clause 8(2). If the argument advanced by the respondent are accepted it will result in adding the expression "at....
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....Rule 96ZNB(1) or Clause 8(2) of Notification 32/01 for the limited purpose as to which value shall be considered to determine as to whether an applicant can be permitted to work under the special procedure or not. Its significance is lost thereafter. It is incorrect to say that the provisions did not provide for taking cognizance of the reduction in investment as once two dates have been prescribed under sub-clause (1) the investments will differ and reductions are to be taken into account. In fact the department itself has taken cognizance of the fact of reduction in investment and has allowed the same for the purpose of determining the original investment on 1-5-01 as being Rs. 2,78,92,000/- after allowing reduction of Rs. 13,08,000/-. The other clauses did not provide for reduction because any reduction will not result in disentitlement of the applicant from compounded levy procedure. It is only if the additions result in crossing limit of Rs. 3 crore, that the processor will go out of the compounded levy scheme and it is for this reason that the provisions of Rule 96ZNB only keep track of the additions made. However, as stated by Member (T) also the intention of the whole schem....