TaxTMI 
TaxTMI 
2023 (10) TMI 991
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....set up new industrial Units in North-Eastern States 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....
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....ods available as inventory in the unit but not cleared, at the end of the financial year; (viii) 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. 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. ....
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....cluding certificates issued by Statutory Auditors. 2.11 The aforesaid applications have been rejected by the Commissioners, on the following grounds: (a) that the Balance Sheet, based on which the computation of value addition has been done by the Appellants, is not in conformity with Section 211 of Companies Act, 1956; (b) that Section 211 of Companies Act, 1956 does not contain any provision to prepare Balance Sheet or financial records for the same company, for different purpose; (c) that the gross sales value (GSV) arrived at by the Appellants by multiplying the quantity of the 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....
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....e total sales tax paid and that claimed is equal. The only difference is that it has been claimed on equalised basis. Since the Appellants are not claiming Sales Tax Deduction more than what was paid (i.e. paid to various States under the name and style sales tax), the same is admissible deduction, irrespective of whether it is claimed on equalised basis or otherwise. Claiming of admissible deductions like Sales Tax, etc. on equalized basis is permissible as has been held by Hon'ble Tribunal and Supreme Court in Appellants' own following cases: (b) Hindustan Unilever Ltd. - 2016 (334) ELT 95(T) (c) Hindustan Unilever Ltd. - 2016 (341) ELT 434 (T) 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 open....
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.... every Company registered under the said Act is to be prepared, showing the true financial position of the said Company. It stipulates that in order to give true and fair picture of the state of affairs of the Company at the end of the financial year, the format as prescribed in Part-I of Schedule VI has to be adopted for preparation of the Balance Sheet and Profit & Loss Account. The Balance Sheet prepared by the Appellants is in a consolidated form, in the sense that all its Units located all over the country have been brought under the common Balance Sheet and Profit & Loss Account. In other words, the said consolidated Balance Sheet of the Company gives the true picture of the functioning or the 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....
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....ess of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. 3.5 He further submits that it is a settled position of law that once the Department has not rebutted the evidences like Statutory Auditor's certificates, as required under the Notification, the evidences brought by assessee have to be accepted, based on the following judgments: (a) Crane Betel Nut Powder Works - 2011 (274) ELT 113 (T) (b) (bi) Crane Betel Nut Powder Works - 2012 (279) ELT 487 (A.P.) (c) -do- Dept's appeal dismissed by SC- 2014 (305) ELT A- 109 (SC) 3.6 He further submits that financial records as certified by the Statutory Auditors would be the basis for calculation of actual value 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) S....
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....rocedure and, hence, the request made on 18.05.2020 (after VVF's judgment dated 22.04.2020) was held to be not time barred. In the present case, applications were made, from time to time, for each of the disputed financial years, as detailed in list of events. Assuming, whilst denying, that there is delay in filing the applications, the application filed in any year would hold good for each of the subsequent financial years. For example, the application filed in September 2009, for financial year 2008-09, can be considered as the application for financial year 200910 and so on. In any case, the applications decided after three months prescribed in Para 2.1(2) of the said Notification is not sustainable. 3.10 Finally, he submits that the Hon'ble Supreme Court in the judgment & Order dated 22.04.2020 in the case 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 su....
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....limitation. 6.1 The said issue has been examined by the Hon'ble Apex Court and the Hon'ble Apex Court in the case of Union of India Vs. V.V.F. Limited reported in 2020 (372) ELT 495 (S.C.), has held that the pending refund application shall be decided as per the subsequent notification/industrial policies, which were impugned before the respective Hon'ble High Courts and they shall be decided in accordance with the law and on merits and as per the subsequent notifications/industrial policies impugned before the respective Hon'ble High Courts. The extracted of orders of the Hon'ble Apex Court is as under : "........... subsequent notification / amendment in the original notification did not in any way alter the basis of the original first notification of 2001." ".......... once it is held that the subsequent notifications/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 notifica....
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....urer by the 15th of the month following the one in which the statement as at clause (a) above has been submitted. 2D. Notwithstanding anything contained in sub-paragraph 2C above,- (a) the manufacturer at his own option, may take credit of the amount calculated in the manner specified in paragraph 2A in his account current, maintained in terms of the Excise Manual of Supplementary Instructions issued by the Central Board of Excise and Customs. Such amount credited in the account current may be utilized by the manufacturer for payment of duty, in the manner specified under rule 8 of the Central Excise Rules, 2004, in subsequent months, and such payment shall be deemed to be payment in cash; (b) the credit of the refund amount may be taken by the manufacturer in his account current , by the 7th of the month following the month under consideration; (c) a manufacturer who intends to avail the 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 rema....
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....e clarification was given that in the area based exemption and the refund of duty vide letter No. 354/34/2004-TRU (Pt) dated 27.03.2008, the same is incorporated herein under : Letter F.No. 354/34/2004-TRU(Pt.) Dated 27-3-2008 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject : Area based exemptions - Changes in refund scheme. As you are aware, area based exemptions from central excise duty operating as refund scheme are currently in operation under various notifications as follows : (a) for North Eastern States under Notification No. 32/99-C.E. and 33/99-C.E. both dated 8-7-1999 and under Notification No. 20/2007-C.E., dated 25-4-2007; (b) for Kutch district of Gujarat under Notification No. 39/2001-C.E., dated 31-7-2001; (c) for Jammu & Kashmir under Notification Nos. 56/2002-C.E. and 57/2002-C.E. both dated 14-11-2002; and (d) for Sikkim under Notification No 56/2003-C.E., 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 t....
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....-credit of the refund amount by the assessee has also been retained. (iv) It has also been provided that in case the actual value addition undertaken by a unit exceeds the prescribed rate by more than 25% (i.e. say, in case the value addition is 50% whereas the rate prescribed is less than or equal to 40%), the unit may apply for a special rate to be fixed by the jurisdictional Commissioner. The special rate would be fixed on the basis of the factors specified in the explanation (defining actual value addition and special rate) in the notifications. The information pertaining to these is required to be taken from the financial records/statements of the assessee for the preceding financial year. For the ease of computation, it has been prescribed that the assessee would furnish a certificate from his statutory auditor containing a computation of the actual value addition, alongwith his application for a special rate. (v) Once fixed, the special rate would be applicable from the date on which the assessee made the claim. Any refunds made in the intervening period would be adjusted accordingly. (vi) These changes shall be effective from 1st April, 2008. 6....
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....1 (274) ELT 113 (Tri.-Bangalore), wherein this Tribunal has observed as under : "5.1........................................... It is also undisputed that the respondent-assessee had produced a detailed Chartered Accountant certificate before the Adjudicating Authority, when the Adjudicating Authority issued a show cause notice to them for rejection of the refund claim. It is also undisputed and on records that the revenue had not produced any contrary evidence to evidence produced by the respondent-assessee in form of Chartered Accountant certificate for coming to such a conclusion that the respondent-assessee had passed on the burden to the customers. ........................................................................................................................ 5.3 ................................................... It is seen from the records that as against the above detailed Chartered Accountant's certificate, revenue has not produced any contrary evidence to rebut the same except for claiming that the said certificate is devoid of any details. We find that the said Chartered Accountant's certificate as reproduced hereinabove clearly indicat....
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....prepared for the purpose of special rate fixation, as held by the adjudicating authority. An extract of Balance Sheet containing figures required for computation, in a format exclusively to suit the calculation of value addition was enclosed, which gets evidenced from the Notes accompanying the said extract of Balance Sheet, to the effect that the said extracted Balance Sheet has been prepared solely for the purpose of and as basis for claim of fixation of special rate and nowhere the Notification stipulates that copy of the Balance Sheet is to be enclosed. Instead, it mandates that the value addition must be calculated based on the audited Balance Sheet and in the present case, the computation of value addition has been done based on the figures taken from such audited Balance Sheets only. 10. Further, an another reason for rejection of application is that the average rate of VAT at the rate of 12.5% is not acceptable. 11. The said issue has been settled by this Tribunal in the appellants' own case reported in 2016 (334) ELT 93 (Tri.-Chennai), wherein this Tribunal has held as under : "3. After hearing both sides, and on perusal of records, we find that the appellan....
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....ginal authority and remand the matter to the original authority to allow the deduction on the lines indicated above after granting reasonable opportunity of hearing to the party. The party shall produce relevant details within two months from the date of receipt of this Order and original authority shall dispose of the matter within four months thereafter. 6. Again this issue came up before this Tribunal in the case of Dabur India Ltd. [2013-TIOL-125-CESTAT-DEL = 2013 (295) E.L.T. 257 (T)] wherein also the same view was taken by this Tribunal. 7. Following the precedent decisions cited hereinabove of this Tribunal, which was accepted by the Revenue, we do not have any hesitation to hold that the appellant are entitled to claim deduction of Equalised Sales Tax from the transaction value to arrive at the assessable value." 5. In view of the above discussion, we hold that the appellants are entitled to claim the abatement of equalized sales tax from the transaction value. Accordingly, both the impugned orders are set aside and both the appeals are allowed with consequential relief. Stay applications are disposed of." the said order has been affirmed by the H....
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....the production process or in the rendering of services." which means that the process of production on such materials i.e. work in process is the part of inventory and the appellants have correctly included the work in process in their stock. Therefore, we hold that the work in process is to be included in the opening stock and closing stock in computation of actual value addition. 15. In a nutshell, we take note of the fact that the issue of rejection of fixation of special rate on the above ground, came up before this Tribunal in the case of M/s Kokuyo Camlin Limited Vs. Commissioner of Central Excise & Service Tax, Jammu & Kashmir reported in 2023-TIOL548-CESTAT-CHD, wherein this Tribunal has observed as under : "4. Heard both sides and perused the records of the case. Brief issue that requires consideration in the instant case is as to whether the Adjudicating Authority was correct in rejecting the appellant's claim for value addition in terms of Notification No. 56/2002-CE dated 14.11.2002 as amended. We find that on an application, dated 29.09.2009, made by the appellants, Commissioner vide letter dated 20.04.2010 informed the appellants that the value addition....
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....nished goods to Samba Unit which was already included in the cost of raw materials has been again included. * Commissioner erred in arriving at inventory values and adding freight inward to the cost of raw materials was incorrect. However, learned Commissioner has not discussed any of the above calculations in the impugned order and therefore, we do not find that there is any reason for us to go into the same in detail more so, when a Statutory Auditor's certificate is on record. 7. On-going through the records, we find that the learned commissioner, vide letter dated 20.04.2010, which is a show cause notice for the purposes of the impugned case, proposes to fix the value addition at the rate of 45.73% and vide final order totally rejects the claim of the appellant. Thus, we find that the Adjudicating Authority has gone beyond the scope of the Show Cause Notice. In case the learned Commissioner was to reject the claim totally, he should have put the appellants to proper notice in terms of principles of natural justice. As the proposal and final order are contrary to each other, we find that, in the instance case, the principles of natural justice have been grossly....
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....ear preceding that under consideration. We find that learned Adjudicating Authority has not given any findings on the above as to whether the calculations arrived by the appellants followed the above principles. The impugned order does not show any reasons to controvert the Statutory Auditor's report. Therefore, the calculations and figures as given by the Statutory Auditor require to be considered as held in Crane Betel Nut Powder Works (supra) and other cases cited above. 9. Having held that the rejection of the appellant's claim in the impugned order is incorrect, we are required to fix the percentage of value addition. We find that the appellants vide application dated 29.09.2009 and during the course of personal hearing on 11.05.2010, submitted that the value addition as applicable to them would be 58.60% ,if actual sale value is taken or 62.65%, if sale value is taken on MRP basis. We are in agreement with the findings of the Adjudicating Authority that MRP is a notional value and such value cannot be considered for the purposes of arriving at "Sale Value" in terms of the Notification No. 56/2002-CE dated 14.11.2002. The actual sale value is to be considered. Therefo....