2002 (9) TMI 713 - AT - Customs

Stay Order - Modification of - Financial hardship - Strictures, Chartered Accountants conduct - Balance Sheet

Summary

Issues Involved:
1. Financial hardship claims by the applicants.
2. Authenticity and reliability of financial certificates provided by chartered accountants.
3. Compliance with the Tribunal's order on deposit requirements.

Issue-wise Detailed Analysis:

1. Financial Hardship Claims by the Applicants:
The Tribunal initially ordered Baron International Ltd. (BIL) to deposit Rs. 85 lakhs and J.R. Consumer Electronics Pvt. Ltd. (JRCE) to deposit Rs. 65 lakhs towards duty and penalties. The Tribunal did not find a prima facie case for the applicants on merits and considered their financial hardship claims. BIL's balance sheet showed reserves of Rs. 101 crores and net current assets of Rs. 87 crores, despite a post-tax loss of around Rs. 7 crores. JRCE's balance sheet showed a profit of Rs. 20.23 lakhs, cash and bank balances of Rs. 10.69 lakhs, and fixed deposits of Rs. 81 lakhs.

2. Authenticity and Reliability of Financial Certificates Provided by Chartered Accountants:
JRCE sought modification of the Tribunal's order, citing financial hardships supported by a certificate from Nidhi & Associates. The Tribunal noted the refusal of the chartered accountant to provide an affidavit and found discrepancies in the balance sheet and the certificate. The balance sheet indicated a profit of Rs. 20.24 lakhs, contrary to the company's claim of losses. The Tribunal highlighted that inventories must be valued at cost or net realizable value, whichever is lower, as per the Accounting Standard issued by the Institute of Chartered Accountants of India. The Tribunal dismissed the certificate from Nidhi & Associates as an attempt to misrepresent the company's financial position.

Similarly, BIL presented a certificate from M.V. Damania & Co., which contradicted the audited balance sheet. The Tribunal found no evidence to support the claims of unrealizable sums and changes in stock and inventories after the balance sheet date. The Tribunal emphasized the importance of adhering to the Accounting Standard AS 4, which mandates disclosure of material changes affecting the financial position after the balance sheet date. The Tribunal rejected the certificate from M.V. Damania & Co. as it lacked material evidence and contained significant contradictions.

3. Compliance with the Tribunal's Order on Deposit Requirements:
The Tribunal ordered that if the amounts were not deposited within 15 days from the receipt of the order, the appeals would be dismissed under Section 129E of the Act. The Tribunal expressed concerns about the conduct of the chartered accountants and referred the cases to the Institute of Chartered Accountants for examination and appropriate action. The Tribunal underscored the reliance on professional statements made by chartered accountants and the need for these professionals to act without fear or favor and present a true picture.

In conclusion, the Tribunal dismissed the applications for modification of the deposit orders, emphasizing the discrepancies and lack of evidence in the financial certificates provided by the chartered accountants. The Tribunal also referred the conduct of the chartered accountants to the Institute of Chartered Accountants for further examination and action.