2009 (3) TMI 812 - AT - Central Excise

Issues Involved:
1. Eligibility for compounded levy scheme under Rule 96ZNA to 96ZND of the Central Excise Rules, 1944.
2. Interpretation of "original value of investment in plant and machinery" under Rule 96ZNB and Notification No. 32/2001-C.E.
3. Calculation of the original value of investment in plant and machinery.
4. Application of Accounting Standards for determining the value of investment.
5. Penalty and confiscation under the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Eligibility for compounded levy scheme under Rule 96ZNA to 96ZND of the Central Excise Rules, 1944:
The respondents, independent processors of textile fabrics, opted for payment of central excise duty under the compounded levy scheme for the period May 2001 to February 2002. The scheme required the original value of investment in plant and machinery to not exceed Rs. 3 crores. The respondents filed an application on 17-5-2001, declaring the value of their plant and machinery as Rs. 2,92,05,560.46 as on 1-3-2001 and Rs. 2,78,97,044.21 as on 1-5-2001, due to the sale of certain machinery. They later installed additional machinery but did not notify the department as required.

2. Interpretation of "original value of investment in plant and machinery" under Rule 96ZNB and Notification No. 32/2001-C.E.:
The Revenue contended that no subtraction from the original value declared as on 1-3-2001 is permissible. The respondents argued that the reduction due to the sale of machinery should be considered, as per Accounting Standards AS 10, which states that an item of fixed asset is eliminated from the financial statements on disposal.

3. Calculation of the original value of investment in plant and machinery:
The Commissioner initially dropped the proceedings, accepting the respondents' argument that the net value of investment remained below Rs. 3 crores even after accounting for the additional machinery. The Revenue appealed, asserting that the original value should include the value of additional machinery installed after 1-3-2001, which would exceed the Rs. 3 crores limit.

4. Application of Accounting Standards for determining the value of investment:
The Tribunal found merit in the respondents' plea, noting that the explanation to para 8 of Notification No. 32/2001, inserted by Notification No. 41/2001, clarified that the original value of investment should be determined according to Accounting Standards. The Tribunal decided that a Chartered Accountant should certify whether the total value of investment exceeded Rs. 3 crores during the relevant period.

5. Penalty and confiscation under the Central Excise Act, 1944:
The Show Cause Notice proposed penal action under Sec. 11AC of the Central Excise Act, 1944, for not declaring the additional machinery. The Tribunal remanded the case to the Commissioner for fresh adjudication, including determining the penalty and confiscation, if applicable.

Separate Judgments:
- Vice-President's View: The case should be remanded to the Commissioner to obtain a certificate from a Chartered Accountant regarding the total value of investment in plant and machinery, applying Accounting Standards.
- Member (Technical)'s Dissent: The impugned order should be set aside, and the appeal allowed, confirming the demand raised in the Show Cause Notice. The case should be remanded only for adjudging confiscation and penalty.
- Third Member's Decision: Agreed with the Vice-President, remanding the case to the Commissioner to ascertain the original value of investment as on the date of addition in the existing plant and machinery, applying Accounting Standard 10.

Final Order by Majority:
The impugned order is set aside, and the case is remanded to the Commissioner to ascertain the original value of investment in plant and machinery as on the date of addition, applying Accounting Standard 10, and then decide eligibility under Rule 96ZNB(1) or Clause 8(1) of Notification No. 32/2001-C.E. The appeal is allowed by way of remand.

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