DEPARTMENTAL OFFICER, BEING A MEMBER OF ICWAI, CAN BE APPOINTED AS COST ACCOUNTANT.

[Mr. M. GOVINDARAJAN]

                        In ‘Commissioner of Central Excise, Belapur, Mumbai V. RDC Concrete (India) Limited’ – 2011 -TMI - 204921 – (SUPREME COURT OF INDIA) the appeal was filed by the Department against the order of CESTAT, West Zonal Bench, Mumbai.   The said order was passed on an application for rectification filed by the assessee under Section 35C (2) of the Central Excise Act.   The facts of the case run as follows:

                        The assessee is a manufacturer of ‘Unipaved Interlocking concrete Blocks (pavers), being excisable goods.  The Department officers visited the factory premises on 13.02.2002 on receipt of specific information with regard to evasion of the duty by the assessee.  On verification the Departmental Officers found that the assessee valued the pavers atRs.250/- per sq.meter and accordingly excise duty was paid by the company.   The said pavers were sold to a related person or its inter connected company M/s Unitech Limited (UTL) for Rs.531/- per sq. meter and thereafter UTL was selling the same for Rs.826.50/- per sq. meter to Senorita Builders Private Limited.   According to the Department the goods manufactured by the assessee were shown at a substantially a low value only for the purpose of evasion of excise duty.

                        Therefore a Cost Accountant was appointed to ascertain the value of the goods manufactured by the assessee.   The Department appointed the Assistant Director (Cost) of their own Department, who was a Cost Accountant.  The assessee objected the appointment of Departmental Officer who was not in practice as Cost Accountant to ascertain the value of the goods manufactured by the assessee before the CESTAT.  The CESTAT rejected the above said contention of the assessee for the reason that the Act or Rules nowhere provides that only a Cost Accountant, who is in practice, should be appointed to ascertain value of goods, when the Revenue feels that the value of the goods shown by the concerned manufacturer is required to be ascertained. 

                        The assessee again filed an application for rectification of order before CESTAT.  Once again the assessee raised the objection that an officer of the Department, though a Member of the Institute of Cost and Works Accountants of India, could not have been entrusted with the work of ascertaining the value of the goods because the person so appointed was in service of the department and not in practice.  The CESTAT now accepted the submission of the assessee and the valuation done was not accepted by CESTAT and the order was modified.

                        Aggrieved against this order the Department filed appeal before Supreme Court.   The Department put forth the following arguments:

• The CESTAT has limited power to rectify its mistake under the provisions of Section 35 C (2) of the Central Excise Act;
• The language of the said section made it clear that the CESTAT has power to rectify any mistake which is apparent from the record of any order passed by it under Section 35 C (1) of the Act;
• The CESTAT had passed final order in an appeal filed by the respondent assessee in which the CESTAT had upheld the demand of duty together with interest and equivalent penalty;
• In rectification application CESTAT modified the original final order to such an extent that the entire demand of duty has been quashed;
• In pursuance of the rectification application, the CESTAT has not only substantially changed its order but has also changed its legal view on the subject;
• While rectifying any order, the CESTAT can rectify any mistake which is apparent from the record.   Under the guise of rectification, the CESTAT cannot altogether take a different view in law and it cannot reappreciate evidence in which had been led before it;
• The CESTAT reviewed its order though it has no power to review its order;
• The interpretation with regard to the provision relating to the appointment of the Cost Accountant, which the CESTAT had accepted at an earlier point of time could not have been changed by the CESTAT while deciding the rectification application because by changing the legal view, the CESTAT was not rectifying any mistake apparent from the record but the CESTAT was changing its view altogether, which is not permissible under the provision of Section 35 C (2) of the Act;
• The CESTAT had earlier arrived at a finding that the respondent company had sold its excisable goods to a related person or an inter-connected undertaking at a particular price and immediately thereafter the inter connected company had sold the very same goods at much higher price to another company.    The CESTAT had earlier come to a conclusion that it was nothing but an attempt to evade duty and subsequently, in pursuance of the rectification application, the CESTAT took altogether a different view whereby it came to the conclusion that the company with which the respondent assessee had dealings, was in no way inter-connected. 

The respondent assessee contended that it was open to CESTAT to change its view because it apparently noted its mistake which had been committed while passing its earlier order.   The CESTAT did not exceed its power and rightly rectified the mistakes which were apparent on the record while deciding the rectification application.

                        The Supreme Court held that ‘a mistake apparent from the record’ cannot be something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions.    It has been held that a decision on a debatable point of law cannot be a mistake apparent from record.   If one looks at the subsequent order passed by CESTAT in pursuance of rectification application, it is very clear that the CESTAT re-appreciated the evidence and came to a different conclusion than the earlier one.

                        The Supreme Court further held that-

• The CESTAT at an earlier point of time came to a conclusion that the company to which the respondent assessee sold its goods was an inter-connected company.  Later it came to a different conclusion to the effect that the assessee company and the buyer of the goods were not inter-connected companies;
• In regard to the appointment of Cost Accountant by the Department was considered by CESTAT as just and proper.   But later in the rectification application the CESTAT came to the conclusion that an officer of the department, who was working as Assistant Director (Cost) and who was also a Member of the Institute of Cost and Works Accountants of India was not competent as a Cost Accountant to ascertain the value of the goods.  
• It is strange as to why the CESTAT came to the conclusion that it was necessary that the person appointed as a Cost Accountant should be in practice.  There is no reason as to how the CESTAT came to the conclusion that the Cost Accountant, whose services were availed by the Department, should not have been engaged because he was employee of the Department and not in practice.
• The above said facts clearly show that the CESTAT took a different view in pursuance of the rectification application.  There was no mistake apparent on record;
• The CESTAT exceeded its powers and it tried to re-appreciate the evidence and it reconsidered its legal view taken earlier in pursuance of a rectification application;
• The CESTAT could not have done so while exercising its powers under Section 35 C (2) of the Act and therefore the impugned order passed in pursuance of the rectification application is bad in law and therefore the said order is quashed and set aside.