2023 (6) TMI 300 - AT - Central Excise

Fixation of special rate of refund of duty - Area Based Exemption - Order beyond the scope of show cause notice (SCN) - value addition at the rate of 62.65% (if the sale value is considered at MRP) or 58.60% (if the actual sale value is considered) - Benefit of Notification No.56/2002-CE as, amended - whether the Adjudicating Authority was correct in rejecting the appellant s claim for value addition? - HELD 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 comes to 45.73% as against the claim of 58.6% or 62.65% by the appellants. The appellants have submitted a detailed written reply and a Statutory Auditor s certificate to establish their claim. On-going through the records, it is found 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, it is found 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, in the instance case, the principles of natural justice have been grossly violated. Moreover, the Adjudicating Authority has not given any finding, whatsoever, on the Statutory Auditor s certificate, rebutting the certificate on the basis of cogent and reliable data and reasoning. The only finding that the Adjudicating Authority gives is that whereas the application is dated 29.09.2009, the Statutory Auditor s report is dated 30.09.2009 and therefore, it cannot be relied upon. Having held that the rejection of the appellant s claim in the impugned order is incorrect, it is required to fix the percentage of value addition. It is found 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. The findings of the Adjudicating Authority is agreed upon 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. Looking into the records of the case and the application dated 29.09.2009 submitted by the appellants and the Statutory Auditor s report, it is found that the appellants are eligible for special rate of 58.60% as against the rate of 36% provided in the table of the said notification. The appeal is allowed fixing the special rate at 58.60%.

Summary

Issues:
The issues involved in the judgment are the rejection of the appellant's claim for value addition in terms of Notification No. 56/2002-CE dated 14.11.2002 as amended.

Detailed Summary:

1. The appellants, a manufacturing unit, applied for a special rate of refund of duty based on value addition. The Commissioner rejected their application for fixing a special rate, leading to the appeal.

2. The appellant's counsel argued that the Commissioner's findings were incorrect, emphasizing that the value addition percentage was accurately calculated based on various factors. They cited legal precedents to support their claim.

3. The Authorized Representative for Revenue supported the impugned order, citing strict interpretation of notifications and the ineligibility of the appellant for the benefit.

4. The main issue was whether the Adjudicating Authority was correct in rejecting the appellant's claim for value addition. The Commissioner initially informed the appellants of a lower value addition percentage, leading to a detailed response from the appellants.

5. The Commissioner rejected the claim based on various grounds, including discrepancies in the value addition calculations and the definition of "sale value." The appellants disputed these findings.

6. The Commissioner's order was found to be contradictory, and the Adjudicating Authority failed to address key calculations and the Statutory Auditor's certificate submitted by the appellants.

7. The Adjudicating Authority's rejection of the claim was deemed incorrect, and the violation of principles of natural justice was highlighted. The importance of the Statutory Auditor's certificate in such cases was emphasized.

8. The Explanation under the Notification regarding the calculation of value addition was discussed, and the Adjudicating Authority's failure to consider the Statutory Auditor's report was criticized.

9. The rejection of the appellant's claim was deemed incorrect, and the value addition rate was fixed at 58.60% based on the appellants' submissions and the Statutory Auditor's report.

10. The impugned order was set aside, and the appeal was allowed, fixing the special rate at 58.60%.

*(Pronounced on 06/06/2023)*