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2023 (10) TMI 991 - AT - Central ExciseArea based exemption - Computation / Determination of Value Addition - Rejection of the applications of fixation of special rate - Time Limitation - N/N. 32/99-CE dated 08.07.1999 - HELD THAT - 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 ANOTHER ETC. ETC. VERSUS M/S V.V.F LIMITED ANOTHER ETC. ETC. 2020 (4) TMI 669 - SUPREME COURT 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. Further, the Hon ble Guwahati High Court in the case of M/S JYOTHY LABS LTD. (ERSTWHILE JYOTHY LABORATORIES LTD.) VERSUS UNION OF INDIA AND 2 ORS., PRINCIPAL COMMISSIONER CGST COMMISSIONERATE, ASSTT. COMMISSIONER OF GST AND CENTRAL EXCISE 2021 (8) TMI 726 - GAUHATI HIGH COURT has held that making such application for fixation of special rate under Notification No. 32/99-CE and Notification No. 31/2008-CE, after the judgement of Hon ble Supreme Court in the case of UNION OF INDIA ANOTHER ETC. ETC. VERSUS M/S V.V.F LIMITED ANOTHER ETC. ETC. 2020 (4) TMI 669 - SUPREME COURT were in time. As all the applications were filed by the appellants before 20.04.2020. In that circumstances, all the applications were filed within time, therefore, the applications in question cannot be rejected on limitation. The first ground for denial of special rate of fixation is that the balance sheet is not in conformity with Section 211 of the Companies Act, 1956 and there is no provision to prepare the balance sheet or financial records under the provision of 211 of the Companies Act, 1956 - HELD THAT - As per the said provisions, the profit and loss accounts and the balance sheet of the Company shall comply with the accounting standards - the figures in the Extract of Balance Sheets, arem based on which the value addition, has been calculated, is very much in conformity with Companies Act and the Income Tax Act - The rejection of application for special rate fixation on the balance sheet is not in conformity with the Companies Act, 1956, is not correct. On the said ground, the said application cannot be rejected. Whether the statutory auditor s report is acceptable or not? - HELD THAT - The statutory auditor s report is acceptable in terms of the decision of this Tribunal in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS GUNTUR. VERSUS M/S. CRANE BETEL NUT POWDER WORKS 2011 (2) TMI 785 - CESTAT BANGALORE wherein this Tribunal has observed In the absence of any effective rebuttal of the said Chartered Accountant certificate by leading a contrary evidence, we are of the considered view that the Chartered Accountant s certificate which indicates that the duty liability has not been passed on and has been absorbed by the assessee, cannot be rejected as an evidence in support of non-passing of the burden of incidence of duty - thus, the statutory auditor s report is acceptable as an evidence. Another issue raised by the ld. Commissioner that the gross sales value based on all India average rate is not acceptable - HELD THAT - For the purpose of calculation of actual value addition, as per the prescribed format, relevant figures from the audited Balance Sheet have been extracted, which has been enclosed along with each application. Hence, it is not a case that a separate Balance Sheet was 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. Another reason for rejection of application is that the average rate of VAT at the rate of 12.5% is not acceptable - HELD THAT - The average rate of VAT at the rate of 12.5% is equalized the basis and the same is permissible for fixation of special rate. Hence, rejection of special rate of fixation, the applications cannot be rejected on that ground. The next issue is that inclusion of work in progress is not correct - HELD THAT - What is to be added is the inventory of goods available at the end of each of the Financial Years and not cleared. Similarly, the value of inventory not cleared at the end of the financial year preceding to the Financial Year under consideration has to be deducted. It may be relevant to note that the term inventory would include stock of finished goods as well as stock of unfinished goods in as much as some stock of goods may be incomplete or just few steps/process away from the stage of completed finished product. The said stock of incomplete/ unfinished goods, which have passed through some processes and are yet to be subjected to some processes to reach the final stage of production, are termed as work-in-progress , which are also the part of the inventory, as per the accounting standards - the work in process is to be included in the opening stock and closing stock in computation of actual value addition. The rejection of the applications of fixation of special rate by the adjudicating authority is not correct and are in violation of law - Appeal allowed.
Issues Involved:
1. Timeliness of Applications for Special Rate Fixation 2. Conformity of Balance Sheets with Section 211 of the Companies Act, 1956 3. Acceptance of Statutory Auditor's Certificates 4. Calculation of Gross Sales Value and Average VAT Rate 5. Inclusion of Work-in-Progress in Inventory Valuation Summary: Timeliness of Applications for Special Rate Fixation: The applications for special rate fixing for the period 2009-10 to 2016-17 were initially held to be filed after the stipulated deadline of 30th September, thus barred by limitation. However, the Hon'ble Supreme Court in the case of Union of India Vs. V.V.F. Limited (2020) held that pending refund applications should be decided as per subsequent notifications and industrial policies. The Hon'ble Guwahati High Court in Jyoty Labs (2021) also held that applications for fixation of special rate under Notification No. 32/99-CE and Notification No. 31/2008-CE, filed after the Supreme Court judgment in V.V.F., were timely. Consequently, the Tribunal held that all applications filed before 20.04.2020 were within time and could not be rejected on limitation grounds. Conformity of Balance Sheets with Section 211 of the Companies Act, 1956: The rejection of applications on the grounds that the balance sheets were not in conformity with Section 211 of the Companies Act, 1956, was found incorrect. The Tribunal noted that the balance sheets prepared by the appellants were consolidated and in conformity with the Companies Act. The figures in the Extract of Balance Sheets, based on which the value addition was calculated, were also in conformity with the Companies Act and the Income Tax Act. Hence, the applications could not be rejected on this ground. Acceptance of Statutory Auditor's Certificates: The Tribunal held that statutory auditor's certificates are valid evidence for arriving at value addition, as supported by the decision in Commissioner of Central Excise & Customs, Guntur Vs. Crane Betel Nut Powder Works (2011). The revenue had not produced any contrary evidence to rebut the statutory auditor's certificates provided by the appellants. Therefore, the statutory auditor's reports were deemed acceptable. Calculation of Gross Sales Value and Average VAT Rate: The Tribunal found that the products manufactured by the appellants were sold at a uniform selling price across all depots, making the calculation of gross sales value based on all India average rate correct. The average rate of VAT at 12.5% was also permissible for fixation of special rate, as settled in the appellants' own case (2016). Hence, the applications could not be rejected on these grounds. Inclusion of Work-in-Progress in Inventory Valuation: The Tribunal clarified that the term "inventory" includes stock of finished goods as well as work-in-progress, as per accounting standards. Therefore, the inclusion of work-in-progress in the opening and closing stock for the computation of actual value addition was correct. The rejection of applications on this ground was found to be incorrect. Conclusion: The Tribunal set aside the impugned orders, allowed all the appeals, and fixed the special rates as prayed by the appellants, in line with the principles established in the case of M/s Kokuyo Camlin Limited Vs. Commissioner of Central Excise & Service Tax, Jammu & Kashmir (2023).
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