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TMI Blog2010 (5) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-2004 as passed by the Commissioner, Central Excise, Jaipur-II ['the Commissioner'] insofar relating to the demand of duty and interest while affirming the finding that the appellant was not eligible to avail of the special procedure of Compound Levy Scheme under Notification No. 32/2001. 2. Briefly put, the relevant facts and the background aspects of the matter are that by way of Notification No. 16/2001, the Central Government introduced, with insertion of Section E-XA containing Rules 96-ZNA to 96-ZND in the Central Excise Rules, 1944, a special procedure [referred to as 'the Compound Levy Scheme'/'the Scheme'] for discharge of liability for Excise Duty leviable on production, by specified process, of the specified goods [referred to as 'the said goods'] by an 'independent processor of textile fabrics', on payment of the amount to be calculated per Rule 96-ZNC ibid. The appellant-assessee, Sulzer Processors Private Limited, Bhilwara made an application in the prescribed manner to the prescribed authority i.e., the Commissioner, Central Excise, Jaipur-II on 1-5-2001, seeking to avail of the said special procedure. While the application so made by the appellant was pending cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Central Excise for the purpose of availing of the special procedure for payment of excise duty as contained in this notification. The Commissioner of Central Excise, on such application being made, shall grant permission, subject to such conditions and limitations as laid down in this notification, so as to cover the period commencing from the date of making the application and ending on the 31st March, 2002. Pending grant of such permission by the Commissioner of Central Excise, the independent textile processor may avail the provisions of this notification on a provisional basis. But if such application is rejected by the Commissioner of Central Excise, then the independent textile processor shall not be eligible to avail of the provisions of this notification from the date of making the application and shall discharge the duty liability as per the provisions contained elsewhere than in this notification and the duty, if any, paid under the provisions of this notification, shall be adjusted against the duty payable on such goods. Explanation I. - For the purposes of this notification, "independent textile processor" means a manufacturer who undertakes b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st March, 2002, shall also be deemed to be an application under sub-paragraph (1) and shall be disposed of under that sub-paragraph. If such application had been granted by the Commissioner of Central Excise under rule 96ZNA of the Central Excise Rules, 1944, so as to cover the period up to 31st March, 2002, such disposal shall be deemed to be the disposal of the application under sub-paragraph (1), subject to all the conditions and limitations as laid down in this notification. 8. (1) The original value of the investment in the plant and machinery installed in the factory of the independent textile processor of the said goods, as on the 1st March, 2001 or on the 1st of May, 2001, whichever is higher, for a factory existing as on 1st May, 2001, of the independent textile processor or on the date of making the application under rule 96ZNA of the Central Excise Rules, 1944 or paragraph 7 of this notification, as the case may be, in the case of an independent textile processor commencing production for the first time in a new factory coming into existence after the 1st of May, 2001, shall not exceed three crore rupees, irrespective of whether such plant and machinery is in use or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, the appellant proceeded to discharge the duty liability in accordance with the said Scheme as permitted by Rule 96-ZNA(2) ibid. As per clause (2) of paragraph 7 of Notification No. 32/2001, the application made by the appellant was required to the dealt with as if made under this Notification and hence, the Commissioner proceeded to deal with the same in his detailed order dated 20-9-2001. The learned Commissioner, at the outset, pointed out the following four pre-condition to be fulfilled by the applicant to avail the said Compound Levy Scheme :- "2. As per the provisions laid down in Rule 96ZNA to 96ZND of Central Excise Rules, 1944 inserted vide Notification No.16/2001 (N.T.) dated 30-4-2001, following four pre-conditions are to be fulfilled by a manufacturer of specified processed textile fabric to avail the compound levy scheme under the said rules : (i) He should undertake bleaching, dyeing or printing or any one or more of these processes with the aid of power or steam. (ii) He should have the facility in his factory (including plant & equipment) for carrying out heat setting or drying with the aid of power or steam exclusively in a Hot Air Stenter. (iii) He should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of activity, a request came to be made on behalf of the appellant that the unit may be allowed to avail the Scheme in relation to 'piece dyed fabrics' and the other goods may be subjected to ad valorem rate of duty but the same was declined by the Commissioner with the observations that the Scheme could not be extended to the part goods being manufactured by the assessee. The Commissioner said,- "7.6 A request was made that the unit may be allowed to avail provision of the Compound Levy Scheme in respect of piece dyed fabrics and other goods namely Fiber/Top Dyed fabrics may be subjected to Ad-valorem rate of duty. However I am of the view that provisions of the present Compound Levy Scheme cannot be extended to the part goods being manufactured by the assessee. Thus on this ground I hold that the assessee do not fulfill this pre condition to be eligible to avail the Compound Levy Scheme under Rule 96 ZNA of the Central Excise Rules, 1944." 9. The learned Commissioner, thereafter, dealt with the precondition (ii) regarding the facility in the factory for carrying out heat setting or drying with the aid of power or steam exclusively in a Hot Air Stenter; and disagreed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation with the following order :- "10. In view of the above findings I hereby hold that the assessee does not fulfill the above conditions at para 2 (i) & 2 (iv) to be eligible for the special procedure of compound levy duty scheme prescribed for independent textile processors engaged in the manufacture of specified textile fabrics. Therefore in exercise of the powers conferred under sub-rule (2) of Rule 96ZNA (now Rule 15 of Central Excise Rules, 2001 read with Notification No. 32/2001 - C.E. dated 28-6-2001), I hereby reject the application of M/s. Sulzer Processors (P) Ltd., Bhilwara opting therein to avail special procedure of compound levy duty scheme." (emphasis supplied) 12. Aggrieved by the aforesaid order dated 20-9-2001 as passed by the Commissioner, the appellant approached the Tribunal in appeal; and before the appeal came up for hearing, the Hon'ble Gujarat High Court rendered a decision in the case of Mangal Textile Mills Pvt. Ltd. & Anr. v. Union of lndia - 2004 (171) E.L.T. 160 (Guj.) while considering the issue regarding investment in the plant and machinery in the relation to the said Notification No. 32/2001. In the said case, the Gujarat High Court held, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants after affording reasonable opportunity of hearing to both the sides with a liberty to the appellants to produce evidence, if any, in support of their case." 14. Pursuant to the remand order aforesaid, the Commissioner took up the matter for consideration afresh. The department had not accepted the facts and figures stated in the certificates sought to be relied upon by the appellant; and a Cost Accountant was deputed to carry out special audit. The Cost Accountant submitted the report dated 30-12-2003 opining that value of investment by the appellant on plant and machinery was Rs. 3,58,10,250/- as on 1-3-2001; and was to the extent of Rs. 3,73,69,369/- as on 1-5-2001. A copy of the report received from the Cost Accountant was supplied to the appellant and at request, the appellant was permitted to cross-examine the Cost Accountant concerned. After taking note of the submissions made on behalf of the appellant and the material placed on record, the Commissioner proceeded to decide the matter over again by the impugned order dated 31-3-2004/6-4-2004. 15. The learned Commissioner in the first place took note of the significant fact that the adjudicating authority while passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not linked with the Notification of the Ministry of Industry and the benefits provided under the later could not be extended to the Compound Levy Scheme, particularly referred to the decision of the Hon'ble Supreme Court in the case of Commissioner of C.Ex., Trichy v. Rukmani Pakkwell Traders - 2004 (165) E.L.T. 481 on the point that the Exemption Notifications have to be strictly construed, they must be interpreted on their own wordings, and the wordings of some other Notification are of no benefit in construing a particular Notification. 17. Thereafter, the learned Commissioner considered at length the other part of the matter as to what would be the constituents for the purpose of the value of investment in the plant and machinery, also referred to Notification No. 41/2001, and observed that while AS-10, which is required to be followed, provides for inclusion of various cost items, the Ministry of Industry Notification provides, on the contrary, for exclusion of some of the cost items; and found it to be another factor for the said Notification dated 10-12-1997 being irrelevant. The Commissioner compared the report of the Chartered Accountant with that of the Cost Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this Central Excise Appeal before us. 21. The Tribunal in its order dated 13-8-2009 proceeded to decide, again, two appeals together involving more or less similar and akin issues, including the one by the appellant. The Tribunal observed that the basic dispute had been about the value of investment in plant and machinery i.e., as to whether it exceeded Rs. 3 crores as on 1-3-2001 or 1-5-2001 where, on one hand, the appellants contended it to be below Rs. 3 crores relying on the certificates of Chartered Accountants produced by them and, on the other hand, the department was relying on the certificates of Cost Accountant appointed by them to contend that such value exceeded Rs. 3 crores. The Tribunal noticed that the difference in valuation was essentially due to the facts that the Chartered Accountants on behalf of the appellants had followed the guidelines of the Central Government in the Notification dated 10-12-1997 and, after reproducing the contents of the said Notification dated 10-12-1997, pointed out the reasons wherefor the same could not be applied thus : "7.3 The above said clarification/guidelines are at variance with the accepted accounting norms. For example, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which are mandatory in certain industries cannot be treated anything other than the plant and machinery. 7.6 The certificate given by the CA on behalf of the appellants do not indicate that the valuation has been done in terms of AS 10 method. It merely mentions that they have taken into consideration the AS 10 norms. Nowhere, it is mentioned that the valuation has been actually done by adopting the said norms. The claims of the appellants are for excluding the value of items like DG sets compressors, effluent treatment plant machinery and these claim are merely based on the guidelines of the Central Government dated 10-12-97. We are not inclined to agree that the said guidelines are relevant for the purpose of interpreting this notification." (emphasis supplied) 23. After rejecting other contentions, the Tribunal concluded the matter while affirming the decision of the Commissioner whereby the appellants were held ineligible for having crossed the eligibility limit of Rs. 3 crores. However, the Tribunal agreed with the submissions made on behalf of the appellants that their case did not warrant levy of penalty and, accordingly, while dismissing the appeal in relation to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing", and that too only of "the said goods", the entire of the machinery used in production or installed in the factory is not to be included for the purpose of valuation under the Notification in question. The learned counsel, in his emphasis on the difference between production and processing, has referred to and relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Kerala v. Tara Agencies - 18 2007 (214) E.L.T. 491. The learned counsel yet further referred to the decision of the Hon'ble Supreme Court in the case of Collector of Central Excise Etc. v. The Himalayan Cooperative Milk Product Union Ltd. Etc. - 2000 (122) E.L.T. 327 to submit that the investment is required to be considered in respect of the plant and machinery used in relation to the "said goods" and not in respect of the whole of the plant and machinery. 26. Learned counsel further submitted that the authorities have acted wholly illegally in relying upon and applying Notification No. 41/2001 dated 21-9-2001 in the Scheme brought into operation with effect from 1-5-2001; that by the said Notification No. 41/2001, the very fundamentals of the original Notification No. 32/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the Commissioner in the order dated 20-9-2001 (as reproduced hereinbefore) had been unambiguous and unequivocal that the appellant had not been carrying out any of the processes specified in the Notification for availing Compound Levy Scheme on fiber/top dyed fabrics; and had been carrying out one or more of the specified processes only on piece dyed fabrics. In fact, in the face of such a position, the appellant made an alternative attempt with a feeble suggestion that the Scheme might be allowed in relation to piece dyed fabrics and other goods might be subjected to ad valorem duty. The baseless suggestion so made was declined by the Commissioner, and rightly so, because the provisions of the Scheme could not be extended to the part of the goods manufactured by the appellant. 31. The aforesaid aspect was dealt with by the Commissioner in the order dated 20-9-2001 in its paragraphs 7.1 to 7.6 and thus, apart from the question relating to valuation (as dealt with in paragraphs 9.1 to 9.4), it had been a separate and distinct, but material, finding that the appellant was not answering to the precondition (i) because it was not carrying out the referred processes of blea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very fundamental requirement of eligibility under the Notification in question, remain uncontroverted, unchallenged, and unassailable. These finding, by themselves, are sufficient to conclude that the appellant is not eligible to avail of the Scheme in question; and in the face of these concluded findings, the appellant would remain ineligible, irrespective of value of investment in plant and machinery, whether above or below Rs. 3 crores. In this view of the matter, the issue of value of investment in plant and machinery becomes rather academic. Even if such an issue were to be decided in its favour, the appellant would yet remain disentitled to claim the benefit of the Scheme in question. 35. Though in the above-noted position of the record, we would have dismissed the appeal only on the uncontroverted and final findings on basic ineligibility of the appellant but, in the overall circumstances and in the interest of justice, we have also examined the contentions urged on behalf of the appellant in relation to the issue of value of investment in plant and machinery; and we find the same totally meritless and bereft of substance. 36. It has been contended on behalf of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the present matter particularly when the Notification dated 10-12-1997 had been issued in an entirely different context and for an entirely different purpose; and when the exclusion of the items as stated therein for the purpose of calculating the value of plant and machinery were at variance with the accepted accounting norms like the costs of installation of plant and machinery, transportation charges, the technical know-how etc. were excluded. The contention urged on behalf of the appellant that the value of investment in plant and machinery for the purpose of the Compound Levy Scheme in question be assessed on the basis of the said Notification dated 10-12-1997 stands rejected. 39. Now to the question about the import and effect of the Notification No. 41/2001 whereby explanation has been inserted to paragraph-8 (1) of Notification No. 32/2001. It has been contended that changing the mode of valuation by Notification No. 41/2001 had been of materially altering the Scheme after a right came existing in the appellant. The submission is not correct. The contents of the Notification No. 41/2001 have been reproduced above and evident it is that thereby only an explanation has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are entirely baseless and rather ill-conceived. 42. The Compound Levy Scheme under Notification No. 32/2001 (and so also under the earlier Notification No. 16/2001) has been in respect of the such processed textiles fabrics, falling under the given headings and sub-headings, which are "manufactured or produced" by an independent textile processor exclusively with the aid of a hot-air stenter. This manufacturer or producer has been referred for the purpose of the Notification as "an independent textile processor"; and the goods subject to the exemption have been referred as "the said goods". In the context of the wordings and phraseology of the Notification in question, we are unable to find if the observations of the Hon'ble Supreme Court in Tara Agency's case (supra) have any applicability to the present case. In Tara Agency, the Hon'ble Apex Court found that the benefit under Section 35-B(1-A) of the Income Tax Act, 1961 was restricted only to the goods "produced" or "manufactured" by the small-scale industrial undertaking and not in case the goods were merely "processed" by a small-scale industrial undertaking. In that context, the Hon'ble Apex explained the construction and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the respondent had been using all the plants and machinery for the purposes of manufacturing different excisable goods falling under different tariff items, the total value of capital investment of all plants an machineries installed in its factory was to be taken into account for determining the limit prescribed in Notification No. 105/80-C.E. However, the Tribunal upheld the assessee's plea that the value of investment on liquid nitrogen plant alone was relevant, the exemption being in relation to the said goods only. In the context of the questions arising for determination, regarding exemption of the goods falling under Item 68 of the tariff with reference to Notification No. 105/1980, the Hon'ble Supreme Court pointed out that the relevant provisions of the Notification were not referring to any other goods under clearance except the goods falling under Item 68; and such goods were referred as "the said goods". The Hon'ble Supreme Court found that according to the findings of the Assistant Collector himself, liquid nitrogen was itself a finished product falling under tariff item 68. In that view of the matter, it was held that the question of taking into account th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and water lines from the value of investment. A major part of such exclusion had been incorrect; and against the fundamental accounting standards. 47. It has been suggested that the items like DG Set (initial investment about Rs. 16.62 lacs) and effluent treatment plant etc. (initial investment about Rs. 21.00 lacs) are not the essential components of machineries for the purpose of the processing in question. The suggestion is baseless. The place of setting up of its factory had been the choice of the appellant. When certain machinery is required to be installed, as per the law and regulations governing the factory in question and as per the requirements of running the plant, the appellant cannot be acceded a right to exclude such investment while computing the total value of investment in plant and machinery. Moreover, we find rather inexplicable that even the investment in electric installation (about Rs. 16.45 lacs) and water lines (about Rs. 20.97 lacs) was also suggested for exclusion while computing the value of investment in plant and machinery! Noteworthy further are the observation of the learned Commissioner that capital goods credit was also admissible on electric gene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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