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TMI Blog2019 (3) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... n materials provided by their principals. In this regard, there are merits in the contention of the appellants that in such cases, the method of valuation laid down in M/s. Ujagar Prints Ltd. [1989 (1) TMI 124 - SUPREME COURT OF INDIA] and reiterated in M/s. Pawan Biscuits Co. (Pvt.) Ltd. Vs. Collector of Central Excise, Patna [2000 (7) TMI 78 - SUPREME COURT OF INDIA] will necessarily have to be followed, in which case, the value to be adopted will be restricted to the material cost of job work charges. There cannot then be any question of adding the profit of the principals. Valuation - processed goods sent via appellant to M/s. Jansons Exports - the appellants have contended that no findings have been given by the adjudicating authority with regard to the detailed submissions made on this aspect by the appellant in their reply to the Notice. It is also brought out that in the reply to the Show Cause Notice, they had submitted a revised quantification of demand, as per which the duty payable is only ₹ 68,65,550/- - Held that:- There is a definite case for re-consideration of the quantum of demand in this case - The matter is therefore remanded to the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1944 under Notification No. 32/2001-CE dated 28.06.2001 during the period from 01.05.2001 to 31.03.2002. Application (Form ASP-1) dated 16.05.2001 filed by the assessee for availing permission to avail this special procedure, was rejected; (ii) An amount of ₹ 2,17,05,582/- was confirmed as the differential duty on the processed fabrics cleared during the period from 01.05.2001 to 28.02.2002 along with interest thereon; (iii) Penalty of ₹ 2,17,05,582/- was imposed on the assessee under Section 11AC of the Central Excise Act, 1944 and under Rule 173Q of the erstwhile Central Excise Rules 1944 read with Section 38A of the Act ibid; (iv) Penalty of ₹ 25,00,000/- each were imposed on Shri. T. S. Natarajan (Partner) and Shri. T. N. Kalaimani (Partner) under erstwhile Rule 209A of the Central Excise Rules, 1944 read with Section 38A of the Central Excise Act, 1944; (v) Penalty of ₹ 2,00,000/- was imposed on Shri. J. Srinivasa Raghavan (Manager) under the same provisions. 2.3 Hence, Appeal No. E/552/2010 was filed by the assessee and Appeal Nos. E/553/2010, E/554/2010 and E/555/2010 were filed by Shri. J. Srinivasa Raghavan, Shri. T. S. Natarajan an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble High Court of Madras has held that a seizure memo is nothing but a corroborative piece of evidence. With regard to the dispute concerning value of plant and machinery exceeding ₹ 3 crores : (i) Ld. Advocate drew our attention to paragraph 16.02 of the impugned Order wherein, along with the original investment of plant and machinery of ₹ 1.93 crores declared in their ASP-1 application, value of generator, electrical and mechanical spares and accessories, pollution control equipment and lift totalling to ₹ 1.11 crores has also been taken into account by the adjudicating authority to conclude that the value of plant and machinery exceeds ₹ 3 crores. Ld. Advocate submits that by no stretch of imagination can the value of such items be included in plant and machinery; (ii) Ld. Advocate also draws our attention to Rule 96ZNB which mandates that value of plant and machinery should not exceed ₹ 3 crores. However, the said provisions relate only to plant and machinery installed in the factory of the Independent Textile Processor. (iii) Ld. Advocate even drew our attention to the Application in ASP-1 dated 16.05.2001 submitted, seekin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying, is only an afterthought and cannot be accepted in view of the observational Mahazar drawn on 31.10.2001. With regard to the dispute concerning value of plant and machinery exceeding ₹ 3 crores : (i) Ld. AR drew our attention to paragraphs 16.02 to 16.09 of the impugned Order to contend that the balance sheet for the year ending 31.03.2001 certified by the Chartered Accountant had included the generator, electrical and mechanical spares and accessories, pollution control equipment and lift under the category of fixed assets; (ii) As per the Accounting Standards 10 issued by the ICAI, a fixed asset should include land, building, plant and machinery, vehicles and fittings, goodwill, patents, trademarks and designs. That fixed asset is an asset held with the intention of being used for the purpose of producing or providing goods; (iii) Ld. AR submitted that the contention of the assessee that some of the machines were not installed and that the value of machines that were not installed would render the overall value as baseless and that therefore, should not be included in the value, is incorrect since the wordings of Rule 96ZNB requires that value ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of value of plant and machinery in the manner prescribed by the institute as per ACCOUNTING STANDARD 10. 10. Salient features of AS-10 some of which are relevant for the case on hand, its applicability on the facts of this case and our Analysis, are as under : DEFINITIONS 6. The following terms are used in this Standard with the meanings specified: .. Property, plant and equipment are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than a period of twelve months. Analysis : - Nowhere it is mentioned about items used or restricted to, production alone; Recognition 7. The cost of an item of property, plant and equipment should be recognised as an asset if, and only if: (a) it is probable that future economic benefits associated with the item will flow to the enterprise; and (b) the cost of the item can be measured reliably. Analysis : - No one can deny the usage of a generator or a lift and the value (economic benefit) in Asset schedule, as long as the same are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as an asset because without them the enterprise is unable to manufacture and sell chemicals. The resulting carrying amount of such an asset and related assets is reviewed for impairment in accordance with AS 28, Impairment of Assets. (emphasised in bold, for clarity) Analysis : - This covers a whole lot of items, as it is mentioned in the first few lines, like tangible items which are held for use or for administrative purposes. The term administrative purposes has been used in wider sense to include all business purposes other than production or supply of goods or services or for rental for others . It is too wide in its ambit, to include every other item/s excluding the ones used for production or supply. It clearly indicates that the items need not have any bearing, even remotely, with the activity of production or got anything to do with performance or capacity or enhancing either performance or capacity. When the above clause even covers items acquired for environmental reasons, the argument that it was not for performance or capacity or enhancing either performance or capacity, falls flat. Subsequent Costs 12. Under the recognition principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (including costs of staff training); and (d) administration and other general overhead costs. Analysis : - Only a few of the above class/s are not the costs of an item of property, plant and equipment and the same doesn t cover other classes. Typically, the above costs are in the revenue field with no impact on the balance sheet. 40. A class of property, plant and equipment is a grouping of assets of a similar nature and use in operations of an enterprise. The following are examples of separate classes: (a) land; (b) land and buildings; (c) machinery; (d) ships; (e) aircraft; (f) motor vehicles; (g) furniture and fixtures; (h) office equipment; and (i) bearer plants. Analysis : - This talks of property, plant and equipment, to be grouped in respective asset groups based on its nature and use. Interesting to note that irrespective of whether an item is machinery or a fixture or office equipment, should form part of respective group under property, plant and equipment; This also indicates and counters the argument of the appellant that lift is only a building , to say that land and building also form a class of property, plant and equipment, of the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat valuation requires to be adopted at 115% of the cost of production. What cannot be dispute is that the appellant was only doing a job work on materials provided by their principals. In this regard, we find merit in the contention of the appellants that in such cases, the method of valuation laid down in M/s. Ujagar Prints Ltd. (supra) and reiterated in M/s. Pawan Biscuits Co. (Pvt.) Ltd. Vs. Collector of Central Excise, Patna - 2000 (120) E.L.T. 24 (S.C.) will necessarily have to be followed, in which case, the value to be adopted will be restricted to the material cost of job work charges. There cannot then be any question of adding the profit of the principals. 14.1.2 We also find that the appellants have correctly relied upon Board Circular No. 619/10/2002-CX dated 19.02.2002, the relevant portion of which is reproduced as under : 2. The matter has been examined by the Board. It is observed that the system of getting goods manufactured on job-work basis is not new. Under the provisions of the earlier Section 4 and Rules made there under the matter has been finally decided by the Apex Court in the case of Ujagar Prints Ltd. [1989 (39) E.L.T . 493 (S.C.)] and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded levy from the value shown in the invoice. It is also argued that the valuation method imposed by the Department is without any legal basis and that the valuation should be under the ratio laid down by the Hon ble Apex Court in the case of M/s. Ujagar Prints Ltd. (supra). 14.3.2 In the grounds of appeal, the appellants have contended that no findings have been given by the adjudicating authority with regard to the detailed submissions made on this aspect by the appellant in their reply to the Notice. It is also brought out that in the reply to the Show Cause Notice, they had submitted a revised quantification of demand, as per which the duty payable is only ₹ 68,65,550/-. We find the revised quantification claim by the appellant in page 185 of the Appeal Paper Book, as under : 2001-2002 (01.05.2001 to 28.02.2002) I. COTTON FABRICS 1. COTTON FABRICS VALUE AS PER SCN W/S} 14,68,13,815.00 x 100 116 FOR HOME CONSUMPTION CLEARANCE} 2. ACTUAL ASSESSABLE VALUE UNDER CUM} 12,65,63,634.00 x 12% ADV DUTY (Dee. Cre. For 2001-2002 is 25% Aggregate} of BED AED (GSI) 3. DUTY PAYABLE FOR THAT VALUE LESS} 1,51,87,636.00 DEEMED CREDIT AT 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,550/- against the confirmed demand of ₹ 2,17,05,582/-. 16.2 We also find merit in the argument of the Ld. Advocate for the appellants that the only basis for alleging suppression is that actual value of plant and machinery was not disclosed in their application dated 16.05.2001 and that the Department identified other fixed assets from the appellant s balance sheet as on 31.03.2001. The appellants have averred that the very same balance sheet was submitted by them along with the application, as recorded in paragraph 7.05 of the Order-in-Original. 17. In the circumstances, we are of the considered opinion that no suppression can be assailed against the appellant. In consequence, we hold that the penalty of ₹ 2,17,05,582/- under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the erstwhile Central Excise Rules, 1944 read with Section 38A of the Act ibid cannot be sustained and is therefore set aside. 18. For the above reasons, Appeal No. E/552/2010 (M/s. Jansons Textile Processors) is partly remanded for the limited purpose of re-quantification of net duty liability in the light of our observations and directions hereinabove. The imposition of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages, there is no discussion with regard to the allegations made against these three persons that they have actively connived or conspired to facilitate the proprietary interest aspect alleged by the Department. 21.2 The only discussion remains in paragraph 21.01 wherein the only finding against Shri. T.S.Natarajan and Shri. T.N.Kalaimani are that being partners of the above firm, cannot disown their responsibility in giving false declaration to the Department . It is also alleged that the partners are at the helm of affairs of management of the firm and are directly responsible for the omission and commission in this case, leading to loss of revenue to Government. This is as bald and presumptive as a conclusion can be. 21.3 The finding against Shri. J. Srinivasa Raghavan is that he was the authorized signatory and has failed to furnish the details regarding the value of plant and machinery as conforming to the Accounting Standards 10 issued by the Institute of Chartered Accountants of India as promised by him. This conclusion is being made in spite of the very clear averment made in the statement of Shri. J. Srinivasa Raghavan recorded on 27.02.2002 that the reasons f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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