9911796707
TMI Blog2023 (10) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Unit No. 1 in August 2001 (ii) Unit No. 2 in April 2003 (iii) Unit No. 3 in March 2013 The appellants were manufacturing the following goods in their Units: Unit No. 1 Unit No. 2 Unit No. 3 Sr. No. Name of the products Chapter 1. Hair Care Hair Care Hair Care 33 2. Talcum Powder Talcum Powder --- 33 3. Skin Cream Skin Cream Skin Cream 33 4. Vaseline Petroleum Jelly --- --- 27 5. Oral Care/ Toothpaste Oral Care --- 33 2.4 Notification No. 17/2008-CE dated 27.03.2008 was issued, for amending the Notification Notn. No. 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the sales value was more than 115% of the prescribed percentage of 56% (i.e. 64.4%), the Appellants made separate applications for Units No. 1, 2, 3 for each of the Financial Years from 2008- 09 to 2016-17, supported by requisite documents, including certificates from their Statutory Auditors, M/s. Lovelock Lewes, for the Financial Year 2008- 09 to 2013-14 and M/s. B.S.R Co LLP, for Financial Years 2014-15 to 2016. 2.9 The said Statutory Auditors issued certificates based on the audited Balance Sheets and Profit Loss Accounts for the financial years 2008-09 to 2016-17. The Appellants, in each of the financial years, claimed value addition ranging between 62% and 83%, product wise, as summarized below: Sr.No. Name of the product Financial year Value addition as per Statutory Auditors Percentage of value addition specified in Notifications 115% of Value addition percentage specified in Notifications (1) (2) (3) (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64% 19. Hair Care 79% 56% 64% 20. Hair Care 2013-14 68% / 75% 56% 64% 21. Skin Cream 82% / 83% 56% 64% 22. Vaseline Petroleum Jelly 66% 36% 41% 23. Oral Care 65% 56% 64% 24. Hair Care 2014-15 67% 56% 64% 25. Skin Cream 83% 56% 64% 26. Vaseline Petroleum Jelly 69% 36% 41% 27. Oral Care 67% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued the inventory physically lying at the Units including the WIP at the cost of raw materials and packing material consumed. As per accounting standards, the valuation of the inventory has to be made on the basis of cost of raw material, packing, factory overheads, administrative overheads, etc. Therefore, the value of inventory of stock does not represent fair and true value; (g) Some of the applications have been rejected on merits and some of the applications have been rejected both on merits and time bar. 2.12 Aggrieved from the said orders, the appellants are before us. 3. The Ld. Counsel appearing on behalf of the appellant submits that the products manufactured at the above mentioned units, the Appellants are delivered to their depots from where the same are sold at a uniform selling price. The term uniform selling price indicates that there is uniform all India average rate prevalent at all the depots of the Appellants and hence, multiplying the number of units cleared from the unit with the said all India average rate of selling price is the only and correct way of computing the gross sales value. The fact of actual cost of product at each unit being consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nventory was available in the factory during this period. 3.2 He further submits that the Commissioner s finding that the Balance Sheet is not in conformity with the Companies Act, 1956, is incorrect, based on the following submissions: (i) that a Certificate from Statutory Auditors, containing the calculation of value addition based on the audited Balance Sheet of the preceding financial year has to be submitted in support of the claim for fixation of special rate. (ii) 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 contended by the Learned Commissioner, in the impugned Orders. In other words, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conformity with the Companies Act, 1956, is incorrect and unsustainable. 3.4 He further submits that the Explanation to Para 4 of Notn. No. 32/99-CE prescribes the formula to arrive at actual value addition, based on financial records of the preceding financial year: (i) Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods; (ii) Less: Cost of raw materials and packing materials consumed in the said goods; (iii) Less: Cost of fuel consumed if eligible for input credit under CENVAT Credit Rules, 2004; (iv) Plus: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year; (v) Less: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year preceding that under consideration. From the above, it is clear 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a similarly circumstanced facts and issue, Hon ble Tribunal, vide its Final Order No. 60151/2023 dated 20.04.2023/06.06.2023, reported in 2023-TIOL- 548-CESTAT-CHD in the case of Kokuyo Camlin Ltd., has held that resorting to and invoking uniform sales price; considering equalized sales tax; preparing adjusted Balance Sheet/adjusted Profit Loss Account, based on whole company s Balance Sheet and Profit Loss Account, etc., etc. is proper and legal for arriving at value addition under area based exemption Notification No. 56/2002-CE dated 14.02.2002. It has also been held that Statutory Auditors certificate cannot be questioned by the Commissioner. Appreciating that applications made for fixation of special rate under para 2.1 was accompanied with Statutory Auditors certificate, which is the basis for computation of value addition, Hon ble Tribunal in Kokuyo Camlin was pleased to fix special rate, as certified by the Statutory Auditors and claimed by the assessee therein. Kokuyo Camlin s claim of fixation of special rate considering MRP based assessment, however, was rejected. The Hon ble Tribunal judgment in Osaka Alloys and Steels [2015 (328) ELT 625 (Tri.-Del. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents (i.e. UOI and jurisdictional Commissioner and Assistant Commissioner) to re-visit the issue regarding the claims sought for by the Petitioner in view of the judgment and order dated 22.04.2020 rendered by the Hon ble Apex Court in the case of Union of India v/s VVF Limited and, thereafter, take into consideration all the claims made by the Petitioner as regards their entitlements to refund as sought for in terms of the excise notification. He submits that invoking the ratio laid down by the Hon ble Supreme Court and Hon ble Gauhati High Court, the eligibility and quantum of refund has to be redetermined. 3.12 He, therefore, prays that based on the above submissions and those made in the grounds of appeals, all the 20 appeals, as has been settled by the Tribunal in the case Kokuyo Camlin s case (supra), may be allowed by setting aside the impugned orders. 4. On the other hand, the ld. A.R. for the Revenue supported the impugned orders and submitted that the applications of fixing of special rate were filed after 3oth September of the same year beyond time limit prescribed under the Notification and admittedly, the appellants have filed these applications for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty paid on actual value addition made by the manufacturers undertaking manufacturing activities . . . they do not take away any vested right conferred under the earlier notifications . 6.2 Further, the Hon ble Guwahati High Court in the case of Jyoty Labs reported in 2021 (378) ELT 269 (Gau.), 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 V.V.F. (supra) were in time. 6.3 In view of the above, we hold that 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. 6.4 The remaining issue in all the appeals are common, therefore, all are disposed off by a common observations as under : 6.5 The first issue is that the balance sheet is not in conformity with Section 211 of the Companies Act, 1956. For better appreciation, the facts of the relevant provisions under Notification No. 32/99-CE dated 08.07.1999, are extracted herein under : 2C. The exemption contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the month in which the credit has been so taken; (e) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed necessary, shall determine the amount correctly refundable to the manufacturer and intimate to the manufacturer by the 15th day of the next month to the month in which the statement under clause (d) has been submitted. In case the credit taken by the manufacturer is in excess of the amount determined, the manufacturer shall, within five days from the receipt of the intimation, reverse the said excess credit from the account current maintained by him. In case, the credit taken by the manufacturer is less than the amount of refund determined, the manufacturer shall be eligible to take credit of the balance amount; (f) in case the manufacturer fails to comply with the provisions of clauses (a) to (e), he shall forfeit the option, to take credit of the amount calculated in the manner specified in sub-paragraph 2A in his account current on his own, as provided for in clauses (a) to (c); (g) the amount of the credit availed irregularly or availed of in excess of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value addition undertaken by the unit. The underlying objective of these exemptions is to incentivize genuine value addition in these backward areas. In order to achieve this in a more effective manner some changes/amendments have been carried out in these exemptions. These have been incorporated in Notification No. 16/2008-C.E. to 23/2008-C.E. all dated 27-3-2008. 3. The salient features of these amendments are as follows - (i) Goods covered by the scheme and manufactured by eligible units in the specified areas are currently exempt from so much of the duty of excise as is equivalent to the duty paid in cash or through account current (PLA). Instead, the extent of exemption shall henceforth be equivalent to the duty payable on value addition carried out by the unit in these areas. (ii) The rates of value addition for goods falling under different chapters of the Central Excise Tariff have been prescribed in the notification. The amount of refund that would be due to the unit at the end of the month would be computed by simply multiplying the total duty payable by it with the applicable rate of value addition. Thus, if the total duty payable by a unit manufacturing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditors, containing the calculation of value addition based on the audited balance sheet of the preceding financial year has to be submitted in support of the claim for fixation of special rate. 6.10 We further take note of the facts that Section 211 of Companies Act, prescribes the form in which the Balance Sheet and Profit Loss Account of every Company registered under the said Act is to be prepared, showing the financial position of the said Company and the balance sheet prepared by the appellants is in consolidated form, in the sense that all its Units located all over the country have been brought under the common Balance Sheet and Profit Loss Account, but in other words, the said consolidated Balance Sheet of the Company gives the picture of the functioning or the financial position of the appellants as the whole. Hence, the Balance Sheet prepared is very much in conformity with the provisions of Companies Act and the findings of the Ld. Commissioner that statement of value addition based on the said Balance Sheet and Profit Loss Account is not acceptable are in conformity of law. 6.11 Further, we find that the figures in the Extract of Balance Sheets, arem base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auditor s report is acceptable as an evidence. 7. Now, another issue raised by the ld. Commissioner that the gross sales value based on all India average rate is not acceptable. 8. We find that the products manufactured by the appellants were delivered to their depots from where the same were sold at a uniform selling price. The term uniform selling price indicates that there is uniform all India average rate prevalent at all the depots of the appellants and hence, multiplying the number of units cleared from the unit with the said all India average rate of selling price is the only and correct way of computing the gross sales value. The GSV was arrived at by taking all India Average rate of sales realization of the Company and the average rate of VAT at the rate of 12.5% has been deducted from the gross value. Since different States have different rates of Sales Tax, it is not possible for the appellant to identify as to what quantity of which product, stock transferred to their Depot, is sold in which State, in order to claim the amount of Sales Tax against that particular clearance. In view of this, the appellant has adopted the formula for computation to arrive at the ave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order. 4. It is seen that the Tribunal subsequently vide Final Order No. A/361 362/13/EB/C-II, dated 16-4-2013 in the appellant s own case set aside the order and allowed the appeal. The relevant portion of the said decision is reproduced below :- 5. This issue came up before this Tribunal in appellant s own case wherein vide Order No. A/1956/WZB/Mum/05/C-III/EB, dated 25-8-2005 this Tribunal held that the Equalised Sales Tax can be allowed to be deducted. This issue again came up before this Tribunal in the case of Dabur India Ltd. - 2009 (247) E.L.T. 335 wherein this Tribunal observed as under : 7. We have carefully considered the submissions from both sides. There is no dispute about the eligibility for deduction on account of octroi and additional sales tax. The original authority has accepted this in principle. He has disallowed the deduction only based on the grounds that the respondent have claimed the same on a weighted average basis as mentioned earlier. The Commissioner (Appeals) have allowed the deduction without specifically giving a finding on each of the above three grounds raised by the original authority. We are of the considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uel consumed if eligible for input credit under CENVAT Credit Rules, 2004; (iv) Plus: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year; (v) Less: Value of said goods available as inventory in the unit but not cleared, at the end of the financial year preceding that under consideration. Special rate would be the ratio of actual value addition in the production or manufacture of the said goods to the sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods. From the above, it is clear 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 good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to do so; burden to prove the claim is squarely on the appellants. The word Sale is not defined under notification and therefore, the definition requires to be taken from Section 2 of Central Excise Act; the appellants claim of two value additions cannot be accepted; MRP value as contemplated under Section 4A of Central Excise Act, 1944 is a notional value and the same cannot be considered as a value for the purpose of the notification. The application made by the appellants is dated 29.09.2009 and whereas the audited balance sheets are 30.09.2009 and therefore, cannot be accepted to be accurate in respect of various figures submitted. As taken in the adjusted balance sheet, gross revenue cannot be considered as sale value; sale value requires to exclude Central Excise, VAT and other taxes; distribution of cost plus 10% on an average basis to all the sales is not acceptable. 6. We find that Commissioner has not discussed, in the impugned order, as to whether the appellants have arrived the calculations as above. However, he has discussed the same in the letter dated 20.04.2010 and made some additions and reductions in the claim of the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing a calculation of value addition in the case of goods for which claim is made, based on the audited balance sheet of the unit for the preceding financial year. We find that the appellants have submitted the necessary certificate, it was therefore, incumbent upon the Adjudicating Authority to go through the Statutory Auditor s report; to question the figures adopted by the Statutory Auditor; to ask for clarification of the appellants before rejecting the same. Therefore, we find that Commissioner had no justified reasons to reject the Statutory Auditor s certificate. For this reason, we find that the Adjudicating Authority has completely ignored the provisions of the notification and therefore, such an order is liable to set aside. 8. We find that Explanation under Para 4 of the Notification reads as under: For the purpose of this paragraph, the actual value addition in respect of said goods shall be calculated on the basis of the financial records of the preceding financial year, taking into account the following: (i) Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods; (ii) Less: C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
