COMMISSIONER OF C. EX. Vs. ASARWA MILLS

JUDGEMENT

(1.) The Respondents herein are engaged in the manufacturing of yarn and fabrics. The yarn was captively consumed in the manufacture of fabrics. The Respondent were paying the duty on the yarn at the spindle stage on the basis of cost of construction arrived at under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. The Department contends that the Respondents had not declared the correct value of the captively consumed yarn during the years 1994-95, 1995-96 and 1996-97 as the value declared was much lower than the value arrived at on the basis of Cost Audit Report furnished by their cost accountants. Thereafter, an investigation was held and it was further observed that the Respondents had not included the value of administrative overheads, bonus, gratuity, interest, conversion charges and depreciation charges in the assessable value of the yarn. Show cause notices were served upon the Respondents in the year 1999 demanding differential duty along with interest. The notices alleged that there had been duty evasion. The said show cause notices were adjudicated upon by the Commissioner of Central Excise, Ahmedabad, who confirmed the demands and also imposed the penalty on the Respondents. It was held that all the administrative and other overheads along with wrapping, winding, beaming, sizing and dyeing charges were includible in the assessable value. The Commissioner further confirmed the invocation of the extended period of limitation only in respect of the administrative and overhead expenses.

(2.) Aggrieved, the Respondents preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (hereinafter referred to as 'CESTAT'). CESTAT vide its common order dated 13-2-2004 allowed the appeals on the ground that the larger period of limitation was not invocable against the Respondents herein and accordingly set aside the demands of duty on them. It was also held that the cost accountants were the experts authorized by the law to do the costing of production of the goods and their duly certified statements/reports relating to such costing were legally authentic enough to be acted upon by their clients and any error found in such certificates would not be a valid ground for any authority to proceed against the clients criminally or quasi-criminally.

(3.) From the aforesaid, it is clear that the only issue is as to whether extended period of limitation could be applied in these cases. As pointed out above, the period involved is April, 1994 to September, 1996 whereas show cause notices to all these Respondent-companies were issued sometime in the year 1999 which was much beyond the period of six months stipulated in Section 11A of the Central Excise Act. The Department took the plea that the extended period of limitation contained in the proviso to Sub-section (1) of Section 11A would be applicable because of the reason that there was intentional misstatement or declarations by the Respondent-companies in order to evade taxes. The CESTAT has found it otherwise. Two things which are highlighted by the CESTAT, while accepting the arguments of the Respondents-assessees are the following: