ORDER
V.K. Ashtana, Member (T)
1. These are two revenue appeals and since the subject matter is identical, therefore, they are being considered by this common order.
2. Appeal No.E/3125/98 is against the Order-in-Appeal No. 66/98(H-III)CE, dated 2-7-1998 passed by the Commissioner (Appeals). Appeal No. E/3126/98 is against the Order-in-Appeal No. 67/98(H-III)CE, dated 2-7-1998 passed by the Commissioner (Appeals). This Order-i n-Appeal in para 7 thereof applies the same reasonings as is contained in the earlier Order-in-Appeal No. 66/98 dated 2-7-1998, therefore, while considering these appeals, I shall also look into the findings in the said Orders-in-Appeal in great detail.
3. Heard Shri S. Sankaravadivelu, learned JDR, who submits that the department is aggrieved by these two Orders-in-Appeal on the following grounds :-
(a) Since the glass bottles are in the nature of durable and returnable containers, therefore, the cost of such packing was not included in the assessable value and hence there can be no availment of Modvat credit on these glass bottles.
(b) The respondents claimed that the cost of these glass bottles has in fact been included in the cost of the final product, while fixing the price thereof as the expenditure incurred on these glass bottles for their maintenance, their depreciation due to use and their breakages have all been charged as expenditure in their profit and loss account and in the balance sheet. But this is not correct.
4. The learned Consultant Shri C.S. Rao, in this connection submits that when the costing of the final product is worked out as per the value laid down and universally accepted principles of accountancy, there are two kinds of costings involved to be considered namely (a) Direct Cost, for example the cost of raw materials like flavour, sugar etc. and (b) Indirect Cost i.e. cost pertaining to depreciation, investment in various factors including glass bottles and those relating to write off of bottles damaged etc. The learned Consultant submits that for the periods in dispute in the two appeals (namely appeal No. E/3125/98, the period is April, May, 1995 and and in appeal No. E/3126/98, the period is November, 1995), these are covered by Chartered Accountant’s certificate dated 13-11-1996 for the financial year 1995-96. He again submits a copy thereof in this Court. He submits that the learned Commissioner (Appeals) has considered this certificate in great detail in the Order-in-Appeal No. 66/98 and has found that since the average expenditure per crate has already been worked out by the Chartered Accountant, therefore, it is clear that the pro-rata cost of these glass bottles has been considered in the pricing of the final product. The learned Consultant says that there is no error in this finding at all. He further submits that if the department disputes the accuracy of this certificate, it is for the department to prove with the product on figures already available with them and the balance sheet also available with them, as to how the Chartered Accountant’s certificate is erroneous. He further submits that normally such certificate of Chartered Accountant, who have to base their calculations on universally accepted principles of accountancy is considered valid by the department in all other cases.
5. The learned DR further submits that the revenue is also of the opinion that the said certificate is a blank certificate by the Chartered Accountant and that it does not enunciate any rule or principle of Costing, which can show as to how the pro-rata cost is already included in the value of the final product. He further submits that the original cost, date of purchase and date on which put into use etc. have not been clearly indicated in the said certificate. He also submits that the Notification No. 36/95 dated 17-11-1995 which includes glass bottles the definition of inputs clearly shows that prior to 17-11-1995 the Modvat credit was not available on these glass bottles.
6. The learned Consultant counters both these submissions and pleads that the Chartered Accountant certificate is based on the company’s balance sheet. In turn, the company’s balance sheets are based on actual accounts of the company with respect to the three factors for the glass bottles i.e. depreciation on glass bottles purchased, breakages of glass bottles and repairs and maintenance thereof. Therefore, it cannot be said that the Chartered Accountant’s certificate is a blank certificate. On the contrary, it emerges as a summary of the entire financial year of accounts of the company. He submits that it is not necessary for a Chartered Accountant certificate to show day by day details of these expenditure as then the certificate would become voluminous; instead; the Chartered Accountants are qualified to submit the certificate as a summary of the entire accounts under law. Further, the learned consultant submits that the Notification No. 36/95 dated 17-11-1995 had not included glass bottles in the definition of imports under Rule 57A. On the contrary, they had excluded crates and glass bottles used for aerated waters. Therefore, this very ground of appeal of the department is totally erroneous.
7. I have carefully considered the rival submissions as well as facts of the case. I find that the Notification No. 36/95 (N.T.), dated 17-11-1995 amends Rule 57A and specifically mentions in Sub-clause (iv) “crates and glass bottles used for aerated waters.” The effect of this is that Modvat credit on crates and glass bottles is specifically excluded from the Modvat credit under Rule 57A with effect from 17-11-1995. However, in this case the period of dispute is prior to the issue of Notification, not therefore, this ground of appeal is not clearly well taken.
8. As far as the basic issue of availability of Modvat credit on glass bottles for aerated waters is concerned, prior to the said amendment to Rule 57A, discussed in the paragraph above, the issue would be covered by Sub-clause (iii) which says that the credit thereon would not be available only if the cost thereof is not includible in the assessable value of aerated waters so used.
In this case, the respondents have claimed that the cost has been included while arriving at the costing of the final product. In support of the claim, they have furnished the Chartered Accountant’s certificate noted above before the lower authorities. A copy of thereof is enclosed as Annexure 1 for ready reference. I have carefully considered the said certificate, which is for the financial year 1995-96 and is therefore, covering the period of dispute in both these : appeals. It takes into account the expenditure in respect of glass bottles and wooden crates on the following counts :-
(a) depreciation
(b) breakages, and
(c) repairs and maintenance
and comes towards total figure of Rs.28,07,121/- Thus, the certificate clearly early mentions a verifiable and specific figure of expenditure for the whole financial year in this respect. I further find that the Chartered Accountant has then certified that this amount has been taken into consideration for arriving at the profit for this financial year. It is a well known principle of accountancy mat the profit on the product depends on its costing, inasmuch as that after the costing etc. is deducted from the sale proceeds, we get the profit. Therefore, if the said expenditure has been considered in the profit and loss account of the respondents, it cannot be said that indirectly this expenditure has already not been added to the value of the product in question i.e. aerated water. Thirdly, I find that the Chartered Accountant has further attempted to work out Rs. 3.10 per crate, as the pro-rata expenditure in this behalf for 29,05,603 crates of aerated water cleared by the respondents in this financial year. In fact I also find that this figure excludes the sale of one product which is called ‘Maaza’ and which was also exempted from duty. Therefore, I find that under no circumstances this certificate of the Chartered Accountant can be termed as “blank certificate”.
9. I also find that the issue of availability of Modvat credit on glass bottles, if the pro-rata cost thereof is included in the assessable value of the aerated water has already been laid down in the case of a Amrit Bottlers as reported in 1997 (23) RLT 637 (T) and in the case of Pure Drinks as reported in 1997 (95) E.L.T. 219 (T) and in the case of Black Diamond Beverages as reported in 1997 (91) E.L.T. 422 (T) and also in the case of Delhi Bottling Co. and Ors. as reported in 1997 (22) RLT 697 (T). In all these decisions of the Tribunal, the basic point prescribed is that the pro-rata cost is to be calculated and is shown to be included in the costing of the final product i.e. aerated water. In these appeals also, in view of the aforesaid findings, I find that since the Chartered Accountant’s certificate is not a blank certificate but contains all the summarised details necessary, therefore, the pro-rata cost indicated therein is to be accepted, as having been added to the cost before working out the profit in the profit and loss account.
10. I, therefore, find that the above analysis clearly shows that there is no infirmity in the Orders-in-Appeal, which compells me to interfere with the same. The revenue appeals are accordingly dismissed.