ORDER
Gowri Shankar, Member (T)
1. The application is for waiver of deposit of duty of Rs. 1.52 crores approx. demanded from M.H. Mills, the manufacturer and penalty on it of Rs. 1.05 crores approx., fine of Rs. 15 lakhs for redemption of plant and machinery; and penalties of Rs. 5 lakhs on K.C. Shah, A.S. Tripathi and Rs. 7.5 lakhs on D.I. Raval, senior vice president, excise officer and cost accountant respectively.
2. The duty has been demanded, and penalties imposed on the finding of the Commissioner that in determining the cost under Rule 6(b)(ii) of the Valuation Rules of the cotton yarn manufactured and captively consumed by it, the manufacturer did not include administrative overheads, bonus, gratuity paid to staff and interest on capital. The demand covers the period from 1.4.94 to 3.9.96, and the extended period contained in the proviso under sub-section (1) of Section 11A of the Act has beeb invoked by alleging suppressing from the department that these elements were not included in the cost of manufacture. The show cause notice proceeds on the basis that while these elements were included in the returns that the applicant filed to the Company Law Board as required by Section 233B of the Companies Act, 1956, read with the Cost Accounting Records (Cotton Textiles) Rules 1977, they were not included in the declaration filed to the department. There is also an allegation that the notional profit was not included in the cost of dyed yarn manufactured and captively consumed by the applicant. The counsel for the applicant has no defence to offer at this stage of the amount of Rs. 1.19 lakhs required to be deposited in this regard.
3. His primary contention with regard to the main issue is that the basis upon which the notice proceeds, that these elements of cost were included in the cost of production of the yarn captively consumed in the return filed to the Company Law Board is incorrect. These details were required to be filed to that authority in proforma A to M. Cost of production of yarn was to be shown in proforma B and cost of sale of yarn in proforma C. The relevant column in proforma B did not provide for including in the cost of production of the yarn, the administrative overheads, bonus etc. It is only proforma C which contained specific column for administrative expenses, sale and distribution expenses, bonus and interest. The applicant was therefore under the impression, while filing the columns in the proforma that there was no question of including these elements in proforma B. In point of fact the show cause notice has adopted these facts from proforma C. It would therefore not be correct to say that the applicant adopted two different criteria, one for the Company Law Board and one for the department in determining the cost of captively consumed goods.
4. It is further contended that the Commissioner has not properly dealt with this point. The basis for his invoking the extended period, that the department did not pay close attention to the declaration of price because it was supported by a cost accountant’s certificate is obviously incorrect, as no such certificate was attested to any of the price list in the declaration. Financial hardship is pleaded on the ground that there has been loss of Rs. 16 crores for the 18 month period ending 31.3.01 and accumulated loss of Rs. 19 lakhs at the end of the previous financial year and these figures are supported by balance sheet of the applicant.
5. The departmental representative emphasises that the Commissioner has found that these elements ought to have formed part of the assessable value and that cost accountant’s certificate has to be accepted at its fact value. He relies upon the Commissioner’s observation that note under proforma A provides that bonus, gratuity and interest shall be shown in proforma C, F and M wherever applicable.
6. The notice to show cause itself reproduced the statement of K.C. Shah, Vice president that the assessee did not seek to support the price declaration filed by it with the certificate of cost or chartered accountant. The note under proforma 1, if anything would prima facie support the case of the applicant, by the fact that it does not require the costs in proforma B to include these elements.
7. We therefore find that the applicant has a strong prima facie case on limitation and on the ground of financial hardship. Accordingly, except for the amount of Rs. 1.19 lakhs, we waive deposit of the duty demanded and penalties imposed on all the applicants and stay their recovery. The counsel for the applicant undertakes to that this amount will be deposited within two weeks from today.
8. The departmental representative does not oppose the application made by the counsel for the applicant for out of turn hearing. Appeals therefore to be heard on 11.9.2001 subject to deposit of the amount mentioned in the preceding paragraph.