Relief to Hindustan Unilever Ltd: CESTAT quashes rejection of fixation of special rate [Read Order]

The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal granted relief to Hindustan Unilever Ltd (The Appellant) by quashing the order by the Adjudicating Authority in favor of the Commissioner of Central Excise (CCE) (The Appellant) which rejected the fixation of the special rate.The appellant was in the business of manufacturing Oral Preparations, Cosmetics, Hair Care, and Skin Care Preparations, and on 20.11.1997, the Central Government announced an Industrial Policy, inviting entrepreneurs to set up new industrial Units in the North-Eastern States and promised that such Units would be exempted from payment of central excise duty and income tax for a period of 10 years from their date of commencement. To avail of this, benefit the appellants had set up factories at Doomdooma Industrial Estate in Tinsukia District of Assam State.As per the notification, the appellants were entitled to an exemption/refund of 56% of the total duty payable on the goods manufactured and cleared by them, subject to the amount paid from PLA. The appellants had claimed value addition between 62% and 83% for each financial year, but the commissioner had rejected the claims on the grounds that: (a) the Balance Sheet, based on which the computation of value addition done by the appellant, was not in conformity with Section 211of Companies Act, 1956. (b) that the gross sales value (GSV) arrived at by the appellant was incorrect, as the actual cost of production of the said Units cannot be considered. (c) as per Explanation to Para 4 of Notification No.32/99-CE, the computation of value addition does not include work-in-progress.The counsel who appeared on behalf of the appellant submitted that the products manufactured by them were delivered to their depots from where it is sold at a uniform selling price and uniform selling price indicates that there was a 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 counsel further submitted that the Commissioner’s finding that the Balance Sheet is not in conformity with the Companies Act, 1956, was incorrect as nowhere in the notification stipulates that a copy of the Balance Sheet was to be enclosed instead, it just mandates that the value addition must be calculated based on the audited Balance Sheet.The counsel who appeared on behalf of the revenue supported the impugned orders and submitted that the applications of fixing of special rate were filed after 30th September of the same year beyond the time limit prescribed under the notification and admittedly, the appellants had filed these applications for special rate fixing in the very next year. Therefore, the applications for special rates of fixing rates were not sustainable, and to support this argument, the counsel submitted that the balance sheets were not in conformity with Section 211 of the Companies Act, 1956 and the gross sale value on the average rate was not acceptable and the average rate of VAT was also not acceptable. He further submitted that the work in process could not be a part of taking value of sales and therefore, the appeals deserve to be dismissed.The two-member bench consisting of Ashok Jindal (Judicial Member) and K.Anpazhakan (Technical Member) after hearing both sides held that the rejection of the applications of fixation of special rate by the adjudicating authority was not correct and was in violation of the law, therefore the appeal was allowed. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates