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Saturday, May 22, 2004

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Cost accountant's mouldy certificate

D. Murali

THE Mumbai CESTAT ruling in the Supreme Industries case is not something that cost accountants would be happy reading. The company, a manufacturer of plastic articles, used moulds supplied by various parties. When the Department, in 14 hearings from 1987 to 1991, asked Supreme for details about the moulds and their expected life, no information was forthcoming. So, the Assistant Commissioner passed orders holding that 10 per cent of the value of plastic parts (such as of TV sets) would represent the value of the moulds.

At the Tribunal, the company disputed the addition of 10 per cent, contending that the suppliers of moulds did not furnish it with the info. That is `disingenuous' said Mr Gowri Shankar, Member of the Tribunal: The fact that Supreme was able to get this information "which forms the basis of the cost accountant's certificate itself exposes the fallacy of this argument." Mr Gowri Shankar, therefore, said: "The competence of the cost accountant to comment upon such a technical matter is highly open to question. The Assistant Commissioner is right in rejecting the value of the certificate."

Would a CA have made some difference?

Money in moist masala

THE Dharampal Satyapal case that came up before the New Delhi CESTAT was about Pan Masala. The company had claimed remission of excise duty of Rs 4 lakh for goods damaged by water; 50 cases of 4 gm each and 48 cases of 1.75 gm each, "became unfit for human consumption" because "rain water entered the premises". But the Department disallowed the same stating that "remission could be allowed only if the goods had been lost or destroyed by natural causes or by unavoidable accidents".

Mr P. S. Bajaj, Tribunal Member observed that the company could have avoided the loss "by taking proper care and precautions" since "it was their duty to store the goods at a safe place." Thus, "they cannot be permitted to take advantage of their own negligence of having failed to remove the goods at the time of rain to a safer place." More important, "If they themselves stored the goods at a place where the rainwater could easily enter, they have to suffer."

Queerly, the company had obtained "compensation from the insurance company of over Rs 27 lakhs" for the goods lost.

Take a deep breath

IF YOU are ready for a test of your lung strength, the following excerpt from a recent Customs notification on Special Economic Zones Rules should help:

"Provided further that in case the goods admitted into special economic zone unit from domestic tariff area, on which benefit under duty exemption pass book scheme or duty drawback has been availed, are removed as such or after subjecting them to a process not amounting to manufacture, to an export-oriented undertaking or software technology park unit or electronic hardware technology park unit directly by the special economic zone unit or through any unit in the same special economic zone or another special economic zone, the duty equal to benefit availed under duty exemption pass book scheme or duty drawback shall be liable to be paid."

That's 100-plus words.

A hand at second-hand

ALL OLD goods are not second-hand goods. Too simple a truth, but the New Delhi CESTAT had to din this into the Department's thinking when dealing with the Pushpsons Balbro case. The company had imported in 2001 polypropylene non-woven sheets in rolls at $0.40 per kg. Customs officials felt that the value was too low and so enhanced it to $1.20 a kg. However, the company appealed to the Commissioner and argued that the imported goods were manufactured in 1988-89 and were of inferior quality, not suitable for industrial use and, hence, the low value. Also, they had been importing regularly from the same supplier since 1994.

The Commissioner ruled in favour of the company. The Department pursued the matter before the Tribunal stating that "the goods were logically second-hand in nature", considering the year of manufacture. Since there was a restriction on import of second-hand goods, the Commissioner had erred in his decision, said the Department.

Justice K. K. Usha, Tribunal President, noted that the Department's contention was `totally baseless': "We are compelled to observe that Revenue should not have filed such a frivolous appeal which would not only go to the harassment of the assessee but would amount to wasting of time of the Tribunal."

Miss Roll that Excise tripped over

MISS World, Miss Universe, and so on, you know them all. To get acquainted with `Miss Roll' you may have to read a recent tribunal decision in the Pepsu Steel Rolling Mills case. The company wanted the benefit of an Excise notification for waste and scrap arising in the course of manufacture of final product, but the Department was not inclined to offer the same, stating that "miss-Rolls which have arisen in the course of manufacture of hot re-rolled product of iron and steel are not waste and scrap."

The Commissioner (Appeals) viewed miss-rolls more benignly and stated: "Miss-rolls are nothing but waste and scrap." The Revenue pursued the matter to the New Delhi CESTAT. There, Mr V. K. Agrawal, Tribunal Member, observed: "The very fact that the impugned product is known as miss-roll suggest that the product is not usable as rolls." Disappointingly for the Department, they had not brought on record any material "to show that miss-rolls are usable as rolls." A case of rolls and misses.

Sanitary storm

EID Parry's case against the Excise Commissioner of Jaipur was about a duty of about Rs 43,000 on goods lost and destroyed due to heavy storm. The company, a manufacturer of ceramic sanitary wares, had kept the finished products in the open yard, arranging one above the other neatly, as per procedure adopted over many years, after due notice to the Department. "Due to very heavy rain and storm" the heap collapsed and there was irretrievable damage. When a claim for duty remission was made on the basis of actual loss, the Department stated that EID had not taken sufficient precautions for storing the goods.

At the Chennai CESTAT, the Department's response to the company's contention — that the Excise authorities were aware of the manner in which the goods were stocked in the open yard — was to go back and verify. The appeal was therefore remanded to the original authority for re-adjudication.

One wonders how they are stacking up in the meantime.


"My inner voice tells me there would be more I-T benefits!"

"Does it mention the section numbers also?"

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