CA Urvashi Porwal
Brief of the Case
In the case of Dhar Cement Ltd. Vs. C.C.E., it was held that the Department cannot reject the certificate issued by the competent authority. In case the certificate was obtained by mis-representation or not presenting full facts the only option left to the department is to approach the competent authority with all the evidences to modify/cancel the certificate issued already.
Facts of the Case
The appellants are engaged in the manufacture of cement liable to Central Excise Duty. They claimed benefit of Notification No.24/1991-CE dated 25.07.1991 and 5/1993-CE dated 28.02.1993. The concession under the said Notification is available to a cement factory using rotary kiln, with installed capacity certified as not exceeding 600 tonnes per day or 1,98,000 tonnes per annum and the total clearances of the cement produced by the factory, in a financial year, shall not exceed 2,20,000 Tons. The condition relevant to the present case to avail the said concession is that the installed capacity of the factory shall be certified by an officer not below the rank of Director of Industries in the State Government. Based on certain enquiry, proceedings were initiated against the appellant to deny the concessional rate of duty as above. After due process the case was adjudicated by the Original Authority vide order dated 04.09.2000. On appeal the Tribunal vide Final Order No.60-62/2002-C dated 15.03.2002 remanded the matter to the Original Adjudicating Authority. The case was re-adjudicated by the Commissioner of Central Excise, Indore. The Commissioner vide his order dated 23.09.2003 again denied the benefit of Notification and confirmed a demand of Rs.6,22,02,982/-. He also imposed equal amount of penalty each on the appellant assessee; Rs.20.00 Lacs penalty each on the Managing Director and the Director of the appellant assessee. Aggrieved by this order the appellants filed appeal before the Tribunal. The Tribunal vide the Final Order No.86-88 of 2005-B dated 28.12.2004 set aside the impugned order and allowed the appeals. The Revenue filed Civil Appeals No.5352-5755 of 2005 in the Hon’ble Supreme Court. The Supreme Court vide their Order dated 21.07.2005 set aside the order of the Tribunal and remanded the matter back to the Tribunal for a fresh consideration.
Contentions of the Assessee
The appellant submitted that competent authority to certify the installed capacity of the factory is Director of Industries in the State Government. The appellants have produced such certificate dated 27.07.1995 issued by the competent authority. It was certificate that the installed capacity of the appellant as 1,98,000 M.Ts. per annum. The Directorate General of Anti Evasion took up the matter with the Director of Industries, Madhya Pradesh, who vide amendment dated 26.04.1997 amended the certificate to indicate that the capacity is as per registration certificate produced by the Unit. The Director of Industries in his further certificate dated 09.09.1997 cancelled the amendment and confirmed the earlier certificate dated 27.07.1995 to the effect that the installed capacity of the appellant is 1,98,000/- M.T. P.A. The whole case against the appellant is on the ground that certificate issued by the Director of Industries, Madhya Pradesh is not acceptable to the Central Excise Department and based on various communications and documents obtained during enquiry, the installed capacity of the appellant was alleged to have been much higher than 1,98,000 T.P.A., making them ineligible for the concession claimed as above. When the case was adjudicated for the first time denying the exemption to the appellant, based on the appeal filed by the appellant, the Tribunal remanded the matter specifically directing the adjudicating authority to approach the competent authority under Notification to certify the installed capacity of the unit at the relevant time after taking into consideration of the facts, material and evidence furnished by both the sides. It is clear that the matter was pursued by the Department by addressing letters to the Commissioner of Industries, Madhya Pradesh. The Commissioner of Industries, Madhya Pradesh considered all the objections raised by the Department and again confirmed the certificate by holding that the Industry Department Certify the appellants factory having installed capacity of less than 1,98,000/- T.P.A. He specifically observed than even though the appellant might have mentioned their installed capacity as more than 1,98,000 tonnes at some places, the certificate was reiterated. There is evidence which was not considered by the Commissioner of Industries, which is now being presented by the Department. All evidences gathered by the Department to contest correctness of certificate issued by the Director of Industries has already been examined by the Commissioner of Industries. The assessee also relied on various case laws to hold that when the Notification stipulates a certificate from a competent authority the Department cannot deny the concession if such certificate has been duly produced by the appellant assessee.
Contentions of the Revenue
The Revenue submitted that the Hon’ble Supreme Court directed this Tribunal to examine the matter afresh. It is clearly recorded that the remand order is mainly due to plethora of material relied upon by the Revenue to arrive at the conclusion that the installed capacity is much more than 1,98,000 tonnes per annum. It is the case of Revenue that the appellants themselves submitted before the various authorities about their installed capacity being much higher than 1,98,000 per T.P.A. Certificate issued by the Director of Industries is based on the report given by Director of SISI, Indore who clarified that the Institute only carries out assessment of production capacity of any unit. It was submitted that installed capacity is entirely different from production capacity. Since the present certificate was issued based on verification by Director of SISI, the same cannot be the basis of extending exemption in terms of the above said Notification. It was also submitted that the various core machines and equipments installed in the plant of the appellant have capacity to achieve the installed capacity of 2,47,500 T.P.A. The appellants themselves claimed higher installed capacity to various authorities including banks and Government authorities.
Held by Hon’ble CESTAT
The Hon’ble CESTAT stated that as per the direction of this Tribunal the Director of Industries was addressed by the Adjudicating Authority on 05.09.2002 alongwith copies of 11 documents (para 12 of the impugned order) which are relied upon by the Revenue to contest the correctness of certificate issued by the competent authority. In response, the Commissioner of Industries vide his letter dated 17.06.2003 categorically stated that the installed capacity of the appellant unit is 1,98,000 T.P.A. during the impugned period. He also observed that with reference to the various evidences submitted by the Revenue his office is in agreement with the clarification given by the appellant that their annual installed capacity was 1,98,000 M.T. and they were capable to produce 25% extra, which comes to 2,47,500 T.P.A., for which there was no restriction from the Government end.
In-spite of such confirmation by Commissioner of Industries Madhya Pradesh, the original authority examined the issue of appellant’s eligibility and held that the appellants have deliberately mis-declared the installed capacity to the Central Excise Department to avail the concessional rate of duty under Notification No.24/91. The Original Authority observed that the very basis of installed capacity certificate is not correct especially when the capacity of individual machinery/equipment and the various other documents of the appellants themselves suggest that installed capacity of their plant was much more than 1,98,000 T.P.A. Accordingly, he held the appellant is not eligible for the concession. While coming to such conclusion he has acted apparently, as appellate authority with reference to certificate issued by the competent authority in terms of the Notification. The original authority has no such legal powers to sit on judgment on the certificate issued by the competent authority designated by the Government. In case the certificate was obtained by mis-representation or not presenting full facts the only option left to the department is to approach the competent authority with all the evidences to modify/cancel the certificate issued already. The Department did approach not only the Director of Industries but also Commissioner of Industries with all the evidences which were examined and the certificate was reiterated by the competent authority. As already noted, no other evidence was left to be considered.
Apart from the above, the Hon’ble CESTAT also examined the evidences relied upon by the Revenue to question the certificate of the competent authority. These evidences are basically the appellant’s declaration in the Board meeting, prospectus of the company for raising fund through issue of shares, declaration to banks/financial institutions and suppliers of equipments. The appellants also declared their installed capacity as 2,47,000 T.P.A. to various Tax Authorities and other departments like Mining, Natural Recourses, Pollution Control Industry etc. for availing various concessions. These claims made by the appellants before various authorities can at best raise the suspicion of the correctness of the installed capacity as mentioned in the certificate issued by Director of Industries. These various claims made by the appellants have already been examined by the Commissioner of Industries and on seeking clarification from the appellants on these claims he reiterated the certificate already issued. The Department cannot reject the certificate issued by the competent authority and reiterated again by the same authority on the ground that the appellant themselves declared to other authorities a different installed capacity. The appellants made various claims for various concessions which are to be accepted or rejected by the concerned authorities on true appraisal of facts. In the present case such declaration are of no consequence in the presence of certificate issued by the competent authority. When the competent authority reiterated the certificate after examining the contrary evidence produced by the Revenue it is not open to the Commissioner to sit on judgment on such certificate.
The impugned order also mentions about a certificate issued by National Counsel for Cement and Building Material, Ballabhgarh. This certificate indicated installed capacity of the appellant as 2,67,300/-. The appellant’s contention is that they could not cross-examine the person who issued certificate of NCBM. Though they submitted a list of questions for cross-examination, the same could not be completed though the permission for cross-examination was initially granted. The e certificate issued by the NCBM as correct and to substitute the same for the certificate issued by the competent authority will not be legally tenable in view of the detailed analysis made above. The appellants have correctly relied upon the various case laws in support of their contention that certificate issued by competent authority as stipulated by law cannot be ignored by the Department. These are as follows:-
Titan Medical System Pvt. Ltd. vs. Collector of Customs, reported in 2003 (151) ELT 254
1. Autolite (India) Ltd. v. Union of India reported in 2003 (157) ELT 13
2. Marmo Classic v. Comm. Reported in 2013 (290) ELT 439
3. Yellamma Dasappa v. Commissioner of Customs reported in 2000 (120) ELT 67
4. R.A. Cement Pvt. Ltd. v. CCE, Allahabad reported in 2003 (161) ELT 964
5. Bses Kerala Power Limited v. CC, Cochin, reported in 2006 (196) ELT 246.
In R.A. Cement Pvt. Ltd. (supra) a similar set of facts were examined by the Tribunal. The assessee claimed certain concessions based on certificate issued by Director of Industries. Certain facts against the claim of the assessee was brought to the notice of the Directorate of Industries who neither cancelled the certificate nor withdrew it. In such situation, it was held that the Department cannot deny the concession claimed based on such certificate. In Suvarna Polymers- 2000 (120) E.L.T. 148 The Tribunal held that when the Director of Industries considered the objections raised by the Department and re-conformed the Certificate it cannot be said that the certificate was obtained by fraud. On careful consideration of submissions made by both the sides and the materials on record, the Hon’ble CESTAT found that the impugned order is not sustainable. Accordingly, the same is set aside. The appeals are allowed.