Custom, Excise & Service Tax Tribunal
M/S. Ravi Foods Pvt. Ltd vs Cce, Hyderabad on 22 December, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing:26/08/2010
Date of decision:..
Appeal No.E/138-142/08
(Arising out of Order-in-Original No.09/2007-C.Ex. dt. 30/10/2007 passed by the CC&CE, Hyderabad)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Ravi Foods Pvt. Ltd.
Shri Ramesh Kumar Agarwal
Shri B. Vivekananda Rao
M/s. Pahal Foods (P) Ltd.
Shri Srinivas Agarwal
..Appellant(s)
Vs.
CCE, Hyderabad
..Respondent(s)
Appearance
Mr. G. Shivadass, and Mr. G.Venkatesh, Advocates for the appellant.
Mr. D.P. Nagendra Kumar, Jt.CDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
FINAL ORDER No._______________________2010
Per: M.V. Ravindran
All these appeals are filed against the Order-in-Original No. 9/2007-C.Ex dated 30.10.2007, passed by the Commissioner of Customs & Central Excise, Hyderabad. Since all the appeals are against the very same Order-in-Original, we propose to dispose of them by a common order :
S/No.
Appeal No.
Name of the party
Duty (Rs.)
Penalty (Rs.)
Interest
1.
E/138/2008
M/s Pahal Foods Pvt. Ltd. (PFPL)
5,79,600/-
5,79,600/-
yes
2.
E/139/2008
Shri Srinivas Agarwal, Director, PFPL
-
2,00,000/-
3. E/140/2008 M/s Ravi Foods Pvt. Ltd.(RFPL) 54,20,400/-
54,20,400/-
yes
4. E/141/2008 Shri B. Vivek-
ananda Rao, Financial Controller, RFPL
-
5,00,000/-
5. E/142/2008 Shri Ramesh Kumar Agarwal, Director, RFPL
-
5,00,000/-
2. The relevant facts that arise are that the main appellants, M/s. Ravi Foods Pvt. Ltd. (hereinafter referred to as RFPL) and M/s. Pahal Foods Pvt. Ltd. (hereinafter referred to as PFPL) are manufacturers of biscuits, wafers and confectionery falling under Chapter Heading No. 19.05 of Central Excise Tariff Act, 1985. Intelligence gathered revealed that the two companies were evading Central Excise duty by not accounting the production and clearances of finished goods in statutory records. The entire investigation started with a raid of Income Tax department in the premises of two units and recovery of certain documents by the Income Tax officers. During the raid of the Income Tax department, certain documents which indicated unaccounted clearance/sales were recovered and the Income Tax department proceeded to collect the income tax on such unaccounted sales and clearances. Income Tax department forwarded the said information to the Central Excise department on a presumption that Central Excise duty might not have been paid on those clearances. On receipt of such information, the Central Excise officers recorded statements of Managing Director, Executive Directors and Financial Controller of RFPL and PFPL. On the conclusion of investigation, the Central Excise officers were of the view that the appellant companies had clandestinely cleared goods to the extent of Rs. 3.75 crores during the period December 2001 and January 2002 and thereby, evaded Central Excise duty amounting to Rs. 60,93,750/-; and that the Executive Director, Managing Director and Financial Controller of RFPL and PFPL are responsible for the evasion of duty and suppression of production and clearance. On such a view, Show Cause Notice dated 25.11.2006 was issued demanding an amount Rs. 60,93,750/- from both the appellants RFPL & PFPL and asking them to show cause as to why penalty should not be imposed on them. The Directors and Financial Controller of the appellants companies were also directed to show cause as to why penalty should not be imposed on them. All the appellants contested the show cause notice on various grounds mainly on the ground that the information which was given to the Income Tax authorities and admitted before the authorities could be an acceptance of suppression of income for the Income Tax purpose and the said information cannot be relied upon for the demand of Central Excise duty, that there is no further evidence found by the department to come to a conclusion that the appellants had clandestinely cleared the goods for evasion of payment of duty. The adjudicating authority did not accept the contentions raised by the appellants and held that the companies are liable to pay duty. Coming to such a conclusion he passed the following order :
O R D E R
i) I demand duty of Rs. 54,20,400/- (Rupees Fifty four lakhs twenty thousand four hundred only) from M/s Ravi Foods P. Ltd. being the duty payable on the suppressed value of Biscuits and Confectionery not accounted and on which appropriate duty was not paid under proviso to Section 11A (1) of the Central Excise Act, 1944.
ii) I impose a penalty equal to the amount mentioned at Sl. No. (i) above on M/s Ravi Foods P. Ltd., under Section 11AC of the Central Excise Act, 1944.
iii) I order that interest at the applicable rate on the amount of duty mentioned at Sl. No. (i) above shall be payable under Section 11AB of the Central Excise Act, 1944;
iv) I demand duty of Rs. 5,79,600/- (Rupees Five lakhs seventy nine thousand six hundred only) from M/s Pahal Foods P. Ltd. being the duty payable on the suppressed value of Biscuits and Confectionery not accounted and on which appropriate duty was not paid under proviso to Section 11A (1) of the Central Excise Act, 1944.
v) I impose a penalty equal to the amount mentioned at Sl. No. (iv) above on M/s Pahal Foods P. Ltd., under Section 11AC of the Central Excise Act, 1944.
vi) I order that interest at the applicable rate on the amount of duty mentioned at Sl. No. (iv) above shall be payable under Section 11AB of the Central Excise Act, 1944.
vii) I impose a penalty of Rs. 5,00,000/- (Rupees Five lakhs only) on Shri Ramesh Kumar Agarwal, Director of M/s Ravi Foods P. Ltd., under Rule 26 of Central Excise (No. 2) Rules, 2001.
viii) I impose a penalty of Rs. 5,00,000/- (Rupees five lakhs only) on Shri B. Vivekananda Rao, Financial Controller of M/s Ravi Foods P. Ltd., under Rule 26 of Central Excise (No. 2) Rules, 2001.
ix) I impose a penalty of Rs. 2,00,000/- (Rupees Two lakhs only) on Shri Srinivas Agarwal, Director of M/s Pahal Foods P. Ltd., under Rule 26 of Central Excise (No. 2) Rules, 2001. Aggrieved by such an order, the appellants are before us.
3. The learned counsel appearing on behalf of the appellants submits as under :
(i) The show cause notice issued to the appellants, more specifically in paragraphs 24 & 25, relied up on the documents received from Income Tax department alleging that the appellants herein were indulging in clandestine clearances. It is the submission that the appellants completely denied the allegation of clandestine removal; submitting details of raw material procured, the input and output ratio etc. and contented that the charge on clandestine removal as set up in the show cause notice was not corroborated by any other evidence. It is the submission that the Commissioner has given up the charge of clandestine removal as recorded in Para 57 of the impugned order and held that the suppression of turn over was considered. It is the submission that once the Commissioner has found that the charge of clandestine removal was not sustainable, the proceedings should have been dropped and confirmation of demand on a new ground cannot be done by the Commissioner. For this proposition, the learned Counsel relied on the following decisions :
(i) CCE Vs. Ballarpur Industries Ltd. [2007 (215) ELT 489 (S.C.)]
(ii) CCE Vs. Champdany Industries Ltd. [2009 (241) ELT 481 (S.C.)]
(iii) Bajrang Ispat & Plywood Ltd. Vs. CCE [Final Order No. 1418 to 1426/2009 dated 30.11.2009 of CESTAT, Bangalore]
(ii) It is the submission that there is no dispute that duty liability had been worked out on the assessable value arrived at under Section 4A of the Central Excise Act, 1944. It is the submission that the Show Cause Notice also considered the excess amount collected by the appellants i.e. Rs. 3.75 crores as representing 65% of the MRP value and demanded duty after apportioning this amount between the two units of the assessees.
(iii) It is the submission that if the contention of the department has to be accepted then revised MRP of the total products cleared would be double. It is the submission that once the department has accepted the MRP declared on the package then it is for the department to prove that any amount in excess of the MRP declared was collected from the customer. It is the submission that in the absence of any such verification, the declared MRP cannot be revised.
(iv) It is the submission that the provisions of Section 4A of the Central Excise Act, 1944 provides for the determination of duty payable on excisable goods on the basis of retail selling price where it is mandatory for the assessee to declare the retail selling price on the package. It is the submission that with effect from 1.3.2008, the Central Government has prescribed the MRP Valuation Rules which are required to be followed for re-determination of retail sale price / maximum retail price in cases mentioned in clause (a) & (b) to sub-section (4) to Section 4A.
(v) It is the submission that there is no machinery provided during the relevant period under Section 4A of Central Excise Act, 1944 to enable the department to undertake an exercise of re-determining the retail sale price, as has been done by the Commissioner in the impugned order. For this proposition, the learned counsel relied on the following decisions :
(i) Millenium Appliances India Ltd. s. CCE [2009 (248) ELT 713 (Tri.- Bang.)]
(ii) Malhotra Shaving Products (P) Ltd. Vs. CCE [2010 (250) ELT 118 (Tri. - Bang.)]
(vi) It is the submission that the document relied upon by the authorities is only a copy and not admissible as evidence under Section 36B of the Central Excise Act, 1944. It is the submission that the computer printouts alleged to have been recovered by the Income Tax department, cannot be considered as admissible evidence under Section 36B of the Central Excise Act, 1944 inasmuch as there is no proof adduced to show such printouts were obtained in accordance with the requirement of Section 36B of the Act. It is the submission that they have always contested the authenticity of the documents inasmuch as neither the author has been examined nor any corroborative statement/evidence recorded under Section 14 of the Central Excise Act, 1944. For this proposition, the learned Counsel relied upon the judgment of the Tribunal in the case of Sri Chakra Ltd. Vs. CCE [2008 (231) ELT 67].
(vii) It is the submission that the allegations are not corroborated by any other evidence and the department has failed to prove that the raw materials required for manufacturing and clearing finished goods valued at Rs. 3.75 crores for the month of December 2001 and January 2002 were procured and unaccounted during this period.
(viii) It is also alleged that the appellants have not accounted the raw materials nor the raw materials were clandestinely disposed off by them. The learned counsel drew our attention to the statement showing production of the final products and raw materials consumed for the last 5 years which were produced by them before the lower authorities, and submits that this statement was sought to be summarily dismissed by the adjudicating authority, recording a finding that he has not relied upon this evidence as there is an admission of unaccounted sales before the Income Tax authorities. For this proposition, the learned counsel relied on the following decisions :
(i) Sapthagiri Cements & Ors. Vs. CCE [2005 (183) ELT 385
(ii) Dalmia Vinyls (P) Ltd. Vs. CCE [2005 (192) ELT 606]
(iii) Chemo Steels Pvt. Ltd. Vs. CCE [2005 (191) ELT 856]
(iv) Arch Plarmalabs Ltd. Vs. CC [2005 (182) ELT 413]
(v) Hlton Tobaccos Ltd. Vs. CCE [2005 (183) ELT 378]
(vi) Hyderabad Electrodes Vs. CCE [2006 (191) ELT 1164]
(vii) Swati Polyster Vs. CCE [2005 (192) ELT 985 (Tri.-Mum)] It is further submitted that the adjudicating authority has not considered the plea raised by the appellants that there is no abnormal consumption of electricity during the relevant period. It is the submission that the Apex Court in the case of Triveni Rubber and Plastics [1994 (73) ELT 7 (S.C.)] has held that the demand could be confirmed on the basis of normal consumption of electricity and also that this should be coupled with other factors such as raw material consumed, etc.
(ix) It is the submission that the quantification of duty is without authority of law. The adjudicating authority has held that the entire liability of Rs. 3.75 crores needs to be proportionately distributed between the two companies and the duty liability has to be worked out based upon the figures available by the appellants companies in monthly returns. This is totally incorrect and unacceptable way of deciding the duty liabilities.
(x) Finally, he submits that the demand of duty based on evidence recorded by the Income Tax authorities is not sustainable as the nature of taxes and computation of taxes is totally different and incomparable. He draws our attention to Section 132 of the Income Tax Act, 1961 and more specifically to sub-section (4) and submits that the authorized officer can record a statement under Section and any statement made by a person during the examination can be used as an evidence in any proceedings under the Income Tax Act, 1922 or under this Act. It is the submission that the evidentiary value of the statement recorded under Section 132 of the Income Tax Act is restricted and limited to the provisions of the Income Tax and the same cannot be used or relied upon by any other purpose. He also draws our attention to Section 14 of the Central Excise Act, 1944 wherein it is clearly mentioned that the statement recorded under Section 14 of the Central Excise Act is much more wider and is deemed to be a judicial proceeding within the meaning of the Section 193 and Section 228 of the Indian Penal Code, 1860 while it cannot be used in any other act other than Income Tax Act. He relied on the following decisions :
(i) CCE Vs. Laxmi Engineering Works [2001 (134) E.L.T. 811 (Tri.-Del.)]
(ii) CCE Vs. Haracharan & Brothers [2004 (168) ELT 454]
4. The learned SDR, on the other hand, submits that the evidence before the Income Tax authorities i.e. statements under Section 132 (4) of the Income Tax Act, 1961are admissible evidence in any court of law. It is submitted that the statements of key persons and in-charge of the companies who admitted that there being unaccounted sale of the goods, are not retracted and since they had admitted to the suppression of sales, the same has to be considered as an admission of unaccounted sales. It is the submission that the case law related to the legal principle that admitted facts need not to be proved. She relied on the following case laws in support of her contention :
(i) Asst. Collector of Cus., Madras-1 Vs. Govindasamy Ragupathy [1998 (98) E.L.T. 50 (Mad.)]
(ii) Bhanabhai Khalpabhai Vs. Collector Customs [1994 (71) ELT 3 (S.C.)]
(iii) Davender Exports Vs. Commissioner of Central Excise, Ludhiana [2007 (219) ELT 533 (Tri-Del.)]
(iv) Commissioner of C. Excise, Ahmedabad-1 Vs. Gopal Textile Mills Pvt. Ltd. [2007 (215) ELT 558 (Tri.-Ahmd.)]
(v) Commissioner of C. Excise, Surat-1 Vs N.D. Textiles [2004 (168) ELT 381 (Tri.-Mum)]
(vi). Ludhiana Food Products Vs. Collector of C. Excise [1989 (43) ELT 648 (Tri.)] It is further submitted that Income Tax proceedings under the Income Tax Act, 1961 concluded against the assessee by confirming the demand under Income Tax Act for December 2001 & January 2002 holding that the amount of Rs. 3.75 crores is an unaccounted income. It is the submission that evidence recorded by the adjudicating authority in paragraphs 50 & 53 of the impugned order are very clear and indicate that the appellants were not recording the proper sales statutory records and discharging the Central Excise duty in accordance with law. It is the submission that the details of input and output which were produced by the appellants does not require any mention at all as no enquiry needs to be made for establishing the turn over which has been admitted as being suppressed. It is also her submission that the Director had given an admission that they were maintaining two sets of accounts, one for regular book and another for suppressing the income.
5. In rejoinder, the ld. counsel specifically draws our attention to the provisions of Section 132 of Income Tax Act, 1961 and submits that the Revenue has not rebutted this fact. It is also his submission that for the charge of clandestine removal cannot be based on mere assumption and presumption, but must be based upon the evidence.
6. We have considered the submissions made at length by both sides and perused the records.
7. The issue to be decided in this case is whether the appellant companies RFPL and PFPL are liable to pay the central excise duty confirmed by the adjudicating authority and consequent penalties and interest, and whether the employees are liable to be saddled with penalties as imposed by the adjudicating authority on the ground of suppression of production and clearances of the final products.
8. The undisputed facts are that the appellant companies i.e. RFPL and PFPL are manufactured products like biscuits, wafers and confectioneries. The said products manufactured by the appellant companies are chargeable to the duty based upon the MRP as provided under Section 4A of the Central Excise Act, 1944. The appellants company was raided by the Income Tax authorities and statements were recorded as regards the computer print out recovered from the appellant companys premises which indicated a certain amount of suppressed sales turnover during the month of December, 2001 to January, 2002. Directors of the company in a statement recorded under Section 132(4) of the Income Tax Act, 1961 had admitted to the Income Tax authorities that the amounts shown on the computer printout for the month of December, 2001 to January, 2002 were undisclosed/suppressed sales turnover. The said information was passed on to Central Excise authorities. Central Excise authorities also recorded statements of all the three persons under Section 14 of the Central Excise Act, 1944.
9. On perusal of the show-cause notice, we find that the entire case started with the information received by the Central Excise authorities from the Income Tax Department regarding the admission of undisclosed / suppressed sales turnover for the months of December, 2001 and January, 2002 by the appellants company. Further statements were recorded by the Central Excise authorities and conclusion of the statements, a show-cause notice dt. 28/11/2006 was issued to RFPL and PFPL wherein in para 24 & 25, the following allegations were made:-
24. From the foregoing it appears that M/s. Ravi Foods (P) Ltd. and M/s. Pahal Foods (P) Ltd. have suppressed the production and sales resulting in clandestine clearances to the extent of Rs.3.75 crores during the period December, 2001 and January, 2002 and thereby evaded the Central Excise duty amounting Rs.60,93,750.00 as discussed supra. It further appears that Shri Ramesh Kumar Agarwal, Director of M/s. Ravi Foods (P) Ltd., Sri Srinivas Agarwal, Director of M/s. Pahal Foods (P) Ltd. and Shri B. Vivekananda Rao, Financial Controller are responsible for the evasion of duty and suppression of production and clearance. The evidence also proves that there was a written plan about the execution of the evasion of duty by the companies, which was meticulously adopted as was detected by the Income Tax Department. The fact that the records and material were available at the residence premises proves that these three personnel fried to keep the records and evidence pertaining to production and clearances away from the regular checks of the officers who frequent their factories. It therefore appears these three personnel are liable for penal action under appropriate rules and relevant provisions of law. Thus it appears that both these companies have failed to maintain appropriate records and failed to assessee and pay appropriate duty on the goods cleared by them, which resulted in contravention of Rule 4, 6,8, 10, 11 and 12 of Central Excise (No.2) Rules, 2001.
25. The information of detection of clandestine removal and evasion of duty came to the knowledge of the Department through external sources. But for the raid by the IT Department and obtaining the records from them, these facts would have not come to the notice of the Central Excise Department. No statutory record contained the above particulars except the slips of manuscripts and other papers recovered during search. The suppression of production and clearances were clearly admitted by the Director and the Financial Controller during the statements given before the IT Department. The details of the production and clearances were never made known to the Department, though they have been filing regular periodical returns under Central Excise Rules, with a malafide intention to evade payment of duty. Thus, there was enough evidence to invoke the proviso to Section 11A of Central Excise Act, 1944 for demanding duty beyond one year from the date of detection. It can be seen from the above reproduced paragraphs that the show-cause notice initially proceeded on the ground that there was a suppressed production and clandestine removal of the goods and hence, there was a evasion of duty. It is seen from the records that but for the statements recorded by the Income Tax authorities under Section 132(4) of the Income Tax Act, 1961, the Revenue authorities in the investigation could not come up with any evidence as regards the clandestine manufacturing of the final products. In the absence of any evidence regarding the clandestine manufacturing of final products by the RFPL and PFPL, it goes without saying, that there is no clandestine removal of goods. The appellants company, during the adjudicating proceedings before the authorities, had filed details of input and output ratio as regards the consumption of raw materials and other materials and electricity consumption. The said statement and details furnished by the appellants were summarily dismissed by the adjudicating authority in his Order-in-Original in para No.59, which is as under:-
59. They have furnished the details of input output in the defence, which, in my view, does not require any notice in view of the above conclusions. Their submission that no reliance can be placed on the proceedings under an other Act, are misplaced as it depends upon the nature of proceedings and the documents recovered and relied. The ratio of different decisions relied is also not applicable as discussed above. In this case, there is no dispute on the evidentiary value of the documents as they stand admitted without any doubt before the Income Tax authorities, the Assessing Officer as well as the Commissioner(Appeals).
10. We find that though the show-cause notice charged the appellants with the allegation of clandestine manufacturing and removal of the goods with intention to evade Central Excise duty, the findings of the adjudicating authority has not supported the said charge. It is seen from para 55, 56 and 57 that the adjudicating authority has let go the charge of clandestine removal from the factory premises, obviously for the reason that there was no corroborative evidence as regards the clandestine manufacturing and removal of goods. The adjudicating authority having not given any positive findings as regards the clandestine manufacturing and clearance of the goods, in itself would indicate that the said charges as alleged against the appellants were not proved. If that be so, the show-cause notice which proceeded against the appellants on the charge of clandestine manufacturing and removal of final products with intention to evade duty, proceedings should have been dropped. We find that the adjudicating authority has confirmed the demand on the appellants. We find that the judgments of the Honble Supreme Court in the case of CCE, Nagpur Vs. Ballarpur Industries Ltd. [2007(215) ELT 489(SC)] and in CCE, Bhubaneswar-I Vs. Champdany Industries Ltd. [2009(241) ELT 481(SC)], has settled the law that once the order confirms a demand beyond the allegations mentioned in the show-cause notice, then impugned order is not sustainable.
11. Be that as it may, we find from para 26 of the show-cause notice that the show-cause notice has proceeded ahead for the quantification of the duty based upon the monthly returns filed by the appellant companies and extrapolating amount of Rs.3.75 crores which has been admitted as undisclosed / suppressed sales turnover for the month of December, 2001 and January, 2002 before the Income Tax authorities. The said para 26 is reproduced below:-
It can be seen from the above reproduced paragraph that the lower authorities in the show-cause notice have tried to quantify the demand by re-working out the Retail Sale Price (RSP) / Maximum Retail Price (MRP) by taking the amount of Rs.3.75 crores as addable to the MRP.
12. We find that the provisions of Section 4A during the relevant period needs to be considered for coming to a conclusion whether the amount quantified by the authorities in the show-cause notice as indicated hereinabove would stand test of law or not. The provisions of Section 4A are as under:-
SECTION 4A. Valuation of excisable goods with reference to retail sale price. The Central Government may, by notification in? (1) the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
(4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer -
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. For the purposes of this section, retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale :
Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.
Explanation 2. For the purposes of this section, -
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.
It can be seen from the above reproduced Section 4A of the Central Excise Act, 1944, that the said section provides for determination of duty payable on excisable goods on the basis of RSP as per the provisions of Standards of Weights and Measures Act, 1976 and Rules made there under. It is undisputed that in the month of December, 2001 and January, 2002, the appellants filed monthly returns indicating the assessable value after availing the abatement in accordance to the notification issued under the said section i.e. 65% of the MRP. There is also no dispute that the MRP which was declared on the goods cleared during the relevant period was either obliterated or scored out. It can be seen from the above reproduced Section 4A that sub-section (4) was introduced by the legislature w.e.f. 1/3/2008. It is also to be noted that the recalculation or re-quantification of an amount received in excess of the MRP declared and collected from the customers has to be done in a prescribed manner. The provisions of MRP Valuation rules under sub-section (4) of Section 4A was introduced w.e.f. 1/3/2008 wherein the Central Government prescribed a procedure to be followed for re-determination of RSP and MRP in case where assessee has collected an amount in excess of the RSP / MRP declared. This re-determination has to be done, failing which the RSP / MRP cannot be revised by the authorities. We find that the CBEC vide circular No.334/1/2008-TRU dt. 29/2/2008 made it clear that the MRP Valuation rules are effective from 1/3/2008. This would indicate that prior to 1/3/2008, there was no procedure to revise the MRP and demand the duty even though there being a provision under sub-section (4) of Section 4A of the Central Excise Act, 1944. In the absence of any legal machinery during the relevant period, re-determination of RSP /MRP by the Department is without any authority of law. We find that in the case of Millennium Appliances India Ltd. Vs. CCE, Hyderabad [2009(248) ELT 713 (Tri. Bang.)], this Bench on this point has held as under:-
9.?Another issue involved in this case is regarding the situation that arises where there are no clear cut statutory provisions to arrive at the value. We find that strong force in the contentions raised by the appellants on the provisions of Section 4A of the Central Excise Act (as is reproduced in Para 8 hereinabove). We find that the Department did not issue any guidelines or rules for determination of value as provided under sub-section (4) of Section 4A of the Central Excise Act. We find that Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008 incorporates Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 which reads as under :-
Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
[Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008] In exercise of the powers conferred by Section 37 read with sub section (4) of Section 4A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules, namely :-
RULE 1. (1)?These rules may be called the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
(2)?They shall come into force on the date of their publication in the official Gazette.
RULE 2. In these rules, unless the context otherwise requires.
(a) Act means the Central Excise Act, 1944 (1 of 1944);
(b) retail sale price means the retail sale price as defined in Section 4A of the Act; and
(c) Words and expressions used in these rules and not defined but defined in the Act or any other rules made under the Act shall have the meaning as assigned therein.
RULE 3. The retail sale price of any excisable goods under subsection (4) of Section 4A of the Act, shall be determined in accordance with these rules.
RULE 4. Where a manufacturer removes the excisable goods specified under sub-section (1) of Section 4A of the Act, -
(a) without declaring the retail sale price on the packages of such goods; or
(b) by declaring the retail sale price, which is not the retail sale price as required to be declared under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or rules made thereunder or any other law for the time being in force; or
(c) by declaring the retail sale price but obliterates the same after their removal from the place of manufacture, then, the retail sale price of such goods shall be ascertained in the following manner, namely:-
(i)?if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods:
(ii)?if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture:
Provided that if more than one retails sale price is ascertained under clause (i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods.
Explanation - For the purposes of this rule, when retails sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis.
RULE 5. Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods:
Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.
RULE 6. If the retail sale price of any excisable goods cannot be ascertained under these rules, the retail sale price shall be ascertained in accordance with the principles and the provisions of section 4A of the Act and the rules aforesaid. It can be noted that these rules came into force with effect from 1-3-2008. We are of the considered opinion that if these rules came to be effective on 1-3-2008, the ascertaining of value of similar goods has to be done so, with effect from 1-3-2008 and cannot be used to determine the value for the clearances made prior to 1-3-2008. We find strong force in the contention raised by the learned Counsel that the decision of the Tribunal in the case of Aditya Cement (supra) would squarely cover the issue in favour of the appellants. The relevant ratio in Para 9 of the said decision is reproduced :-
9.?It can be seen from the above reproduced rule that it was in context of the definition of person liable for paying the Service Tax. This provision in itself may not suffice revenue to direct the appellant to discharge the service tax liability as service receiver, on the face of the fact that notification under Section 68(2) of the Finance Act, 1994, was issued by the Central Government only on 31-12-2004. If the contention of the learned SDR is to be accepted, then there was no necessity for the Government to issue Notification No. 36/2004-S.T. notifying the service receiver from non-resident having no office, to pay Service tax, as receiver. By issuing the said Notification, Central Government intended to tax the service receiver from non-resident, with effect from 1-1-2005, which, in corollary would be that no service tax is payable by this category prior to 1-1-2005. If that by so, then the amount paid by the appellant is not a tax, which the revenue cannot kept with it.
13. It is seen from the findings of the adjudicating authority in para 55, 56 and 57 that the adjudicating authority has confirmed the demand based only on the ground of undervaluation and extrapolating the amount for the period December, 2001 and January, 2002 as being 65% of the MRP declared and confirmed the demand. As we have already held that this could not be done by adjudicating authority in the absence of any rules or authority under the section, the demand is not sustainable. We find that in para 55 and 57, the adjudicating authority has recorded a finding which is as under:-
55. . . .. Thus, in this case, the suppression of turnover is admitted and can be either on account of undervaluation or on account of volume. 57. . . . As the suppressed turnover is in value terms only, no enquiry need be made for establishing the turnover to the use of raw materials etc. The suppressed turnover, being the excess collection over and above the recorded value or income in their books, is related to the sale value which escaped assessment under the Central Excise Act. Once the suppressed turnover is admitted beyond any doubt and the assessee opts to accept the tax liability under the Income Tax Act, no meaningful purpose would have been served to cause further detailed probing under the Central Excise Act and Rules.
14. We find that the above said findings recorded by the adjudicating authority are directly in conflict of the law which has been settled by the higher judicial fora as regards the confirmation of demand of the duty on an assessee on the ground of undervaluation in respect of goods covered under Section 4A of Central Excise Act, 1944.
15. In the case before us, the question of undervaluation would not arise, and assuming even if it arises, during the relevant period (in this case prior to 01/03/2008) there was no procedure under Section 4A of the Central Excise Act to demand the duty, as the said procedure came into statute from 1/3/2008 only. As regards the finding by the ld. adjudicating authority that suppression could be on account of volume, we have already recorded that there is no corroborative evidence nor there is any finding as to the exact quantity of goods clandestinely cleared to come to the conclusion that the value of Rs.3.75 crores is attributable to the specific quantity of goods on amount of clandestine removal. In the absence of any such details, we are of the considered view that the impugned order is unsustainable.
16. Before parting with the case, we would like to record that since we disposed off all the appeals only on the merits of the case, we are not recording any other finding on the other submissions made by both sides on various issues.
17. In view of the foregoing findings, we are of the view that the impugned order is not sustainable and is liable to be set aside and we do so. The impugned order is set aside and all the appeals are allowed with consequential relief.
(Pronounced in court on) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) VC/Nr 23