Custom, Excise & Service Tax Tribunal
Mr.M.V. Ravindran, Hon Ble Member ... vs Mr. H.K. Thakur, Hon Ble Member ... on 23 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT AHMEDABAD COURT - I Appeal No Appellant Respondent
Arising Out of Passed by E/46/2012 M/s Acme Ceramics CCE Rajkot OIO No. 74-COMMR-2011, dt.30.09.2011 CCE Rajkot E/47/2012 Shri Dipakkumar Maganlal Patel CCE Rajkot
-do-
CCE Rajkot E/103/2012 M/s Sogo Ceramics Pvt.Ltd.
CCE Rajkot OIO No. 76-COMMR-2011, dt.21.10.2011 CCE Rajkot E/104/2012 Shri Rameshbhai Bhanjibhai Patel CCE Rajkot
-do-
CCE Rajkot E/159/2012 M/s Fashion Ceramics CCE Rajkot OIO No. 85-COMMR-2011, dt.26.12.2011 CCE Rajkot E/160/2012 Shri Ramnikbhai Savjibhai Patel CCE Rajkot
-do-
CCE Rajkot E/161/2012 Shri Niravbhai Chaganbhai Sojitra CCE Rajkot
-do-
CCE Rajkot E/162/2012 Shri Manishbhai Ramniklal Bhalodia CCE Rajkot
-do-
CCE Rajkot E/12074/ 2013 M/s Shreeji Gold Ceramics Pvt.Ltd.
CCE Ahmedabad OIO No.9/Commr(Adj.)/ Ahd/2013, dt.16.04.2013 CCE Ahmedabad E/12075/ 2013 M/s Shreeji Ceramic Industries CCE Ahmedabad OIONo.10/Commr(Adj.)/ Ahd/2013, dt.30.04.2013 CCE Ahmedabad E/1153/ 2011 M/s Real Ceramic Pvt.Ltd.
CCE Rajkot OIO No. 58-COMMR-2011, dt.08.07.11 CCE RajkotFor approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial) Mr. H.K. Thakur, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
Represented by:
For Assessee: Shri V.K. Jain, Shri Vishal Agarwal, Shri P.D. Rachchh, Shri P.M. Dave, Shri P.V. Sheth For Revenue: Shri P.R.V. Ramanan, Special Counsel CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. H.K. THAKUR, HONBLE MEMBER (TECHNICAL) Date of Hearing:21,22,23.10.13 Date of Decision:
Order No.11683-11693, dt.12.12.2013.
Per: M.V. Ravindran
1. All these appeals raise a common question of valuation of final products cleared by the appellant, hence are being disposed of by a common order.
1.1 The period of dispute involved in each appeal is as under:-
Appeal No Period of Dispute E/46-47/2012 01.01.2005 to 31.03.2009 E/103-104/2012 April 2005 to March 2008 E/159-162/2012 01.07.2007 to 31.03.2008 E/12074/2013 2004-2005 to 2007-2008 E/12075/2013 2004-2005 to 2007-2008 E/1153/2011 01.04.2004 to 28.02.20082. Briefly stated the facts in all the appeals herein are that the appellant herein are manufacturer of ceramic tiles. The office of DGCEI collected intelligence that the manufacturer of ceramic glazed tiles and vitrified tiles were engaged in large scale evasion of Central Excise duty by not declaring the actual MRP on their product and Central Excise invoices. It was also gathered by the DGCEI that the manufacturers were declaring only part of the actual MRP and consequently evading the payment of Central Excise duty and in fact mis-declared the actual ex-factory price of such tiles and recovered the same from their dealer in cash and did not account the same in statutory records. Based upon such intelligence, the officers of DGCEI visited all the tile manufacturers in their area and undertook the investigation. After conducting detailed investigation and recording statements of various manufacturers, dealers, and other persons, show cause notices were issued to all assessee/appellants directing them to show cause as to why the value declared by them on ceramic glazed tiles and vitrified tiles be not rejected and re-determined based upon the intelligence collected and differential duty be not demanded, demand interest thereof and also seeking to impose penalty on the main assessee as well as their employees/partners. All the appellants herein contested the show cause notice on merits and also on various other grounds and filed reply stating that there is no evasion of Central Excise duty on their part. The adjudicating authority in all these appeals, after following the due process of law, came to a conclusion that all the appellants herein have under-valued the product i.e. ceramic glazed tiles and vitrified tiles during the material period (relevant period against each appeal is indicated in Paragraph 1) and confirmed the demand, demanded interest and also imposed penalties. To come to such conclusion, the adjudicating authority relied upon the evidences in the form of statements of dealers, shroff/angadias that there was additional consideration flowing back to the manufacturer from the dealer/buyers and also relied upon the subsequent development of increase in the MRP by the manufacturers; as also relied upon the evidence in the form of printed price lists which were recovered from the premises of the dealers of the tile manufacturers; and has also worked out the differential duty based upon the weighted average price of the tiles and applied the same for entire period. Aggrieved by such order, the appellants are before the Tribunal.
3. Shri V.K. Jain, Shri P.M. Dave, Shri Vishal Agarwal, Shri P.D. Rachchh, Shri P.V. Sheth, Ms.Dimple Gohil Advocates appeared on behalf of the appellants and Shri P.R.V. Raman, Special Counsel appointed by the Revenue and Shri K. Sivakumar, Addl.Commissioner (A.R.) appeared on behalf of the Revenue.
4. It is the common submission of the ld.Counsel for the appellants that the dispute in the present appeals pertains to two periods i.e. period prior to 01.03.2008 and period post 01.03.2008. It is the submission that the appellant had manufactured and cleared the ceramic glazed tiles and vitrified tiles which were covered under the provisions of Section 4A of Central Excise Act, 1944 (herein referred to as the Act). It is the submission that on perusal of the Order-in-Original, it is very clear that the directors, partners of the appellant had given ex-culpatory statements. It is the submission that when the tiles were cleared from the factory premises, the said tiles were sold on the basis of factory gate sale price and transport arrangements were to be undertaken by the buyers/purchasers/dealers. It is also the submission that the tiles when they were removed from the factory premises, MRP was printed on the said tile boxes. It is the submission that all the appellants herein discharged the Central Excise duty based upon such declared MRP on the boxes of tiles after availing the eligible abatement. It is the submission that the statements which were recorded by the investigating officers, specifically stated that the goods when they were removed from the factory premises, there was a MRP which was declared on such boxes. After taking us through various statements of dealers and other persons, ld.Counsel submit that the dealers have specifically stated that MRP was declared on the tile boxes which were cleared from the factory premises but the dealer had sold the said tile boxes at higher price to the purchasers of such tiles. It is the submission that it would indicate that there was changing of MRP after the tiles were removed from the factory premises. After making these submissions, ld.Counsel would take us through the provisions of Section 4A of the Act and also the definition of manufacturer as it would apply to the product in question as enumerated in Section 2(f) of the Act. After taking us through said provision, it was submitted that the change of MRP would tantamount to manufacture and such changing of MRP on the boxes took place subsequent to the clearance of the goods hence if any duty is liable to be demanded, it would not be on the manufacturer but on the persons who have changed the MRP. It is further submitted that they had specifically stated before the adjudicating authority that the provisions of Section 4A underwent a change for collection of the duty in the case where MRP which has been declared is considered as incorrect by the lower authorities. After taking us through the changed provision of sub-section 4 of Section 4A of the Act, ld.Counsel would state that the said sub-section provides for enactment of rule to determine revised MRP/RSP. He would submit that such rules were brought into statute by Notification No.13/2008-CE(NT) and was made applicable from 01.03.2008. It is the submission that when there was no provision of re-determining the MRP/RSP, even if it is considered that there was under-valuation, determination of the MRP/RSP should have been done only as per the provisions of the sub-section (4) of Section 4A of the Act which can be brought into statute from 01.03.2008. It is the submission that Tribunal in the case of Millennium Appliances India Ltd Vs CCE Hyderabad 2009 (248) ELT 713 (Tri-Bang), Ravi Foods Pvt.Ltd. Vs CCE Hyderabad 2011 (266) ELT 399 (Tri-Bang), M/s ABB Ltd 2011-TIOL-972-CESTAT has specifically considered these provisions and held that prior to 01.03.2008, re-determination of declared MRP/RSP could not have been done by the Revenue authorities, in absence of any rules under the provisions of sub-section (4) of Section 4A of the Act. Ld.Counsel would take us through the detailed order passed by the Bench in these cases. Reliance is also been placed by the ld.Counsel on the judgments in the case of Mohammad Hussain Gulam Hohammad & Anr Vs State of Bombay & Others AIR 1962 SC 97, Consumer Online Foundation & Ors Vs UoI & Ors - (2011) 5 SCC 360, Dhrangadhar Chemical Works Vs State of Gujarat & Ors (1973) 2 SCC 345, P. Kasilingam & Ors Vs PSG College of Technology & Ors (1995) Supp 2 SCC 348, PNB Financial Ltd (2008) 13 SCC 94, Sunil Siddharthbhai (1985) 4 SCC 519, Bhayana Builders Pvt.Ltd. 2013 (32) STR 49 for the proposition that in the absence of rule having been framed during the relevant period, provisions of Section 4A (4) was not operational. It was further submitted that in the case of Sinnamani (2012) 5 SCC 759; Babu Varghese (1999) 3 SCC 422, Mira Sahani (2008) 9 SCC 177 for the proposition as to when the statute provides a thing to be done in a particular manner, then the thing has to be done in that manner only and no other manner. It is also the submission that in absence of any relevant facts being brought on record, adverse inference ought to be drawn against the Revenue as has been held in the case of Panasonic AVC Network India Co. Ltd - 2013 (288) ELT 413 (Tri-Del); Tex-AGE 2008 (221) ELT 395, Vishwajyoti Impex - 2009 (238) ELT 257 (Tri-Mum), Pratapsingh & Anr - (2005) 13 SCC 624; and it was submitted that the Revenue authorities did not bring on record that the MRP declared on the boxes of tiles cleared from the factory premises was altered by the appellants/manufacturer; that the dealers who had stated in the statements that there was sale of the tiles at a price higher than what was cleared from the factory premises. In continuation of such submission, it was stated that in the current scenario, it cannot be expected of any buyer/consumer purchasing a box of tiles wherein MRP is declared is Rs.100 but the dealer/seller sells the goods for Rs.150; it would indicate that the boxes when sold to the customers, there was a change in MRP. It is also further submitted that in continuation of this proposition that the despite making Pan India investigation, the DGCEI authorities were unable to seize even one carton of tiles which was cleared from the factory premises of the appellant wherein the declared MRP was changed and nor is there any evidence brought on record as to who changed the MRP. It is the submission that impugned order be set aside and the appeals be allowed. It is also further submitted that as regards the demand of the duty liability post 01.03.2008, the demand is also not correct in as much as the adjudicating authority has not followed the provisions of valuation rules as envisaged by Notification No.13/2008-CE(NT). It is the submission that the said rules which came into statute from 01.03.2008 requires the authorities to follow the said rules before coming to a conclusion of demand of differential on the allegations of under-valuation of the goods which are covered under the provisions of sub-section (4) of Section 4A of the Act.
5. Ld.Standing Special Counsel appearing for Revenue would submit the overall factual aspects of the case. It is his submission that the investigations were undertaken with shroffs and dealers and it indicated that the dealers of the tiles were paying cash in excess of the amount of the bills which were raised on them and was routed through the shroffs. It is his submission that the details of evidences which were collected during the entire period of investigation indicated that the dealers had paid various manufacturers of tiles, (who are appellants) cash over and above the invoiced amount; invoices were issued by the manufacturers for a lesser amount; it is also submitted that investigation was conducted with 3 transporters and the statements recorded from the proprietor of these firms revealed that the truck carried the full load of tiles and transportation charges were collected in cash to avoid deduction of income tax at source as well as to evade payment of Service Tax. It is also his submission that if the margins to the dealers and local transportation cost are added, actual MRP would be so high as to render declared MRP total totally infeasible. It is his further submitted that the investigations conducted with 11 firms of shroffs located in Rajkot/Morbi who handled the task of reaching the cash payment received from dealer to the manufacturer, revealed a modus operandi which was well executed; transfer of cash amount by their dealers was handled in different modes and methods i.e. within Gujarat cash was transferred to angadiya and from outside Gujarat cash amounts were either collected personally by authorized representative of the manufacturer or their sales personnel during their visit to dealer. He would submit most common method used for collection of cash amount was through bank accounts opened in different private banks in the name of large number of fictitious trading firms; shroffs deposited the amount in such bank account number and transmit the bank account number, pin number to the manufacturer and the manufacturer through their net work withdrew cash deposited in such account. It is his submission that the details of investigations also reveal that the amount involved was very huge. It is his submission that the statements recorded of the representatives/ partners/owners of the tile manufacturers does indicate that there was one MRP declared on all sizes of tiles, across the board, while there was a difference in each and every tile manufactured and cleared by the manufacturer. It is further submission that the after-effect of the massive investigation, has resulted that the manufacturers have increased the retail sale prices of various brands substantially, which would indicate that the prices were earlier suppressed in order to evade Central Excise duty. It is his submission that the manufacturers have destroyed all the data, information regarding actual MRP of different grades/colours/design of ceramic tiles cleared by them for the period prior to 01.03.2008 and this can be evidenced from the fact that the ceramic/vitrified tiles manufactured by organized sector manufacturers like M/s Somani Pilington Ltd and M/s H & R Johnson Ltd has very high MRP/RSP on like goods. He would submit that essentially the issue is regarding the under-valuation of the ceramic/vitrified tiles for the period prior to 01.03.2008 and post 01.03.2008. He would assail the defences taken by the ld.Counsel for the appellant, on the ground that that the fact remains the manufacturers ought to have declared the RSPs correctly by including all the elements enumerated in Explanation-I to Section 4A of the Central Excise Act, 1944; have not included the cash payments which were received over and above the abated price which is to be held as additional consideration and hence the RSP which was declared was not sole consideration for the sale of the goods. It is his submission that when confronted by the statements of shroffs and the dealers, none of the representatives of the manufacturers would escape admitting duty evasion by mis-declaring the RSP and it is worthwhile to note that none of the statements were ever retracted. It is also his submission that the proprietors/partners of the manufacturers of ceramic/vitrified tiles have not denied receiving cash from the dealer. It is his submission that the defences taken by the appellants counsel that the declared price for delivery of goods was at the factory gate and the appellants had availed the abatement and hence the price on which the Excise duty has to be paid on the same, is incorrect submission, as the manufacturers mayl not have the factored un-quantified element in the declared RSP, the RSP which was declared on the package were only dealers prices and not maximum retail prices at which the goods may be sold to ultimate consumer, and the statements of the individuals indicate that they have not taken into consideration the expenses such as freight, profit of dealers, sub-dealers and payment of VAT while fixing the MRP, would in itself indicate the RSP which were declared on the boxes were incorrect. He would also take us through the figures which are illustrated in the impugned order to show that if the dealers costs and profit are included along with cash payment, the declared MRP is less. It is also his submission that the intention of the manufacturers were very clear as they had declared one single MRP for each grade irrespective of size, quality and design, though the cost of production would have been different on account of these factors. It is also his submission that the arguments raised on legal issues basically concern the interpretation of the provisions of Section 4A of Central Excise Act, 1944 which relates to the determination of value of excisable goods based on the concept of RSP i.e. maximum price at which the specified goods may be sold to the dealer. After giving a overall view of the reasons for introducing such a provision i.e. Section 4A, he would submit that in the year 1999, new sub-section (4) was added to Section 4A to provide confiscation of goods in respect of clearances which were effected without declaring the RSP, tampering or altering the RSP or mis-declaring RSP. He would further submit that in the year 2003, sub-section (4) was substituted by an elaborate provision to cover cases of default including the cases where the manufacturer declared incorrect RSP and decide the liability of confiscation of such goods, it also provided for ascertainment of RSP in the specified cases of default was to be done in a prescribed manner. He would submit that subsequently, rules were framed by Notification No.13/2008-CE(NT), dt.01.03.2008 describing the manner of ascertainment of RSP in the aforesaid cases of defaults. It is his submission that the arguments of the ld.Counsel that from 01.03.2008, only the value of mis-declared MRP can be re-calculated is incorrect as provisions of Section 3 of Central Excise Act, 1944 is a charging section for levy of Central Excise duty and the provisions of Section 4A are machinery provisions. It is his submission that the definition of RSP given in Explanation-I also enumerate elements that would form a part of RSP and these provisions are applicable to all specified goods in all situations. It is his submission that in deliberately declaring artificially low RSP and leaving out the element of actual freight borne by the dealer, dealers profit, VAT payable by dealer, etc from the RSP, the appellants have clearly violated the criteria laid down in Explanation I to Section 4A of Central Excise Act, 1944, hence recovering an amount over and above the invoice price resulting from sale of goods needs to be added and duty liability confirmed needs to be upheld. It is his submission that re-determination of MRP for a period post 01.03.2008 is also correct, as there is a charge of evasion which has been substantially proved by various statements of the dealers and the transporters and the manufacturers themselves. He would rely upon the decision of the Tribunal in the case of Sudhir Sharma - 2011 (265) ELT 243 for the proposition that if an admission is clear and an unequivocal is the best evidence against the party. He would submit that the appellants reliance on the decision in the case of M/s Millenium Appliances - 2009 (248) ELT 713, M/s Ravi Foods Pvt.Ltd. 2011 (256) ELT 399 and M/s ABB Ltd 2011 (272) ELT 706 are mis-placed in as much as in all these cases, Tribunal has always stated that re-determination of RSP was permissible, in the absence of rules prescribing the manner of ascertainment of RSP. It is his submission that the ratio laid down by the judgments of M/s Millenium Appliances, M/s Aditya Cement ought not to be applied to the present case at all as the facts are different and in the case of M/s Ravi Foods Pvt.Ltd., the facts were totally different and the application of the judgment of M/s Millenium Appliances was improper. It is his submission that in the case of ABB Ltd., the issue was not related to demand of Central Excise duty but CVD and the reliance was again placed on Millennium Appliances India Ltd. It is his submission that the Revenue would like to rely upon the decision in the case of M/s Planet Sports Pvt.Ltd. 2005 (180) ELT 206, M/s Media Industries Ltd. 2006 (199) ELT 345 and M/s Onida Saka Ltd. 2011 (267) ELT 101, wherein the re-determination of RSP was upheld and re-determination of RSP on best judgment basis was also upheld by laying down a ratio just because there is no provision in Section 4A for enhancing the declared MRP, if the same was not found to be correct, it does not mean that during the period, an assessee coming within the purview of Section 4A was free to declare any false MRP and evade the duty as it is well settled law that nobody can be allowed to benefit from his wrong doing. It is his submission that the appellants in these cases should also be not allowed to take undue advantage of wrong doing merely on the ground that the manner of ascertainment was not prescribed during the period from 14.05.2003 to 01.03.2008. He would submit that Revenue places reliance on the judgment of Apex Court in the case of M/s Mahim Patram Pvt.Ltd. 2007 (7) STR 110 wherein their Lordships have held that measure or value to which rate would be applied but how the turnover would be determined is another; Computation provision may bear a relationship with the nature of charge and charging section and computation provision together constitute an integrated course. He would submit that this ratio would directly apply in the cases in hand as the charging Section specifically talks about the levy of Central Excise duty based on the RSP of the goods to the ultimate consumer. It is his submission that this view was followed by the differing Member (Technical) in the case of Schneider India Ltd. 2013-TIOL-1502-CESTAT-MUM. It is his submission holding that non-availability of provisions for re-determination of RSP during the period 14.05.2003 to 01.03.2008 and re-determination being set aside on this ground would certainly lead to absurd result. He would distinguish the various decisions as relied upon by ld.Counsel for the appellant.
6. Ld.Departmental Representative, while adopting the arguments put forth by ld.Special Counsel for the Department, would submit that atleast in one case, there was pricelist of the manufacturer which was recovered from the dealers premises and it was not disputed. It is his submission that all the manufacturers had, in fact, never retracted their statements, which itself goes to prove that there was large scale evasion of Central Excise duty by declaring incorrect MRP/RSP.
7. In rejoinder, ld.Counsel would submit that the Revenue had not rebutted the basic fact as to that if the cost of ceramic/vitrified tiles has a printed MRP of Rs.100/-, how the purchaser or the ultimate consumer would have paid a price which was more than Rs.100/-. He would submit that the decisions relied upon by the ld.Special Counsel for the Revenue have not considered the law which has been laid down by the Tribunal in the case of M/s Millenium Appliances India Ltd, M/s Ravi Foods Pvt.Ltd., and M/s ABB Ltd. He would submit that the law as has been relied upon by the Revenue in the case of M/s Mahim Patram Pvt.Ltd is totally incorrect as the judgment of Apex Court was considering a different issue in as much as the said ratio is not in respect of non-existent set of rules but the said ratio, in fact, supports the case of the assessee as there was a provision in the rule which indicated that the rules which are framed under the Central Act would be relied upon for calculation. It is his submission that the Revenue has not put forth any argument as regards the demand was based on generalization for the entire period and could not be done so.
8. We have considered the detailed submissions made by both sides and perused the records as also the written submissions filed by both sides after the conclusion of hearing.
9. Essentially, the dispute in these cases relates to the demand of Central Excise duty due to under-valuation of final product cleared by the appellant in two periods i.e. prior to 01.03.2008 and post 01.03.2008.
10. The undisputed facts are that the appellants are manufacturer of ceramic/vitrified tiles and the said tiles are covered under the provisions of Section 4A of Central Excise Act, 1944 (hereinafter referred to as the Act) and are discharging MRP declared on the boxes cleared from their factory premises. It is also undisputed that the appellant assessees are selling their final product ex-factory and the transportation arrangements are made by the purchasers themselves.
10.1 The entire case of the Revenue as adjudicated by the lower authorities has confirmed the demand based upon the evidences such as the statements of various dealers who had stated that the tiles which are manufactured and cleared by the appellant are sold at a price more than the MRP/RSP declared on such tiles; statements of various shroffs / angadiyas who had stated that the appellants were handed over an amount in cash which were collected from various dealers and that the appellant assessee have increased their prices of the final product after the massive investigation which was carried out; application of weighted average and re-determination of RSP is permissible even prior to 01.03.2008 and post 01.03.2008.
11. For the period prior 01.03.2008 as well as post 01.03.2008, the basic statutory provision which needs to be considered by us are the provisions of Section 4A of the Act and the provisions of Section 2(g) and 2(h) of the Act which are reproduced herein below:-
Section4A: Valuation of excisable goods with reference to retail sale price. -
(1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 (1 of 2010) 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.
SECTION 2. Definitions. In this Act, unless there is anything repugnant in the subject or context, -
(f) manufacture includes any process, -
i)
ii)
iii) incidental or ancillary to the completion of a manufactured product;
which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;
(g) prescribed means prescribed by rules made under this Act;12. For the period prior to 01.03.2008, we have to record that the provisions of sub-section (4) of Section 4A were enacted in the statute which is reproduced hereinabove, if read, would indicate that if the manufacturer declares retail price which is not the correct retail price as required to be declared under the provisions of the Act, then the ascertainment of such retail sale price will be done in a prescribed manner. We find that though the provisions of sub-section (4) of Section4A was brought into statute from 14.05.2003, how to re-determine the RSP in the case of mis-declared RSP was not prescribed by the Central Government till the issuance of Notification No.13/2008-CE(NT), dt.01.03.2008. This would effectively mean that the legislature in its wisdom has considered a situation wherein the RSP which is declared could be wrong RSP, thought of remedying the situation by inserting the provision of sub-section (4) in Section 4A, but had not prescribed the rules how the re-determination has to be done till 01.03.2008. It can be seen from the definition of the word prescribed as enshrined in Section 2(g) of the Act (as reproduced hereinabove) that it is very clearly stated that it can be done only by the rules made under this Act. Closer perusal of Notification No. 13/2008-CE(NT), dt. 01.03.2008 indicated that the said notification was issued in exercise of 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. It can be seen from the above preamble to the Notification No.13/2008-CE(NT), Central Government made the rules as applicable for sub-section (4) of Section 4A w.e.f. 01.03.2008. In the cases in hand, for the period prior to 01.03.2008, the entire exercise of the Revenue in re-determining the RSP, even if RSP is not in accordance with the law, is faulty and not in accordance with the law, as prescribed manner of re-determination of RSP was brought into statute only from 01.03.2008. We find that once the Central Government has not framed the rules for re-determining the RSP in a case where the RSP declared on the package was sought to be rejected, though being empowered, authorities had no power to re-determine the RSP in any manner; more so in a manner adopted in these appeals. It is also provided in the statute, that as per sub-section (4) of Section 4A of the Act, the manner has to be prescribed only by the Central Government by rules, which came into force only from 01.03.2008, which would also indicate that the provisions of Section 4A (4) could not have been operationalised, till the manner for ascertaining the RSP was prescribed by framing the rules. In the absence of any rules for re-determination of RSP, the contentions of ld.Special Counsel for the Revenue that the Revenue can adopt best judgment method for ascertaining the said RSP, is against the provisions of the law and cannot held as correct, as the provisions of Section 4A of the Act do not indicate any other manner for ascertainment of the RSP based upon the best judgment method prior to 01.03.2008. The law on this is settled by the decision of Apex Court in the case of Gulam Hohammad & Anr Vs State of Bombay & Others AIR 1962 SC 97. We also find that if the legislature prescribes that if the thing is to be done in a particular manner, then the same has to be done in the stated manner only, is the law which is settled by the Apex Court. We find that our this view is fortified by the decision of the co-ordinate Bench of the Tribunal in the case of M/s Ravi Foods Pvt.Ltd, wherein similar issue came before the Bench. In the case of M/s Ravi Foods Pvt.Ltd., the Revenue sought to re-determine the RSP of the goods which were covered under the provisions of Section 4A of the Act, by adding the value/amount received not accounted for by the appellant therein. The relevant paragraphs from the said judgment are reproduced herein below.
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 the Official Gazette, specify any goods, in? (1) 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, dated 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. v. CCE, Hyderabad [2009 (248) E.L.T. 713 (Tri. - Bang.)], this Bench on this point has held as under :-
Another issue involved in this case is regarding the situation?9. 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.
Act means the Central Excise Act, 1944 (1 of 1944);?(a) retail sale price means the retail sale price as defined in?(b) Section 4A of the Act; and Words and expressions used in these rules and not defined but?(c) 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 sub-section (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 , - without declaring the retail sale price on the packages of such?(a) goods; or by declaring the retail sale price, which is not the retail?(b) 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 by declaring the retail sale price but obliterates the same?(c) after their removal from the place of manufacture, then, the retail sale price of such goods shall be ascertained in the following manner, namely :-
if the manufacturer has manufactured and removed identical?(i) 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 :
if the retail sale price cannot be ascertained in terms of?(ii) 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 1-3-2008) 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 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.
13. Identical views were expressed by the Tribunal in the case of M/s ABB Ltd (supra), we would like to record here that the 3 decisions of the Tribunal i.e. M/s Millennium Appliances India Ltd, M/s Ravi Foods Pvt.Ltd., M/s ABB Ltd have held a view that prior to 01.03.2008, in the absence of any provisions for re-determining the RSP, in the form of prescribed rules, the Revenue authorities cannot re-determine the RSP under any of the provisions available to them. It has to be noted that there is no contrary view which has been taken by the Tribunal.
14. At this juncture, we would like to refer to the submissions made by the ld.Special Counsel for the Revenue that in the case of M/s Schneider Electrical India Pvt.Ltd.(supra), Honble Member (Technical) has diferred with the views of Honble Member (Judicial) who has relied upon all these three case laws. In our considered view, the differing Member has incorrectly applied the law in the case of M/s Mahim Patram Pvt.Ltd. to take a different view from the views already existing. On perusal of the said decision of Apex Court in the case of M/s Mahim Patram Pvt.Ltd, we find that the Apex Court was dealing with a dispute wherein in the absence of rules having been prescribed under the Central Sales Tax for determining the manner in which the sale price of transfer of goods under Works Contract was to be calculated, would the levy of Works Contract be sustainable in the State of Uttar Pradesh by computing the value of taxable turn over in accordance with the rules framed under Uttar Pradesh Trade Tax Act, 1948. The Apex Court while dealing with the issue noted that Central Sales Tax Act, 1956 provides that the authority who is empowered to assess, re-assess, collect, and enforce payment of any tax under General Sales Tax law of the appropriate state, shall on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax under the Central Sales Tax Act and for this purpose, they may exercise all or any of the powers they have under the General Sales Tax law of the State; Section 3(3) of the Central Sales Tax provides that State Government may make rules not inconsistent with the provisions of the Act and rules made thereunder. The Uttar Pradesh State Government has framed Central Sales Tax (U.P. Rules) 1957, in exercise of the powers conferred under the CST Act, 1956, and Rule 9 of the said Rules provided that the provisions of Uttar Pradesh Sales Tax Act, 1948 and U.P. Sales Tax Act, 1948 and U.P. Sales Tax Rules, 1948 as amended from time to time or the rules made thereunder would apply to the dealer liable for assessment under Central Sales Tax Act and U.P. Sales Tax Rules, 1948, Rule 44 (B) prescribed the manner of determining the turn over of the goods involved in execution of Works Contract. The relevant findings of the Apex Court were rendered on this factual aspect as contained in Para 27 of the judgment. In our considered view, the ratio decidendi from this judgment is that merely because the rules were not framed in Central enactment, it would not mean that no tax is leviable if rules have been framed under said enactment and there is a provision for referential incorporation of the said act in the Central act. We are of the view that the ratio laid down by Apex Court in the case of M/s Mahim Patram Pvt.Ltd. does not in any manner support the case of the Revenue as well as the view of the differing member in the case of M/s Schneider Electrical India Pvt.Ltd; in the cases in hand the ascertainment/re-determination of RSP has not been enacted or prescribed in any other enactment and as no provisions have been incorporated by reference under Central enactment. In our view, there being no contrary judgment to the views expressed by the 3 decisions of the co-ordinate benches of the Tribunal on this issue, even assuming that there was mis-declaration of RSP, period prior to 01.03.2008 the RSP cannot be re-determined by the Revenue in any manner.
15. We also find that in the cases in hand, on factual matrix also, there is a strong case in favour of the assessee i.e. manufacturer of tiles. The statements recorded of the individuals of manufacturer of the tiles, specifically state that they were declaring a RSP of Rs.100/- on each box which were cleared by them from the factory premises, it is also stated that the said clearances are effected on ex-factory basis and transportation of such boxes are in the hands of the buyers. If it is the case of the Revenue that RSP was later on changed and sold to the ultimate consumer at higher price, it was for the Department to first ascertain who has changed the said MRP. In our view, the person who has altered the RSP on the goods is the person who can be held as a manufacturer on alteration of RSP; as the definition of manufacturer Section 2(f) of the Act (herein before reproduced) specifically talks about the process of declaration or alteration of RSP on the product which are covered under the provisions of Section 4A of the Act would be considered as a manufactured product. As stated hereinabove, it is the case of the Revenue that there was an alteration of the MRP, there is nothing on record which indicates that the appellant manufacturers herein are the persons who have altered the MRP in godown/places of the dealers. The dealers whose statements were recorded by the Revenue authorities state that they have sold the goods at a higher price than the price at which goods were cleared from factory premises of the appellants. We are unable to understand the investigating authorities mind, as during the course of investigation there is a a specific admission of the dealers that they have sold the goods at higher MRP than the declared MRP; no question was put any of the dealers as to who altered the RSP declared on boxes of glazed/vitrified tiles. In our considered view, this clinching evidence has not been recorded by the investigating authorities, for the reasons best known to them. If there would have been any evidence in any form as to who altered the RSP, then the duty liability, in our considered view, gets crystallized in the hands of such persons as goods become manufactured goods; is the law which can be deduced from the provisions of Central Excise Act, 1944. In the absence of any evidence suggesting as to who altered the MRP on the boxes of tiles, we are of the view that the Revenue authorities cannot turn around and take a stand that the manufacturers are liable to duty, which would effectively mean that they are the persons who have altered the RSP. Yet another angle to the entire case is absence of evidence as to there being alteration of RSP; in as much as when the investigations were conducted by the authorities, we find that the investigating authorities have not seized a single carton of the offending goods in the Pan India operation at different dealers premises, wherein different RSP was declared. It would be beyond imagination that the dealers could not have had any stocks of glazed/vitrified tiles received from the appellants, in their hands when the investigation took place. In the absence of such a crucial evidence, we are unable to hold that the appellant herein can be saddled with a liability of Central Excise duty based upon re-determined RSP, for the period prior to 01.03.2008.
16. We also find the statements of the authorized persons of the manufacturers have stated that they have cleared the glazed/vitrified tiles based upon a RSP declared, which was in their opinion a correct price is not contraverted by leading any evidence that the declared price was not the correct one. Was known to the manufacturer. We find that the contention of ld.Counsel that the belief of manufacturer has always considered that declared RSP was correct, is supported by the statements of individuals who were either partners/proprietors of appellant manufacturer. We find strong force in the contentions raised by ld.Counsel for the appellant that the manufacturers may be unaware that the RSP on the box was obliterated or altered after the removal from their place of manufacturer, as none of the dealers have stated that the RSPs were changed on direction of manufacturer; or manufacturer was instrumental to order such a charge. In the 1 are disposed of as indicated hereinabove.
(Pronounced in Court on ______________________) (H.K. Thakur) (M.V. Ravindran) Member (Technical) Member (Judicial) cbb ??
??
??
??
2