Custom, Excise & Service Tax Tribunal
Asian Tiles Limited vs Ahmedabad-Iii on 10 January, 2019
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Impugned
Appeal No. Arising Out of Passed by Appellant Respondent
order date Commissioner of Central Excise, OIA-369/2007/COMMR-A- Ocean Ceramics C.C.E. & E/235/2008 18/12/2007 Customs and /RAJ Ltd. S.T.-Rajkot Service Tax-
RAJKOT
C.C.E. &
Commissioner of
E/1282/2009- S.T.-
OIO-04/COMMR/2009 21/03/2009 Central Excise- Arvind Ceramics
DB Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/1283/2009- S.T.-
OIO-04/COMMR/2009 21/03/2009 Central Excise- R Kumar
DB Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of Crystal Ceramics
E/1293/2009- S.T.-
OIO-04/COMMR/2009 21/03/2009 Central Excise- Industries Pvt
DB Ahmedabad-
AHMEDABAD-III Ltd
iii
C.C.E. &
Commissioner of
E/10735/2013- OIO- S.T.-
27/12/2012 Central Excise- Century Tiles Ltd
DB 07/COMMR/ADJ/AHD/2012 Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/10736/2013- OIO- Ganpatlal S.T.-
27/12/2012 Central Excise-
DB 07/COMMR/ADJ/AHD/2012 Dayalal Patel Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/10868/2013- OIO-08-09-COMMR-ADJ- Sterling S.T.-
27/12/2012 Central Excise-
DB AHD-2012 Ceramics Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/10869/2013- OIO-08-09-COMMR-ADJ- S.T.-
27/12/2012 Central Excise- Shri R Kumar
DB AHD-2012 Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/10870/2013- OIO-08- Shri Divyeshbhai S.T.-
27/12/2012 Central Excise-
DB 09/COMMR/ADJ/AHD/2012 N Patel Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/10871/2013- OIO-08- Shri Arvindbhai S.T.-
27/12/2012 Central Excise-
DB 09/COMMR/ADJ/AHD/2012 N Patel Ahmedabad-
AHMEDABAD-III
iii
Commissioner of
E/11751/2013- OIO-05-06-COMMR-ADJ- Dharmendrabhai C.C.E. &
14/02/2013 Central Excise-
DB AHD-2013 Patel S.T.-Rajkot
RAJKOT
Commissioner of
E/11752/2013- OIO-05-06-COMMR-ADJ- Nice Ceramics C.C.E. &
14/02/2013 Central Excise-
DB AHD-2013 Pvt Ltd S.T.-Rajkot
RAJKOT
C.C.E. &
Commissioner of
E/11891/2013- OIO-3-COMMR-ADJ-AHD- Sanyo Cera Tiles S.T.-
28/03/2013 Central Excise-
DB 2013 Pvt Ltd Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/11892/2013- OIO- Mittalbhai S.T.-
28/03/2013 Central Excise-
DB 3/COMMR/ADJ/AHD/2013 Bhikhabhai Patel Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/12814/2013- OIO- S.T.-
25/04/2013 Central Excise- Santro Tiles Ltd
DB 14/COMMR/ADJ/AHD/2013 Ahmedabad-
AHMEDABAD-III
iii
C.C.E. &
Commissioner of
E/12815/2013- OIO- Prakashbhai S.T.-
25/04/2013 Central Excise-
DB 14/COMMR/ADJ/AHD/2013 Dahyabhai Patel Ahmedabad-
AHMEDABAD-III
iii
Commissioner of
E/13099/2013- OIO-16/COMMR-ADJ- Central Excise- C.C.E. &
30/05/2013 Oscar Ceramics
DB /AHD/2013 AHMEDABAD- S.T.-Rajkot
ADJUDICATION
E/13100/2013- OIO-16/COMMR-ADJ- Commissioner of Shri Manshuklal C.C.E. &
30/05/2013
DB /AHD/2013 Central Excise- Mavjibhai Patel S.T.-Rajkot
2|Page
AHMEDABAD-
ADJUDICATION
C.C.E. &
Commissioner of Crystal Ceramic
E / 13258 / OIO-AHM-EXCUS-003- S.T.-
13/06/2014 Central Excise- Industries Pvt
2014-DB COM-003-14-15 Ahmedabad-
AHMEDABAD-III Ltd
iii
C.C.E. &
Commissioner of Mahedrabhai
E / 13259 / OIO-AHM-EXCUS-003- S.T.-
11/06/2014 Central Excise- Amichandbhai
2014-DB COM-003-14-15 Ahmedabad-
AHMEDABAD-III Patel
iii
C.C.E. &
Commissioner of Mahendrabhai
E / 13260 / OIO-AHM-EXCUS-003- S.T.-
09/06/2014 Central Excise- Amichandbhai
2014-DB COM-002-14-15 Ahmedabad-
AHMEDABAD-III Patel
iii
C.C.E. &
Commissioner of Cystal Ceramic
E / 13424 / OIO-AHM-EXCUS-003- S.T.-
09/06/2014 Central Excise- Industries Pvt
2014-DB COM-002-14-15 Ahmedabad-
AHMEDABAD-III Ltd
iii
C.C.E. &
Commissioner of
E / 13810 / OIO-AHM-EXCUS-003- Asian Tiles S.T.-
25/09/2014 Central Excise-
2014-DB COM-013-14-15 Limited Ahmedabad-
AHMEDABAD-III
iii
Represented by:
For Appellant: Mr. Amal Dave, P.D. Rachchh, Shubham Jhanjharia, Devashish Trivedi (Advocates) For Respondent: Mr. J. Nagori (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing:12.09.2018 Date of decision:10.01.2019 Final Order No. A/ 10071-10093 /2019 Per: Raju These appeals have been filed by various tile manufacturers against orders of Commissioner in respect of on the goods cleared by them.
2 The DGCI in the year 2008 initiated proceedings against the number of tile manufacturers. The appellants in this case are all manufacturers of ceramic tiles. Ceramic tiles are goods notified for assessment under Section 4A of the Central Excise Act. At the material time the goods were covered by the provisions of Standard of Weights and Measure Act, 1976 and rules made thereunder and thus it
3|Page was mandatory to declare the Retail Sale Price (RSP) of the goods on the ceramic tiles cleared by the appellants.
2.1 The investigations made by DGCEI suggested that the Retail Sale Price (RSP) declared by the appellant was not the correct RSP. The investigations revealed that the RSP at which the goods were actually sold to the customer was much higher than the RSP declared by the appellant on the packages. The modus operandi adopted allegedly included suppression of costs, misdeclaration of description and elaborate mechanism for recovery of cash from dealers. 2.2 Investigation in some cases also revealed that the cost of transportation was not being included in the RSP declared by the appellant. The investigations also revealed that extra money over and above the recorded transactions for sale of these goods was being recovered and transferred to the appellant by the dealers of tiles. The investigation suggested that there was an elaborate modus operandi to clear the goods at a very low declared RSP and later on sell the same at much higher RSP and recover the differential value in cash through various channels. It was also seen in some cases, to enable this modus operandi, the size, design and colour of the tiles was not being declared while clearing the goods. In many cases same Retail Sale Price was declared at the time of clearance for goods, irrespective of grade, size, colour and design, as a part of modus operandi. It was also alleged in some cases that the transport cost was also being suppressed in connivance with transporters in order to make the declare Retail Sale Price look reasonable. Similarly in some cases, it was alleged that the expense incurred in local transportation, transit insurance, loading, unloading transit insurance etc were being suppressed to enable declaration of low RSP.
4|Page 2.3 It was also alleged that for transfer of cash from dealers to appellants within the state mostly the services of Angadias was being used, however for collection of cash outside the State mostly appellants own representatives were being used. Another method used for collection of cash from dealers was through the bank accounts and discounting using the services of Shroffs. Intricate mechanisms was evolved to transfer cash using the Shroffs as the intermediaries to hide the appellants interest.
2.4 It was also noticed that immediately after cases were booked in many cases, the appellants had revised the Retail Sale Price significantly upwards. Notice alleged that it indicated that prior to booking of the case the RSP were artificially suppressed. 2.5 From the above, it is seen that the Revenue had unearthed certain evidence which suggested that an elaborate mechanism to enable suppression of Retail Sale Price was evolved. While the actual sales took place at much higher Retail Sale Price, the money was being collected in cash over and above the actual sale price declared at the time of clearance, through the intricate mechanism involving Angadias, personal representatives and through bank/ shroffs. 3 The matter was argued by various Counsels namely, Mr. Amal Dave, P.D. Rachchh, Shubham Jhanjharia, Devashish Trivedi. All the arguments essentially relied upon the decision of Tribunal in the case of Acme Ceramics 2014 (304) ELT 542 and 2014 (304) ELT 588, which was followed by Tribunal in case of Suzuki Ceramics 2016 (334) ELT
169. It was argued that since most of the cases decided by the orders in the case of Acme Ceramics (Supra) which was followed by Tribunal in case of Suzuki Ceramics (Supra), involved similar common
5|Page investigation and identical facts, the said decisions should be followed in this case as well. Reliance was also placed on the decision of Hon'ble Apex Court in the case of SANT LAL GUPTA reported in 2010 (262) E.L.T. 6 (S.C.). It is seen that the core issue decided in the case of ACME (Supra) was RSP cannot be re-determined for period prior to 1.3.2008 because the rules for determination of RSP were notified only on 1.3.2008. It essentially held that prior to notification of the rules vide Notification 13/2008-CE(NT) dated 1.3.2008, redetermination of RSP was not permissible.
3.1 It was also argued that the buyers/dealers whose statements have been relied as major evidence, have not been made co accused. It was also argued that the statements cannot be relied unless examination and cross examination of the buyers is done as prescribed under Section 9D of the Central Excise Act, 1944.
3.2 It was also argued that apart from mis-declaration of RSP there are notices involving clandestine clearances for which the matters were remanded earlier by the tribunal in cases involving similar circumstances.
4 Learned AR relies on the impugned order. It was argued that though some of the clearances pertain to period after 1.3.2008, most of the dispute pertains to clearances made prior to 1.3.2008. He pointed out that the rules for ascertainment of RSP in the situation mentioned in subsection (4) of Section 4A of Central Excise Act, 1944, were notified on 1.3.2008. He argued that when the decision in the case of ACME (Supra) was made the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) was not available. He pointed out that the decision in the case of SCHNEIDER ELECTRICAL
6|Page INDIA (P) LTD (Supra) was not taken in consideration in case of Suzuki Ceramics (Supra) as at the material time there was a stay on the said decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). He pointed out that now there is no stay on the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) and therefore there are two conflicting decisions of Tribunal on the same question of law. In these circumstances the matter needs to be referred to the larger bench of Tribunal. Reliance was, interalia, places on the decision of Hon Apex Court in the case on Mahindra and Mahindra 2015 (315) ELT 161 (SC).
5 We have gone through the rival submissions. The core question of law that needs to be decided before other issues are taken up is if it is permissible in law to redetermine RSP prior to notification of rules under Section 4A(4) of CEA, 1944, by issue of notification 13/2008- CE(NT) on 1.3.2008.
5.1 The legislative history of the taxation on the basis of RSP is as follows. The section 4A of CEA, 1944, was introduced in 1997 as follows "Section 4A. 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 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.
7|Page 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, as the case may be. Explanation 2. - Where on any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this sections".
It can be seen that in 1997 there was no specific mention about the manner in which revenue authorities could ascertain RSP in case of misdeclaration/ non declaration/ amendments etc. 5.2 In 1999, a new sub-section (4) was inserted, which read as under :-
"(4) If any manufacturer removes from the place of manufacture any excisable goods specified under sub-section (1) without declaring the retail sale price of such goods on the packages, or declares a retail sale which does not constitute the sole consideration for such sale, or tampers with, obliterates or alters any such declaration made on the packages after removal, such goods shall be liable to confiscation".
It can be seen that even in 1999 there was no specific mention about the manner in which revenue authorities could ascertain RSP in case of misdeclaration/ non declaration/ amendments etc. 5.3 In 2003, a new sub-section (4) was substituted which read as under :-
"(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, -
8|Page
(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".
Thus for the first time in 2003 provision was introduced which prescribed ascertainment of RSP in the prescribed manner. The subsection (4) prescribed that RSP in certain circumstances will be ascertained in the prescribed manner. The Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 were notified vide notification 13/2008-CE (NT) dated 1.3.2008. The core issue is if it is permissible to determine RSP of goods prior to 1.3.2008, when the rules prescribing manner of ascertainment were notified.
6 In the case of ACME (Supra) the tribunal held that in view of the fact that w.e.f 2003 when sub section 4A(4) of the CEA, 1944, prescribed that in certain circumstances the RSP can be redetermined in the manner prescribed, till the time when the manner was prescribed by issue of notification 13/2008-CE (NT) dated 1.3.2008, it is not permissible to redetermine the RSP for clearances. The Tribunal in the said case relied on the decisions of Tribunal in the case of M/s. Millennium Appliances India Ltd 2009 (248) E.L.T. 713 (Tribunal), M/s. Ravi Foods Pvt. Ltd 2011 (266) E.L.T. 399 (Tribunal)., M/s. ABB Ltd. 2011 (272) E.L.T. 706 (Tri. - Bang.). Another bunch of cases was decided in the decision reported in case Suzuki Ceramics (Supra), which in turn relied on the decision in case of ACME(supra).
9|Page 6.1 The appellants are harping on the fact that the facts of these cases are identical to the facts in the group of cases decided in the case of Suzuki Ceramics (Supra) and in case of ACME(supra), and therefore Tribunal is bound to follow those decisions. 6.2 It is seen that the decision in case of SCHNEIDER ELECTRICAL INDIA (P) LTD specifically decided with following specific questions of law crystallized by the bench which was referred to the third member. The questions of law were as under
As there is a difference of opinion between the Members of the Bench, the matter may be placed before the Hon'ble President to refer it to a 3rd Member to decide the following :
DIFFERENCE OF OPINION (1) The demands for the period prior to 1-3-2008 are not sustainable as there was no machinery provisions available to determine MRP of the product.
OR The demands for the period prior to 1-3-2008 are sustainable as MRP of the product can be determined by the assessing officer using reasonable/best judgment based upon material available and consistent with principles and provisions of Section 4A of the Central Excise Act, 1944. (2) The list price cannot be adopted as MRP as per Rule 4(a)(ii) of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
OR The list price or (with suitable adjustment for VAT/local taxes, etc.) of the manufacturer which is basis for all transactions between manufacturer, distributor, stockiest, retailer as also consistent with the price informed to public on their website can be adopted as MRP of the product under reasonable/best judgment method before 1-3-2008 and on and after 1-3-2008 under Section 4(a)(ii) read with Rule 6 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 in the facts and circumstances of the present cases, particularly when the same is used by the appellants themselves for subsequent period.
(3) Demands for extended period is not sustainable in view of reasons enumerated in Para 19 above.
OR Demand for extended period is sustainable in view of the conduct of appellants as enumerated in Para 26 above including the reason recorded in impugned orders. 10 | P a g e It can be seen that the first question of law crystallised by the bench is a pure question of law. The same were answered by the third member in the following manner.
30. In view of the above analysis, I answer the reference made to me as follows :-
(1) The demands for the period prior to 1-3-2008 are sustainable as MRP of the product can be determined by the assessing officer using reasonable/best judgment means based upon material available and consistent with principles and provisions of Section 4A of the Central Excise Act, 1944. Further the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 have retrospective application as they are procedural and directory in nature.
(2) The list price (with suitable adjustments for VAT/Local taxes, etc.) of the manufacturer which is basis for all transactions between the manufacturer and distributor/stockist/retailer can be adopted as MRP of the product under the reasonable/best judgment method before 1-3-2008 and on and after 1-3-2008 under Section 4A read with Rule 6 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
(3) Demand for the extended period is sustainable as the appellants have resorted to subterfuge and misdeclarations with an intent to evade excise duty.
The answer to the first question referred to third member is based on the following arguments "29. I have carefully considered the rival submissions. It will be useful at this juncture to examine the provisions of Section 4A which reads as under :
"Section 4A. 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 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.
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, 11 | P a g e transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be. Explanation 2. - Where on any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section"
29.1 There is no dispute between the Member (Judicial) and the Member (Technical) with regard to the question as to whether the provisions of Section 4A applies to the goods manufactured by the appellants. The order of the Director, Legal Metrology as also the order of the Hon'ble High Court of Bombay confirm this position. A careful examination of the provisions of sub-section (2) reveals that two conditions are required to be satisfied for application of Section 4A. The first condition is that there should be a requirement under the Standards of Weights and Measures Act, 1976 or the Rules made thereunder or under any other law for the time being in force to declare the RSP on the packages of the goods. The second condition is that the goods should be notified under sub-section (1) of Section 4A. If these two conditions are satisfied, then notwithstanding anything contained in Section 4, the value for the purpose of assessment of duty will be the retail sale price minus the amount of abatement, if any, as specified by the Central Government. The expression used is 'notwithstanding anything contained in Section 4'. The non obstante clause is generally appended to a section with a view to give the enacting part of the section, in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non obstante clause. It is equivalent to saying that in respect of the provisions of the Act mentioned in the non obstante clause, the provision following it will have its full operation, or the provisions of embraced in the non obstante clause will not be an impediment for the operation of the enactment of the provision in which the non obstante clause occurs. The Hon'ble High Court of Andhra Pradesh in the case of Tirupati Udyog Ltd. v. Union of India - 2011 (272) E.L.T. 209 (AP) inter alia held that non obstante clause is a legislative device to give overriding effect to certain provisions over some contrary provisions found either in the same or some other enactment.
29.1.1 Therefore, once the goods are specified under Section 4A(1) and there is a statutory requirement to declare RSP on the retail sale packages of the goods, the question of application of Section 4 would not arise at all. In the present case, there is no dispute on the fact that on the retail packages the appellant-manufacturers were required to declare the RSPs and the goods were also notified under the provisions of Section 4A(1). If that be so, it cannot be contended that the valuation of the goods have to be done under Section 4 of the Act and not under Section 4A. Thus, there is a contradiction in the findings and conclusions drawn by the learned Member (Judicial) that prior to 1-3-2008 the goods were liable to be assessed for excise duty purposes under Section 4 of the Act and not under Section 4A.
29.2 The next question for consideration is whether for the period prior to 1-3-2008, the maximum retail price of the impugned goods can be determined by the assessing officer using reasonable/best judgment method based on the materials available and consistent with the provisions of Section 4A of the Central Excise Act, 1944, in the absence of a machinery provision available for determination of the MRP of the product.
29.2.1 There is no dispute that the Central Government acquired the powers to ascertain in the prescribed manner the retail sale price of such goods and the retail sale price so ascertained shall be deemed to be retail sale price for the purpose of the Section vide Finance Act, 2003 which substituted sub- section (4) of Section 4A. The rules were notified only w.e.f. 1-3-2008. The
12 | P a g e question is, prior to 1-3-2008 whether the provisions of the said Rules could be applied for determination of RSP using the best judgment method. 29.2.2 The provisions of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 reads as follows :
"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 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, -
(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 :
13 | P a g e Provided that if more than one retail 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 retail 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."
29.2.3 If one carefully goes through the provisions of Section 4A and the Rules, 2008 cited above, it can be seen that there is no determination of RSP envisaged in the legal provisions. The declaration of RSP is mandated by the provisions of the Packaged Commodities Rules and the Standards of Weights and Measures Act and RSP by definition is 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, all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale.
Neither the Standards of Weights and Measures Act nor the Rules made thereunder provides for determination of RSP. It merely defines what RSP is. Since the declaration of RSP is mandated by the Standards of Weights and Measures Act or the Rules made thereunder, Excise law cannot prescribe a method for determination of RSP since the declaration of RSP is not mandated by the Central Excise law. Therefore, what is provided under the Central Excise law is only the ascertainment of the RSP as against determination of RSP. If one carefully reads the Rules, 2008, it can be seen that, it applies only to a limited situation where the manufacturer or a packer does not declare the RSP at the time of removal of the excisable goods from the factory or tampers or obliterates the RSP declared subsequent to such removal. In such a situation, the Rules provide for ascertainment of RSP. This rule, by its very nature, applies and applies only to the assessing officer. It does not apply to the manufacturer or the packer. In other words, though it is called rules, the Rules, 2008 is in effect and in fact a guideline for ascertaining the RSP in a situation where a manufacturer/packer does not declare the RSP or tampers with or obliterates the RSP already declared subsequent to the removal of the goods. In other words, the Rules is only directory in nature and the said rules also provide that if the RSP cannot be ascertained by following the methods therein, then the same can be ascertained in accordance with the principles and provisions of Section 4A and the Rules aforesaid. In other words, it provides for ascertainment of RSP by using reasonable and fair means consistent with the provisions. 14 | P a g e 29.2.4 RSP is defined in Explanation - I to Section 4A. Thus, what RSP is clearly indicated in the Act and what the Rules purport to do is, how to ascertain the RSP. In other words, the ascertainment of RSP is purely procedural in nature.
29.2.5 A similar issue came up for consideration before the Hon'ble Apex Court in the case of C.W.T v. Sharvan Kumar Swarup & Sons - 1994 SCC (6)
623. The question before the Apex Court was whether Rule 1BB of the Wealth-tax Rules, 1957 is a provision which affects and alters the substantive rights or is merely procedural and whether the Rules is attracted to all the proceedings pending at its enactment. The said Rule 1BB was concerned with mode of valuation of a house property wholly or mainly used for residential purposes, for the purposes of ascertaining the net wealth under the Wealth-tax Act, 1957. The Hon'ble Apex Court in that context held as follows :
"10. The basis of distinction between statutes affecting rights and those affecting merely procedure is well-recognised. Dixon, C.J. in Maxwell v. Murphy drawing upon the following words of Lord Justice Mellish in Republic of Costa Rica v. Erlanger said :
"No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done."
It is true that if one traces any substantive right back far enough it will be found secreted in the interstices of procedure.
11. In W.H. Cockerline & Co. v. IRC 10, Lord Hanworth quoted with approval a following passage from the judgment of Sargent, L.J. :
"The liability is imposed by the charging section, namely, Section 38 the words of which are clear. The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and when quantified to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately."
12. In, Halsbury's Laws of England (Fourth Edn., Vol. 23, para 29), referring to the machinery provisions it is stated :
"It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed."
13. The distinction between substantive law and procedural provisions has been indicated in Black's Law Dictionary (Sixth Edn., p. 1203) as follows :
"As a general rule, laws which fix duties, establish rights and responsibilities among and for persons, natural or otherwise, are 'substantive laws' in character, while those which merely prescribe the manner in which such rights and responsibilities may be exercised and enforced in a court are 'procedural laws'."
14. In Salmond's Jurisprudence (Twelfth Edn., p. 462), the distinction between substantive law and law of procedure is indicated in the following words :
15 | P a g e "What, then, is the true nature of the distinction? The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions - jus quod ad actiones pertinet - using the term action in a wide sense to include all legal proceedings, civil or criminal. All the residue is substantive law, and relates, not to the process of litigation, but to its purposes and subject matter. Substantive law is concerned with the ends which the administration of justice seeks. Procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated.
'... What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure. '... So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other.'"
29.2.6 The Hon'ble Apex Court further held that :
"a distinction has to be made by Court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated."
Accordingly, it was held that, Rule 1BB which merely provides a mode of valuation is procedural in nature and, therefore, can be applied retrospectively in respect of matters pending.
29.2.7 When we apply the ratio of this decision to the facts of the present case, it can be easily seen that the provisions of the Rules, 2008 are entirely procedural in nature and therefore, it is retrospective in nature, can be applied to all proceedings which are pending or which arise after the rule has been introduced.
29.2.8 In the present case, the charging section is Section 3 of the Central Excise Act and the rate of tax is prescribed in the Schedule to the Central Excise Tariff Act, 1985. The value for the purpose of assessment is the retail sale price as defined in the Explanation 1 to Section 4A of the Act. Thus, the taxable event, the rate of tax, the measure of the tax and the person liable to pay tax are separately provided for in the various provisions of the Central Excise Act, 1944 and the Rules made thereunder. Rules, 2008 apply only to a limited situation where the manufacturer fails to declare the RSP or tampers with or obliterates the RSP already declared. Therefore, the provisions are merely procedural and directory in nature and hence has retrospective operation.
29.2.9 The reliance placed by the appellants on the cases of Consumer Online Foundation (supra), Mohammad Hussain Gulam Mohammad (supra), Dhrangadhra Chemical Works Ltd. - (1973) 2 SCC 345 do not help the case of the appellants. In the Consumer Online Foundation (supra) the basic issue was levy of user development fee by the Airport Authority at a rate as may be prescribed by the Rules. Inasmuch as the rules were not framed, the Apex 16 | P a g e Court held that the levy was ultra vires. The rate of tax is a core part of the tax system and is substantive in nature and it was in that context, the levy was held ultra vires when the rules for fixing the rates were not framed. Similarly, in the case of Mohammad Hussain Gulam Mohammad (supra), the question before the Court was whether APMC should have levied market cess when the levy was subject to the maximum to be provided for in the Rules. However, the rules did not provide for the maximum and, therefore, it was held that the levy was ultra vires. There again, the question was the rate of cess and what should be the maximum rate. In the absence of a maximum rate prescribed under the rules, it was held that the levy was ultra vires. Similarly, in the case of Dhrangadhra Chemical Works Ltd. (supra), the issue was whether the Municipality could levy enhanced octroi. The law in that case mandated that there should be a resolution and rules specifying the class or class of persons who is liable to pay tax and the amount of rate at which the tax should be collected. However, no rules were framed and hence it was held that the levy was ultra vires. In other words, in this case also the person liable to pay tax and the rate of tax was the issue. Since these elements are core of the tax system and are substantive in nature, the levy was held to be illegal in the absence of proper prescription. That is not the case before me. 29.2.10 In the present case, the charging section provides for the levy, the rate of tax is specified in the schedule, the person liable to pay the tax is the manufacturer of the goods under Rule 4 of the Central Excise Rules, 2002 and the measure of tax is defined under Section 4A. Thus, all the core ingredients of the tax system is specified in the law. The Rules 2008 merely provides for ascertainment of the measure of tax in a situation where it is not declared. Therefore, the ratio of these decisions has no application whatsoever to the facts of the present case and the arguments raised by the appellants in this regard have to be rejected. In view of the above, I hold that the demand for the period prior to 1-3-2008 and after 14-5-2003 when the Government acquired the power to frame the Rules is sustainable as MRP of the product can be determined by using reasonable means. 29.2.11 There is one more reason, why it should be so? The Hon'ble Apex Court in the case of Assistant Collector of Central Excise v. National Tobacco Co. of India Ltd. [AIR 1972 SC 2563 = 1978 (2) E.L.T. J416 (S.C.)] held that, in a situation where no assessment took place for the reason of non- ascertainment of duty due to deficiency in quasi-judicial procedure, it can be made good with the use of the implied power in conjunction with the established rule of construction that power to do something essential for the proper and effectual performance of the work which the statute has in contemplation may be implied. It was held in that case that the basic principle is that the Courts must endeavour to ascertain the legislative intent and purpose, and then adopt a rule of construction which effectuates rather than one that may defeat these. The purpose of introduction of Section 4A was to enable assessment of certain class of goods to duty on the basis of retail sale price declared on the packages which was a statutory requirement under the Standards of Weights and Measures Act or the Rules made thereunder or under any other law. Thus the legislative intention is crystal clear. Merely because an errant/defiant manufacturer fails to declare the RSP in gross contravention of the law, it cannot be held that the executive is powerless to deal with the matter and has to be a helpless spectator. 29.2.12 A somewhat similar issue arose for consideration before the Hon'ble High Court of Gujarat in the case of Rupani Spinning Mills Pvt. Ltd. (supra). The question was, in the absence of specific rules providing for mutilation of the goods imported, whether the Customs can direct mutilation. The Hon'ble High Court of Gujarat held as follows :
17 | P a g e "Section 24 of the Customs Act provides the clue thereto. Under that provision the Central Government is empowered to make rules for permitting at the request of the owner mutilation of imported goods so as to render them unfit for use for a purpose other than the one for which they are imported.
This is an enabling provision which indicates that Parliament had conceived of a situation where further mutilation on import may be necessary to render the material unfit for use for a purpose other than the one for which the same was imported. In the absence of rules and till such rules are framed, the spirit underlying this provision can be invoked by directing the customs authorities to permit further mutilation on import before clearance." 29.2.13 If we apply the ratio of this decision to the facts of the present case. Section 4A(4) enables the Government to frame rules for ascertaining the RSP. Section 4A(2) deems the value for the purpose of assessment of excise duty as the retail sale price declared on the packages of the goods minus the abatement. Therefore, even if in a situation the retail sale price are not so declared, it would be permissible to adopt any fair and reasonable means to ascertain the RSP so long as it is consistent with the provisions of Section 4A. A similar view was taken by the Hon'ble High Court of Delhi in the case of Great Eastern Shipping Co. Ltd. v. Union of India - 2002 (150) E.L.T. 1403 (Del.) where a question arose whether in the absence of any rules providing for certain set of precautions, is it possible to direct confiscation of the vessel under sub-section (2) of Section 115 of the Customs Act. The Hon'ble Delhi High Court held that in the facts and circumstances of the case, wherein the vessel was found to indulge in smuggling of contraband goods, it would be sufficient to bring it under the purview of Section 115(2) enabling confiscation even in the absence of rules providing for certain set of precautions. The same view was held by the Hon'ble Madras High Court in the case of Shipping Corporation of India Ltd. v. Commissioner of Customs, Madras - 1998 (98) E.L.T. 78 (Mad.), the Hon'ble High Court of Karnataka in the case of Inspector v. S.T. Venkatramappa - 1986 (24) E.L.T. 484 (Kar.) held that a machinery provision in a fiscal statute should be so interpreted as to make the charging provision of that statute effective. Again in Associated Cement Co. Ltd. v. Commercial Tax Officer - AIR 1981 SC 1887 it was held that :
"It is settled law that a distinction has to be made by Court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The Courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated."
The Hon'ble Apex Court in the case of ITW Signode India Ltd. v. Collector of Central Excise - 2003 (158) E.L.T. 403 (S.C.) held that -
"A retrospective effect indisputably can be given in case of curative and validating statute. In fact curative statutes by their very nature are intended to operate upon and affect past transaction having regard to the fact that they operate on conditions already existing."
Rules 2008 is a curative provision to deal with a situation where the RSP is not declared or tampered with. Therefore, it is retrospective in nature. 29.2.14 In the light of these decisions, there is absolutely no doubt that the MRP of the product can be ascertained by the assessing officer using reasonable/best judgment means based on the material available and 18 | P a g e consistent with the principles and the provisions of Section 4A of the Central Excise Act, 1944 even if rules for ascertainment of the same were not framed earlier and came about later. I answer the reference accordingly." 6.3 It can be seen that the question has been answered without reffering to any specific facts of the said case, treating it as a pure question of law. The decision of tribunal in case of Suzuki (Supra) differentiates this deision on the ground that the facts are different. In para 11 of the said decision following has been observed
11. Without dwelling into any further details, on perusal of the records and after considering the submissions made before us, we find that the entire cases were outcome of a common investigation and various show cause notices were issued. Few of the show cause notices got adjudicated and were contested before the Tribunal in the case of Acme Ceramics & Others (supra). We are of the clear view that the issue involved in all these appeals as filed by the appellant-assessees as well as the Revenue are squarely covered by the ratio laid down in the case of Acme Ceramics & Others (supra). We do not find any reason to deviate from such a view already taken as ld. Counsel are correct in bringing to our notice that in the case of Schneider Electricals (India) Pvt. Ltd. & Others (supra), the factual position as seen from the order (See Para 29.2.3, 29.2.8, 29.2.11) the facts are that the manufactures therein either did not declare the RSP on the package as was statutorily required and the RSP was either tampered or altered or obliterated. In a situation like there being tampering, the view taken by the Bench in the case of Schneider Electricals (India) Ltd. (supra), may not be applicable in the cases in hand wherein such an allegation is absent nor there are any finding to that effect. Be that as it may, the majority decision of the Tribunal is stayed by the Hon'ble High Court of Bombay. Hence, the said decision of the Tribunal cannot be considered as a precedent judgment.
It is seen that the core question in dispute in both the cases, ACME as well as SCHNEIDER ELECTRICAL INDIA (P) LTD, was a pure question of law. The question being if it is permissible for revenue to ascertain RSP in case of in situations envisaged in subsection 4A(4) prior to 1.3.2008. Essentially the relevant facts are common in both the cases, i.e ACME (Supra) and SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). In both the cases the power of Revenue to ascertain RSP was tested for period prior to 1.3.2008, in cases where situation envisaged in subsection (4) of the section 4A of CEA 1944 arose. In these circumstances individual facts of the case cannot be treated as different so long as in both the cases, admittedly, the situation envisaged in subsection 4A(4) has arisen. In both the cases, ACME (Supra) and SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), it is 19 | P a g e admitted that on facts a situation envisaged in subsection 4A(4) has arisen and in that circumstances the power of authorities to ascertain RSP has been challenged. In the case of ACME (Supra) it has been held that revenue does not have power to ascertain RSP in situation envisaged in subsection 4A(4) prior to issue of notification 13/2008-CE (NT) dated 1.3.2008. In the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (supra) it has been held that revenue has the power to ascertain RSP in situation envisaged in subsection 4A(4) even prior to issue of notification 13/2008-CE (NT) dated 1.3.2008. These are different decisions of Tribunal in identical facts. The decision of tribunal in case of Suzuki (Supra) is therefore per incuriam in so far as it differentiates on facts between the decisions of tribunal in the cases of ACME (Supra) and SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) when the relevant facts are identical.
6.4 Thus there are two diametrically opposite decisions of tribunal, one in case of ACME (Supra) and another in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). In both a situation envisaged in subsection 4A(4) has arisen necessitating ascertainment of RSP. The issue regarding power of revenue to ascertain RSP by adopting reasonable means consistent with relevant provisions, has been adjudged in exactly opposite manner. While in the case of ACME (Supra) it is held that revenue cannot ascertain RSP for clearances prior to 1.3.2008, in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) it is held that revenue can ascertain RSP using any reasonable/best judgment means based upon material available and consistent with principles and provisions of Section 4A of the Central Excise Act, 1944. In case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) the decision even suggests that the Central Excise 20 | P a g e (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 have retrospective application as they are procedural and directory in nature.
6.5 The argument of the revenue is that when decisions in the bunch of cases decided by the decisions reported in case of Suzuki Ceramics (Supra) and in case of ACME(supra) were given there was no contrary decision of Tribunal on the issue. The argument of the revenue is that at the time of the decision in case of ACME (Supra), the final decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) was not available. At the said time the matter in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD was pending at the stage where the difference of opinion between the two members was referred to the third member. Therefore the bench in the case of ACME did not give any weightage to the observations made by member in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). The tribunal in the case of Suzuki Ceramics (Supra) did not consider the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) as there was a stay on the operation of said order by Hon High Court of Bombay. Ld AR pointed out that the stay on the order of tribunal in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD has been lifted and the matter is now pending in Ho'ble Apex court. Thus the argument that there are contrary decisions of tribunal on this issue, one in the case of ACME (Supra) and other in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) and therefore matter needs to be referred to the Larger Bench has significant force.
7 In the case of ACME (Supra) the following has also been observed 21 | P a g e
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 in Section 2(f) of the Act (hereinbefore 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 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; inasmuch 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 redetermined RSP, for the period prior to 1-3-2008. It is seen that the proposition is that if the dealers have altered the RSP then the liability should be on the dealers. We respectfully disagree with the proposition. It ignores the evidence that the money in cash was flowing back to the appellants in the said cases. The entire conspiracy/ fraud / modus operandi was organized by the appellants in those cases. Alteration in the RSP too was being done at the behest of the appellants in the said cases. The section 2(f) read as follows Section 2. Definitions. - In this Act, unless there is anything repugnant in the subject or context, -
(f) "manufacture" includes any process -
(i) incidental or ancillary to the completion of a manufactured product, 22 | P a g e
(ii) 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
(iii) 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;
In the facts of the case, the evidence suggests that the entire modus operandi was being controlled by appellants in the said case and therefore the RSP was being changed at the behest and on behalf of the appellants in the said case. Thus the appellants were the deemed manufacturers under section 2(f) even in respect of the activity of RSP manipulations was physically done on their behalf by anybody else. It is seen that in the case of in the case of A.V. Papayya Sastry and Others v. Govt. of A.P. and Others, reported in (2007) 4 Supreme Court Cases 221, Hon Apex Court observed as under:-
"26. Fraud may be defined as an act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. The principle of 'finality of litigation' cannot be stretched to the extent of an absurdity that it can be utilized as an engine of oppression by dishonest and fraudulent litigants.
In the instant case the entire alleged modus operandi involved elaborate operation of misdeclaring RSP by suppressing costs and selling at higher RSP and recovering their share of profit in cash through an elaborate network of angadias, shroffs and personal representatives. Thus all the alteration of RSP happened at the behest of appellants in that case and therefore they remained the manufacturers.
23 | P a g e 8 Moreover, in the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 have been notified. In the said rule the Retail Package, Retail Sale and Retail Sale Price has been defined as under:
* (p) 'retail package' means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages :
Provided that for the purposes of this clause, the expression 'ultimate consumer' shall not include industrial or institutional consumers.
(q)'retail sale', in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer.
(r)'retail sale price' means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on the package, there shall be printed on the packages the words ['Maximum or Max. retail price......inclusive of all taxes or in the form MRP Rs.........incl., of all taxes.']* Explanation: For the purposes of the clause 'maximum price' in relation to any commodity in packaged form shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing forwarding and the like, as the case may be;
Section 4A of the Central Excise Act also defines the Retail Sale Price in Explanation 1 of the said Section as follows:
"For the purpose of this section, 'retail sale price' means the maximum price at which the excisable goods in package form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealer, 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 of provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retails sale price excluding any taxes local or otherwise, the retail sale price shall be construed accordingly."
A comparison of the definitions of RSP in Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and in Central Excise Act, 1944, shows that they are different in one important aspect. While the Central Excise Act, 1944 prescribes that in RSP 'the price is the 24 | P a g e sole consideration for such sale' the definitions under Standards of Weights and Measures (Packaged Commodities) Rules, 1977 do not have such prescription. In the instant case there are allegations of price not being the sole consideration and cash being received by the manufacturers. While subsection 4A(4) of CEA, 1944, provides for a situation when there is violation of provisions of the Act, rules or other law as referred to in sub-section (1). In sub-section (1) the provisions mentioned are the provisions which require declaration of price on such goods, i.e. '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'.
In the instant case apart from violation of above provisions there is violation of declaraed RSP under CEA, 1944, in so far as the price is the not the sole consideration for such sale. In the instant case the price is not the sole consideration of sale and therefore there is violation of CEA, 1944, also apart from the provision listed in sub section 4A(1). Restriction mentioned in the sub-section 4A(4) regarding prescription of the manner of determination of RSP only when there is violation of provisions listed in sub-section 4A(1) only. Those restrictions apply only when RSP is not in conformity with the provisions mentioned in Sub-Section 4A(1). Section 4A of CEA, 1944, is not a provision of law that requires affixing of RSP as per sub- section 4A(1), but it is a provision of law that determines duty on the basis of RSP. In the present case the allegation is that the RSP was increased after clearance from the factory and price was not the sole consideration for sale. In these circumstances the specific provision of clause (b) of to section 4A comes into effect. It provides that Expanation2: - For the purposes of this section,-
25 | P a g e
(a) --
(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;
This provision is specifically applicable to the situation and it is independent of the sub-section 4A(4) of CEA, 1944. 9 In view of above this matter may be placed before the Hon'ble President for constitution of a larger bench to examine the following questions of law
1) In the facts and circumstances of the case and in view of the contrary precedent decisions of tribunal in the cases of ACME (Supra) and in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), is it permissible to ascertain RSP for the purpose of assessment under Section 4A of CEA, 1944, in respect of clearances made prior to issue of notification 13/2008-CE(NT) dated 1-3-2008 ?
2) If yes, can it be done by using best judgment method, based upon material available and in a manner consistent with principles and provisions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 ?
(Pronounced in the open court on 10/01/2019)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Neha