Custom, Excise & Service Tax Tribunal
M/S. Hotline Electronics Ltd vs Cce, Noida on 1 August, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH, NEW DELHI.
Date of hearing:01.08.2012
Date of Decision:03.12.2012
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
Excise Appeal No.E/1432 of 2005
(Arising out of Order-in-Appeal No.04-CE/APPL/NOIDA/05 dated 20.01.2005 of the Commissioner of Central Excise (Appeals), Noida).
M/s. Hotline Electronics Ltd. Appellant
Vs.
CCE, Noida Respondent
Coram : Honble Justice Shri Ajit Bharihoke, President Honble Shri Rakesh Kumar, Member (Technical) Appearance: Shri B.L. Narsimahan, Advocate for the appellant.
Shri Sanjay Jain, Joint CDR for the respondent. Order No. .
Per Rakesh Kumar:
The facts leading to this appeal are, in brief, as under:-
1.1 The appellant during the period of dispute i.e. period from Feb.2003 to March, 2003, manufactured VCD players and also different models of colour T.V. sets. Both these items were chargeable to duty on the value determined under Section 4A on the basis of the MRP declared on their packages. The appellant during this period cleared combination packs of certain models of CTVs along with VCD players, the VCD being given free along with those models of CTVs. The duty was paid by the appellant on the value determined on the basis of MRP of the combo pack of the CTVs along with VCD players. The Department was of the view that since the VCD players had been given as free on sale of certain models of CTVs, the MRP of the combo pack of the CTVs and the VCD players was the MRP of CTVs only and as such, the VCD had been cleared without payment of duty. On this basis, the department issued two show cause notices dated 31.3.2004 and 8.4.2.2004 for demand of duty amounting to Rs.22,10,992/- and Rs.8,33,644/- respectively in respect of the clearances of the 4356 and 1567 VCDs respectively. The assessable value for calculation of the duty on the VCDs cleared was determined on the basis of MRP of the VCDs ascertained by the department, as no MRP had been declared by the appellant in respect of the VCDs. These show cause notices was adjudicated by a common order No.46-47/ADDL/COM/04 dated 31.08.2000 passed by the Addl. Commissioner by which he confirmed the duty demands of Rs.22,10,992/- and Rs.8,33,644/- along with interest under Section 11 AB and besides this, also imposed penalty of equal amount on the appellant under Section 11 AC of the Central Excise Act, 1944. The duty demands were confirmed by invoking extended period of limitation to Section 11 A(1) of the Central Excise Act.
1.2 The appellant filed appeals to the Commissioner (Appeals) against this order of the Addl. Commissioner, which were decided by the common order-in-appeal dated 20.01.2005 by which the Commissioner (Appeals) upheld the duty demands along with interest. He, however, reduced the penalty to Rs. 3Lakhs. Against this order of the Commissioner (Appeals), this appeal has been filed.
2. Heard both the sides.
3. Shri B.L. Narsimhan, ld. counsel for the appellant, pleaded that the issue involved in this appeal is as to whether VCD players manufactured and cleared by the appellant to be given free along with certain models of CTVs, also manufactured by the appellant, are chargeable to duty separately, when the duty has been paid in respect of the combo pack of the CTVs with the VCD players on the value determined on the basis of the MRP of the combo pack, that the MRP of the combo pack is the MRP of both the CTV and the VCD player, that when duty has been paid in respect of clearances of the combo pack of CTVs with the VCD players, on the assessable value determined on the basis of the MRP of the combo pack, no separate duty is required to be paid on the clearances of the VCD players, that both the products have been cleared as a combination pack and mere fact that both the products were not in one package, though were individually packed, does not mean that the same would cease to be combination pack, when MRP had been declared for the combo pack of CTV with VCD player, that when two products manufactured by a manufacturer, both of them notified under Section 4 A, are cleared as a combination pack on a combined MRP, in accordance with the judgement of the Tribunal in the Millenium Appliances India Ltd. Vs. CCE reported in 2009 (248) ELT 713, duty is payable on the value determined on the basis of combined MRP and not the sum of the MRPs of both the products, even though the MRP of the combination pack may be less than the sum of the MRPs of the individual products, that the Tribunal in the case of Surya Food and Agro Ltd. reported in 2003 (156) ELT 488 (Tribunal) has held that when a manufacturer who supplies particular units of excisable goods along with certain articles stated to be gift articles without charging separate amount for the same, the manufacturer would not meet the cost from his pocket and he would include the cost of the gift or bonus article in the cost structure of the excisable goods delivered and the value of the articles supplied as free gift is not required to be included in the value of the excisable goods sold, that ratio of this judgement is squarely applicable to the facts of this case and, therefore, the value of the VCD players is deemed to be included in the value of the CTVs and hence no separate duty is required to be charged on the value of the VCD players sold as free gift along with CTVs, that the Tribunal in the case of Vinayaka Mosquito Coil Mfg. Co. Vs. CCE, Bangalore, reported in 2004 (174) ELT 107 (Tribunal-Bang.), as affirmed by the Apex Courts judgement reported in 2005 (181) ELT A-183, has held that when one coil is supplied free along with sale of every 12 mosquito coil, the value of the one mosquito coil supplied free is not required to be included in the assessable value of the mosquito coils cleared, that VCD players are chargeable to the duty under Section 4 A on the basis of MRP and since the VCD players had been cleared free alongwith certain models of CTVs, their MRP is nil, and ,therefore, their assessable value also become nil and hence no duty would be payable in respect of the same, that in any case, calculation of duty is incorrect as the department has adopted the price of Rs.3325/- as MRP in respect of each VCD which was prevailing price in the year 2001, while in 2003, the price of VCDs had drastically come down, that another serious mistake in calculation of duty is that duty has been charged on the MRP of Rs.3325/- without any abatement, that at the worst, the MRP of the VCD supplied free along with CTVs can be taken Rs.2500/- per piece in 2003 and after 40% abatement, the assessable value would come to Rs.1500/- per piece and the duty demand would get reduced to Rs.35520, that in the circumstance of the case, no penalty was imposable on the appellant and that in view of the above, the impugned order is not sustainable.
4. Shri Sanjay Jain, ld. Departmental Representative defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that in this case, both the CTVs and VCD players had been manufactured by the appellant, that admittedly, VCD players had been supplied free on sale of certain modals of CTVs, that in view of this factual position, the MRP declared in respect of the CTVs is the MRP of CTVs only and cannot be treated as combined MRP of both the CTVs and VCD players, that even if the VCD had been supplied free, duty would be chargeable on the same and since the MRP was not declared, the department has correctly taken the same as Rs.3325/- per VCD, that the Tribunal in the case of G.S Enterprises reported in 2002 (144) ELT 387 (T), where a combo pack of 5 blades and one razor [razor manufactured by M/s.G.S. Enterprises and blades manufactured and supplied by Indian Shaving Products Ld. (ISPL)] had been cleared for retail sale at MRP of Rs.23/- (MRP being for 5 blades with one razor supplied free), has held that the razor being supplied free along with 5 blades would be chargeable to duty by taking its MRP as Rs.10/- as ISPL were selling the razor with MRP of Rs.10/- that this judgement of the Tribunal has been affirmed by the Apex Court affirmed by the Apex Court vide judgement reported in 2003 (15J) ELT 297, that the ratio of this judgement, as affirmed by the Apex Court, is squarely applicable to the facts of this case and, therefore, the duty has been correctly demanded in respect of the clearances of VCD players. He, therefore, pleaded that the confirmation of the duty demand and imposition of penalty on the appellant has been correctly upheld.
5. We have considered the submissions from both the sides and perused the records. The undisputed facts are that the appellant manufactured various models of CTVs as well as VCD players and in respect of certain models of CTVs, to promote their sale, the VCDs had been supplied free and MRP displayed for such CTVs was for sale with one VCD being supplied free. It is an admitted position on the part of the appellant that nothing has been charged from the customers for the VCD players supplied along with certain models of CTVs and the only consideration for giving free VCD player is promoting the sale of CTVs. The point of dispute is as to whether as pleaded by the Appellant, the value of the VCDs cleared is deemed to be included in the MRP of the CTVs with which those VCDs had been supplied free and accordingly, the MRP declared in respect of those CTVs is to be treated as combined MRP of the CTVs and VCD players and accordingly duty is not required to be charged separately on VCDs or whether, as pleaded by the Department, duty is to be charged on VCD. The appellants contention is that this has to be treated as a case where the CTV and the VCD players were sold in combination under a combined MRP and, hence, in view of the judgement of the Tribunal in the case of Millenium Appliances India Ltd. (supra) no duty is required to be charged separately on the assessable value of the VCD players determined on the basis of their ascertained MRP.
6. In the case of Millenium Appliances (supra), the assessee was manufacturing refrigerators and microwave ovens, both of these products were notified under Section 4 A of the Central Excise Act, 1944 and for both of these products separate MRPs had been declared. However, under a particular sale promotion scheme, the assessee during certain period, sold certain models of refrigerators along with microwave ovens under a combined MRP, which was less than the sum of individual MRPs of Refrigerators and the Microwave ovens. There was no claim that microwave oven was being supplied free on sale of refrigeration. In these circumstances, the Tribunal held that the duty on the combined sale of refrigerator along with microwave oven is to be charged on the assessable value determined on the basis of their combined MRP and not on the basis of their separate MRPs. In our view, irrespective of the correctness or otherwise of the Tribunals judgement in case of Millenium Appliances (supra), the ratio of this judgement of the Tribunal is is not applicable to the facts of this case as, in this case the VCD players had been supplied free on sale of certain models of CTVs. In such circumstances, it would not be correct to conclude that that the value of the VCD players is included in the value of the CTVs. When the appellant have manufactured VCD players, the duty would be chargeable at the time of their clearances irrespective of whether the same are cleared as such or are cleared along with CTV sets and irrespective of whether the same are cleared on sale or are cleared as free supply to be given as free gift alongwith sale of certain models of CTVs. For example, duty is charged on physicians samples cleared by a manufacturer even though, the same are meant for price distribution among physicians for promoting the sale of the medicines. While the price of CTV is not required to be loaded with the price of VCD supplied free, as the sales consideration for any goods sold is what flows from the buyer to the seller and not from seller to the buyer, this cannot be the reason for not charging duty on the item supplied free, if the free supply item has also been manufactured by the same manufacturer. The issue of levy of duty under Section 3 of the Central Excise Act, 1944 on the clearance of the goods manufactured by an assessee cannot be mixed with the issue of valuation under Section 4 or 4A. Therefore, the question of levy of duty on the VCDs manufactured and cleared by the appellant has nothing to do with the question whether or not the value of VCD supplied free, is deemed to be included in the value of CTVs with which the same had been cleared. The Appellants contention that MRP of the VCD is to be taken as nil and on this basis, the duty chargeable would be nil, is totally incorrect, as admittedly, the consideration for supply of VCD free is promoting the sale of certain models of CTV, while as per the definition of retail sale price in Explanation-I to Section 4A, the retail sale price must satisfy the condition of the price being the sole consideration for sale. Therefore, when a product A notified under Section 4 A is supplied free (nil price) or at RSP less than the RSP at which the product is individually sold, for being sold in combination with another product B, also notified under Section 4 A, with the objective of promoting the sale of the product B, the nil or lesser RSP of product A for its sale in combination with product B can not be said to be its correct RSP for the purpose of determining its assessable value under Section 4 A. Therefore, the MRP of the VCD can not be taken as nil.
7. In the case of G.S. Enterprises Vs. CCE (supra), M/s. G.S. Enterprises were manufacturing Presto razors on job work basis for Indian Shaving Product Ltd. (ISPL), out of the components supplied by ISPL and besides this, they were also packing on job work basis, the razors so manufactured, with a set of 5 blades also supplied by ISPL, whose combo MRP declared was Rs.23/- . The Tribunal in this case has held that even though the razors were cleared in a combination pack along with 5 blades and Rs.23/-per pack declared was the MRP of the combo pack, duty would be chargeable on the presto razors by adopting its MRP as Rs.10/-, as this was the MRP of the razors, when the same were being sold by ISPL individually packed. This judgement of the Tribunal has been affirmed by the Apex Court vide judgement reported in 2003(151) ELT A-297. We are of the view that the ratio of this judgement of the Tribunal, affirmed by the Apex Court, is squarely applicable to the facts of this case. Hence, in view of the facts of this case, the MRP declared by the appellant has to be treated as MRP of the CTVs only and not the combined MRP of the CTV and the VCD players supplied free and the duty would be chargeable separately on the VCD players. Since during the period of dispute the MRP of the VCD were not available, the same has to be ascertained by adopting a reasonable criteria.
8. However, we find merit in the appellants plea that the department has adopted the MRP of Rs.3325/- per piece in respect of VCDs which admittedly was the MRP in 2001 while during 2003, there was drastic reduction in the prices of this item and also that no abatement has been given from the MRP of Rs.3325 adopted by the Department. According to the appellant, reasonable MRP of the VCD during the period of dispute would be around Rs.2500/- and after 40% abatement, the assessable value would come to Rs.1500/- per piece while the duty has been charged on the assessable value of Rs.3325/- per piece. We are agree with the plea of the appellant that MRP of VCD prevailing during 2003 must be adopted and assessable value must be determined after 40% abatement from the MRP. The Appellants plea that during the period of dispute, the MRP of the VCDs, in question, was Rs.2500/- per piece should, therefore, be examined and a specific finding on this point should be given. Besides this, whatever MRP is adopted, duty is to be charged after giving 40% abatement. The duty on the clearances of VCDs is to be requantified in this manner. However, for requantification of the duty demand, the matter would have to be remanded to the Original adjudicating authority.
9. As regards the question of penalty, since the VCD players were cleared without discharging duty liability, penalty under Rule 25 (1)(a) would be attracted. However, the same would be in proportion of the quantum of the duty demand confirmed against the appellant.
10. In view of the above discussion, we hold that duty would be chargeable on the clearances of VCD players cleared for free supply along with sale of certain models of CTVs and this duty has to be charged on the basis of the assessable value determined in terms of the provisions of Section 4 A i.e. after giving the abatement from MRP of the VCD player during this period. Since there was no MRP of VCD during the period of dispute, the same has to be determined on the basis of some reasonable criteria and in this regard, the MRP prevailing in 2001 cannot be adopted.
10.1 The impugned order is, therefore, set aside and the matter is remanded back to the original adjudicating authority for de novo decision for re-quatification of the duty demand in accordance with our above observations and also re-determination of the quantum of penalty imposable under Rule 25(1)(a) of the Central Excise Act, which would be in proportion to the quantum of duty demand confirmed against the appellant. Appeals stand disposed of as above.
[order pronounced on 3.12.2012 ] ( Justice Ajit Bharihoke ) President ( Rakesh Kumar ) Ckp. Member (Technical) 13