Acer India P Ltd vs Commissioner Of Customs (Ii), Chennai on 8 May, 2024

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Custom, Excise & Service Tax Tribunal

Acer India P Ltd vs Commissioner Of Customs (Ii), Chennai on 8 May, 2024

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI

REGIONAL BENCH - COURT No. III

Customs Appeal No. 41786 of 2019

[Arising out of Order-in-Original No. 67498/2019 dated 13.02.2019 passed by Commissioner
of Customs (Audit), Chennai, Custom House, No. 60, Rajaji Salai, Chennai - 600 001]

M/s. Acer India (Pvt.) Ltd., ...Appellant
Embassi Heights, 6th Floor,
No. 13, Magrath Road,
Bangalore - 560 025.

VERSUS

Commissioner of Customs (Audit) ...Respondent
No. 60, Rajaji Salai,
Custom House,
Chennai - 600 001.

APPEARANCE:

For the Appellant : Shri V. Lakshmi Kumaran, Senior Advocate
Shri Anurag Kapur, Advocate
Shri Rohan Muralidharan, Advocate
Shri S. Ganesh Aravindh, Advocate

For the Respondent : Shri P. Narasimha Rao, Commissioner,
Authorised Representative.

CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)

FINAL ORDER No.40534/2024

DATE OF HEARING : 23.02.2024
DATE OF DECISION : 08.05.2024

Per : Ms. Sulekha Beevi C.S.

Brief facts are that the appellant has been importing and clearing
notebook / laptop computers and supplying the same to M/s. Electronics
Corporation of Tamil Nadu Ltd. (herein after referred to as 'ELCOT') and
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Customs Appeal No.41786 of 2019

other state Government agencies for free distribution to students. On
specific intelligence that the appellant has been suppressing the actual sale
price by mis-declaring the MRP to evade Customs duty (CVD), officers of
SIIB conducted inspection of the goods stored at warehouse of the importer
situated at the premises C/o. M/s. Uniworld Logistics Pvt. Ltd., SIPCOT,
Sriperumbudur.

1.2 It was discovered by the officers that there were 16,331 Nos. of
laptop computers ready for supply to M/s.ELCOT with Tamil Nadu
Government Logo pasted in the form of sticker on the carton boxes and a
rubber stamping with the words 'Box 1&2 shipped with combined MRP of
Rs.16,899/-'. On enquiry, it revealed that the laptop bags were purchased
locally and packed in a box along with laptop computer and a combined MRP
of Rs.16,899/- had been affixed in respect of both laptop computer and the
laptop bag. Copies of several tax invoices billed to various schools in Nilgiris
District, Tamil Nadu were also found and seized.

1.3 In addition to the aforesaid laptops, 25,512 Nos. of Acer Brand
laptops meant for supplying to M/s. Rajcomp Info Services Ltd., for free
distribution to the students of Rajasthan was also discovered. An offence for
evasion of duty in respect of these laptops (for supply to M/s.Rajcomp) were
also registered by the Department for which Show Cause Notice was issued
separately. In the present case, the dispute is with regard to the notebook /
laptop computers meant for supply to M/s.ELCOT for free distribution to
schools in Tamil Nadu only.

1.4 The appellant submitted that the goods are for distribution to the
schools in Tamil Nadu and in order to keep up the time frame, the appellant
requested for provisional release of the goods. On 23.07.2013, the
Commissioner of Customs (Import) permitted provisional release of 16,331
Nos. of laptops on execution of bank guarantee for Rs.1.31 crores (the
amount being the differential CVD calculated on the difference between
actual sale price and declared MRP after 20% abatement in respect of total
57,024 Nos. of laptops imported vide Bill of Entry dated 31.05.2013 for
supply to ELCOT) and also on execution of bond for the value of goods to the
tune of Rs.72,17,40,737/-. On 25.09.2013, the appellant furnished details
of past and present supply of laptops to State Government agencies, such as
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ELCOT and Orissa Computer Application Centre (OCAC) under their free
supply scheme. On query as to the difference in the MRP declared at the
time of import and MRP affixed on the laptop along with the carry bag (RSP
Rs.2,500/-), it was contended by the appellant that since both the laptop
and the carry bag are covered under the Legal Metrology Act, declaring the
RSP on the laptop was mandatory. The RSP of the laptop was decided by the
company and RSP of the carry bag which was procured locally was declared
as provided by the supplier.

1.5 The laptops were preloaded with software and the import invoice
price was US$ 226.30. They had obtained the Special Valuation Branch
Order No. 465/2013 dated 25.04.2013 which accepted the transaction value
with its related party suppliers under Rule 3 of the Customs Valuation
(Determination of Price of Imported Goods) Rules, 2007.

1.6 The Department noted that there was much difference in the
MRP affixed on the laptops at that time of import and the MRP that was
affixed on the laptop along with the carry bag which was to be supplied to
ELCOT. At the time of import, in some Bills of Entry, the MRP declared for
laptop alone was Rs.14,399/- whereas the MRP declared for supply to ELCOT
with carry bag and inclusive of VAT was Rs.16,789/-. The importer claimed
that the difference in the price is because supply to ELCOT was to be made
along with laptop bag whereas the order placed with the foreign supplier was
only for laptop. The laptop bags were procured by the appellant locally at
the rate of Rs.225/- though the market price of laptop bag is Rs.2500/-.
The appellant had affixed the new MRP for supply to ELCOT after packing the
laptop along with the carry bags, and therefore the difference in MRP at the
time of import (Rs.14,399/-) and at the time of supply to M/s.ELCOT
(Rs.16,789/-).

1.7 It appeared to the Department that the appellant had
undervalued the MRP at the time of import of laptop to evade payment of
Countervailing Duty (CVD). Show Cause Notice dated 08.08.2017 was
issued proposing to reject the MRP declared by the appellant in the Bills of
Entry and to re-determine the same under Section 4A of the Central Excise
Act, 1944 read with Central Excise (Determination of Retail Sale Price of
Excisable Goods) Rules, 2008. Show Cause Notice proposed to demand
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differential CVD along with interest and also proposed to impose penalties,
besides proposing to hold the goods liable for confiscation. After due
process of law, the Original Authority rejected the MRP declared by the
appellant at the time of import and re-determined the same. Adjudicating
Authority ordered for confiscation of the goods, confirmed the demand of
differential duty (CVD) along with interest and an option was given to
redeem the goods on payment of redemption fine Penalties were also
imposed. Aggrieved by such order, the appellant is now before the Tribunal.

2. The Ld. Senior counsel Shri V. Lakshmi Kumaran appeared and
argued for the appellant. His submissions are as follows:-

The Ld. Counsel explained the facts as under :

2.1 The Appellant is engaged in the business of import and trading of
laptops, personal computers, projectors, TFT monitors and various computer
peripherals. The present Appeal is against the differential CVD demand in
respect of laptops imported by the Appellant in packaged form for supply to
Electronics Corporation of Tamil Nadu Limited ("ELCOT") meant for further
distribution to school students in Tamil Nadu.

Transaction that forms the subject matter of the present dispute:

2.2 During the impugned period, the Appellant imported laptops for further
sale in India. As the laptops are intended for retail sale, the Appellant paid
CVD based on the Retail Sale Price ("RSP") which was declared and affixed
on the imported laptops. The imported laptops were exempted from Basic
Customs Duty ("BCD") as well as Special Additional Duty of Customs
("SAD") in terms of Notification No. 24/2005-Cus. dated 01.03.2005 and
Notification No. 21/2012-Cus. dated 17.03.2012 respectively.

2.3 Generally, the laptops imported by the Appellant for retail sale in India
falls in two categories, viz. a) laptops imported for sale to retail customers
and b) Laptops imported for supply to Central/State Government agencies
for their own use or for further free distribution to students and other
beneficiaries.
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2.4 The present dispute is confined to the MRP adopted by the Appellant
for the purpose of payment of CVD in respect of Laptops imported by
Appellant for sale to State Government agency namely ELCOT, along with
other goods and services as required in the tender(s) issued by ELCOT.

2.5 During the relevant period, the Appellant was awarded with a contract
by ELCOT to supply Laptops, Laptop back packs, user manual, instruction
guide. Details of the same are tabulated below:

Period of Quantity of ELCOT Purchase Order Price for
Import Imports Laptop with Bags (inclusive of
VAT)
May to August 200250 13939
2012
Mar-April 2013 96095 16790
May-June 2013 110000 16790
May-June 2014 130950 16486
Total 5,37,295

2.6 The ELCOT Purchase Order price as above was a lump-sum price for
the entire bundle of supply including laptop and laptop bags. There was no
break-up of individual items to be supplied under the contract.

2.7 For undertaking supplies to ELCOT, the Appellant imported laptops
from M/s. Acer Inc., Taiwan. However, the Appellant procured laptop bags
with MRP of Rs. 2,500/- from a local vendor at a price of Rs. 225/- (inclusive
of VAT).

2.8 The MRP of imported laptops were determined by appellant for supply
to ELCOT as the total price agreed with ELCOT (less) the MRP of locally
procured bags i.e., Rs. 2,500/-.

Case of the Department:

2.9 It is submitted by the Ld. Counsel that pursuant to the investigation by
SIIB in 2013, the Revenue initiated proceedings against the Appellant vide
Show Cause Notice dated 08.08.2017 alleging the following:

a) Firstly, the price initially quoted by the Appellant to ELCOT for
supplying the laptops along with bags etc. ("Quoted price") (plus 5%
VAT) is inclusive of all elements of costs of the laptop and denotes the
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actual MRP of the laptop with the backpack. Therefore, it is the quoted
price and not the finally agreed purchase order price that must be
considered as the combined MRP of Laptops and Laptop Bags. The
manner in which Revenue has sought to re-determine MRP is shown
below:

Period of Quantity Quoted Price of Re-determined
Import of Price Bag with MRP of Laptop
Imports with VAT tax before abatement
(A) (B) (C)

(A) - (B)
May to 200250 17,586 225 17,361
August
(17586-225)
2012
Mar-April 96095 18,097 225 17,872
2013
May-June 110000 18,097 225 17,872
2013
May-June 130950 16,486* 225 16,261
2014

[* This is the ELCOT Purchase Order price and not the quoted price as the
Department was not able to ascertain the quoted price for imports made in
2014. Further, for these imports, provisional assessments are sought to be
finalized and differential duty is sought to be demanded by deducting Rs. 225/-
from ELCOT Purchase Order price. The differential duty arising on account of the
same has also not been quantified in the impugned Order.]

b) Secondly, the MRP of imported laptops is liable to be re-determined by
deducting only the purchase price of laptop bags i.e., Rs. 225/- from
the quoted price as against the MRP of such laptop bags i.e., Rs.
2,500/-

c) The Department has undertaken re-determination of MRP under
Section 4A (4) of the Central Excise Act, 1944 read with Rule 6 of
Central Excise (Determination of Retail Sale Price of Excisable Goods)
Rules, 2008.

SUBMISSIONS:

3. MRP of imported laptops cannot be re-determined in the absence of
machinery for the same in Section 3(2) of Customs Tariff Act, 1975:

3.1 Under the Central Excise Act, 1944, predominantly the following two
methods of valuation have been prescribed for levy of Central Excise duty on
manufacture of goods:
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- Excise Duty payable on Transaction Value based assessment (Section
4 of Central Excise Act)

- Excise Duty payable on MRP based assessment (Section 4A of Central
Excise Act)

Background to introduction of MRP based assessment in Section 4A of Central
Excise Act, 1944:
3.2 MRP based assessment was introduced in Central Excise Act, 1944
vide Finance Act, 1997. However, the provisions relating to re-determination
of MRP/RSP was introduced through sub-section (4) only vide Finance Act,
2003 wherein, it was specified that MRP will be re-determined as prescribed
by the Rules.

3.3 Pertinently, Central Excise (Determination of Retail Sale Price of
Excisable Goods) Rules, 2008 ("RSP Rules") to operationalise Sub-section
(4) of Section 4A were framed only with effect from 01.03.2008. Thus,
during the period from 2003 to 2008, no rules were prescribed for re-
determining MRP of excisable goods. Resultantly, even if the MRP declared
was found to be incorrect, there was no machinery which empowered the
Department to redetermine the MRP for the purposes of payment of central
excise duty.
3.4 In this context, for the period prior to introduction of RSP Rules, 2008,
the Larger Bench of Tribunal recently, in the case of Ocean Ceramics,
Interim Order No.1-23/2024 dt. 23.1.2024 in Excise Appeal No.235
of 2008 has held that the RSP rules are substantive in nature and in the
absence of any machinery prior to such period for re-determination, MRP
cannot be re-determined.

The RSP Rules have not been made applicable to Section 3(2) of Customs Tariff
Act, 1975:

3.5 Section 3 (1) of Customs Tariff Act, 1975 provides for levy of CVD
equal to the excise duty leviable on a like article if produced or
manufactured in India. In addition to general provision for payment of CVD
on Transaction value (under Section 14 of Customs Act), the proviso to
Section 3(2) (introduced vide Finance Act, 2001) provides that in case of an
article imported into India,
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a) in relation to which it is required, under the provisions of the Legal
Metrology Act, 2009 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 article; and

b) where the like article produced or manufactured in India, or in case
where such like article is not so produced or manufactured, then,
the class or description of articles to which the imported article
belongs, is

i. the goods specified by notification in the Official Gazette
under sub-section (1) of section 4A of the Central Excise Act,
1944, the value of the imported article shall be deemed to be
the retail sale price declared on the imported article less such
amount of abatement, if any, from such retail sale price as
the Central Government may, by notification in the Official
Gazette, allow in respect of such like article under sub-section
(2) of section 4A of that Act.
3.6 As per the Explanation, if on any imported article 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.

3.7 On a perusal of the proviso to Section 3(2), it can be seen that Section
3 of the Customs Tariff Act, 1975 is a standalone code. It is not a legislation
by reference to Section 4A of Central Excise Act, 1944 but a legislation by
incorporation. Consequently, there is no provision under Section 3 for re-
determination of MRP of imported goods and for application of amendments
made to Section 4A [in 2003 when Section 4A (4) was introduced] and RSP
Rules 2008 to bring in the methodologies for re-determination of CVD
payable on imports on MRP basis.

3.8 In other words, though the Customs Tariff Act, 1975 has borrowed the
Notification issued under Section 4A (1) and the provisions of sub-section
(2) of Section 4A for the purposes of payment of CVD on imported goods on
the basis of MRP declared, the provisions for re-determination of RSP under
Section 4A (4) and the RSP Rules made thereunder have not been borrowed
to Section 3 (2) of the Customs Tariff Act, 1975.

3.9 Reliance is also placed on the following decisions, wherein it has been
held that MRP/RSP of imported goods cannot be re-determined with
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reference to the provisions of Section 4A (4) of the Central Excise Act, 1944
and the RSP Rules, 2008:

a) ABB Ltd. v. CC [2011 (272) E.L.T. 706 (Tri. - Bang.)] - Civil
Appeal No. 7147 of 2011 has been filed by Department before
Supreme Court - No stay on CESTAT order
b) CC v. V.J. Traders [2019 (366) E.L.T. 909 (Tri. - Del.)] - Civil
Appeal No. 844/2019 has been filed by Department before Supreme
Court - No stay on CESTAT order
c) CC v. King Kaveri Trading Co. [2019 (370) E.L.T. 1049 (Tri. -
Mumbai)]
d) DS Chandok & Sons v. CC [2021 (9) TMI 417 - CESTAT MUMBAI]

e) Legrand India Pvt. Ltd. v. CC [2014 (304) E.L.T. 305 (Tri. -
Mumbai) - Civil Appeal Nos. 7320-7323 of 2014 have been filed by
Department before Supreme Court - No stay on CESTAT order.

3.10 As above, even in the context of levy of excise duty under Section 4A
of Central Excise Act, 1944, the Larger Bench in Ocean Ceramics case
(supra), has held that the RSP Rules framed on 01.03.2008 is substantive
and cannot be applied retrospectively for the period prior to 2008. The said
decision will squarely apply to levy of CVD under Section 3(2) of the
Customs Tariff Act, 1975.

3.11 Therefore, the Appellant submits that re-determination of MRP in the
present case is without authority of law and the impugned order must be set
aside.

4. Without prejudice, even assuming power to borrow RSP Rules exists
in Section 3(2) of Customs Tariff Act, 1975, the methodology followed by
the Department for re-determination of MRP in the present case is not
contemplated under Rule 6 read with Section 4A and proviso to Section 3 :

4.1 In the impugned order, it has been held by the adjudicating authority
that the imported laptops were tailor made and customized to the
specifications of ELCOT and therefore, MRP cannot be re-determined in
accordance with Rule 4 of the RSP Rules. Resultantly, the same has to be re-
determined as per Rule 6 of the RSP Rules which provides for best judgment
assessment.
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4.2 It is submitted by the Ld. Counsel that the above view is erroneous.
Without prejudice, even assuming that the power to borrow RSP Rules exists
in Section 3 (2) of Customs Tariff Act, 1975, the methodology followed by
the Department for re-determination of MRP in the present case is not
contemplated under Rule 6 of the RSP Rules.

4.3 It is submitted that the following valuation Rules formulated under the
Central Excise Act, 1944 and the Customs Act, 1962 provide for Best
Judgment method/residual method:
a) Rule 11 of Central Excise Valuation (Determination of Price of
Excisable goods) Rules, 2000.
b) Rule 9 of Customs Valuation (Determination of Price of imported
Goods) Rules, 2007.
c) Rule 6 of Central Excise (Determination of Retail Sale Price of
Excisable Goods) Rules, 2008.

4.4 As per Rule 11 of the Central Excise Valuation Rules, 2000, "if the
value of any excisable goods cannot be determined under the foregoing
rules, the value shall be determined using reasonable means consistent with
the principles and general provisions of these rules and sub-section (1) of
section 4 of the Act". It is pointed out that Rule 6 of RSP Rules, 2008 is also
similarly worded.

4.5 Thus, it can be seen that even under the best judgment method, the
means used to determine value must be consistent with the principles and
general provisions of the Rules.

4.6 It is submitted that value cannot be determined arbitrarily by adopting
methodologies alien to the principles and provisions of the Rules. Such
unbridled powers cannot be assumed to be conferred for determining value
under the best judgment method. If it is assumed, then it will render the
provisions arbitrary and constitute a violation of Article 14 of the
Constitution. Even the validity of the Rules would be brought to question.
Thus, there is a purpose behind ensuring that the best judgment method is
applied subject to the principles and provisions of the preceding Rules which
act as reasonable guidelines.
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4.7 Moreover, the best judgment method only allows some elbow room or
reasonable flexibility in valuation while applying the methodology already
prescribed.

4.8 In State of Kerala v. C. Velukutty [1965 (12) TMI 32 - SUPREME
COURT], the Apex Court has held that though there is an element of
guesswork in a "best judgment assessment", it shall not be a wild one, but
shall have a reasonable nexus to the available material and the
circumstances of each case. The same principle has also been reiterated in
SG Jayaraj Nadar & Sons v. State of Madras [1967 (7) TMI 106 - MADRAS
HIGH COURT] subsequently affirmed by Hon'ble Supreme Court in State of
Madras v. SG Jayaraj Nadar & Sons [1971 (9) TMI 156 - SUPREME COURT]

4.9 In Uflex Ltd. v. CCE [2016 (335) E.L.T. 376 (Tri. - All.)], it has been
held that value of intermediate goods that were captively consumed in
manufacture of final product cannot be re-determined by resorting to
deductive method or best judgment assessment under Rule 11 of Central
Excise Valuation Rules, 2000 as best judgment under Rule 11 of Valuation
Rules does not permit such arbitrariness and imaginative valuation.

4.10 Further, Rule 9 of the Customs Valuation (Determination of Price of
imported Goods) Rules, 2007 ("Customs Valuation Rules") is in pari
materia with Rule 11 of the Central Excise Valuation Rules, 2000 and RSP
Rules, 2008. As per the Interpretative Notes to Rule 9 of the Customs
Valuation Rules, the "value of imported goods determined under the
provisions of rule 9 should to the greatest extent possible, be based on
previously determined customs values and the methods of valuation to be
employed under rule 9 may be those laid down in rules 3 to 8, inclusive, but
a reasonable flexibility in the application of such methods would be in
conformity with the aims and provisions of rule 9".

4.11 Therefore, the application of Rule 6 of the RSP Rules to arrive at the
MRP of imported laptops by deducting the price of laptop bags from the
ELCOT purchase order price is arbitrary and not supported by the provisions
of the RSP Rules. Section 4A and the RSP Rules attempts to arrive at the
value of goods by analysing the MRP of identical goods. Deductive method of
valuation has not been prescribed anywhere.
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4.12 Thus, the MRP of laptops ought to have been determined based on
supply of similar laptops available in market (with suitable adjustments) or
supply of similar laptops made by other suppliers to ELCOT. No market
enquiries were conducted by the Department at any point in time.

4.13 Even assuming but without admitting that Rule 6 of the RSP Rules
provide for determination of value of imported laptops by deducting price of
laptop bags from composite price charged for both laptops and laptop bags,
the deduction of the purchase price of bags i.e., Rs. 225/- is
incorrect. In other words, while computing the MRP of the laptop from the
sale price/MRP of laptop + bags, the cost of bags cannot be taken as
deduction. For parity, it is the MRP of the bag which should be deducted.
Reliance in this regard is placed on the decisions of the Hon'ble Supreme
Court in CCE v. Acer India Ltd. [2004 (172) E.L.T. 289 (S.C.)] and Gannon
Dunkerley and Co. and Ors. v. State of Rajasthan & Ors. [(1993) 1 Supreme
Court Cases 364]. Thus, the computation methodology adopted by the
Department is ex facie arbitrary.

Further, the Customs Department, under the garb of re-determining MRP of
imported laptops cannot question MRP of laptop bags as well as the composite
supply of laptops and laptop bags.

4.14 As noted in the impugned order, the Appellant arrived at the MRP of
the imported laptops by subtracting the MRP of backpack i.e., Rs. 2,500/-
from the ELCOT Purchase Order price.

4.15 It is pertinent to note that the said MRP was affixed on the laptop
backpack by the local vendor itself and not at the instruction of the
Appellant. This has not been controverted in the impugned order except for
a plain statement that the Appellant has tried to offset loss by getting MRP
of laptop bags/backpacks declared as Rs. 2,500/-.

4.16 The Appellant submits that the impugned order by ordering re-
determination of MRP of laptops by taking ELCOT quoted price as MRP of
laptop + bag and deducting purchase price of laptop bags from quoted price,
has indirectly re-determined the MRP of laptop bags and the composite
supply of laptops and bags which is impermissible as it is only the nodal
authority under the Legal Metrology Act, 2011 or the Central Excise Officer
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under the Central Excise Act, 1944 who is empowered to question/re-
determine the same and not the Customs Department.

4.17 Thus, the methodology adopted by the Department under the best
judgement method is not consonance with the powers vested with the
Customs Department. Therefore, the impugned order inasmuch as it suo-
motu re-determines the MRP of composite supply of laptop + laptop bags
and disregards the MRP of the laptop bags purchased locally by the
Appellant viz. Rs. 2,500/-, is improper and deserves to be set aside.

5. Without prejudice to above, quoted price cannot be treated as the
combined MRP for the Laptop and Laptop bags as it is only the Purchase
Order price which can be collected by the Appellant :

5.1 In the impugned order, differential duty has been computed by taking
the price quoted by the Appellant to ELCOT for supply of laptop and laptop
bags on the ground that the quoted price is inclusive of all elements of costs
of the laptop and is the actual MRP of the laptop with the backpack.

5.2 Explanation to Section 4A of the Central Excise Act, 1944 defines
Retail Sale Price as 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, and the price is the sole
consideration for such sale.

5.3 In this regard, it is submitted that the quoted price cannot be taken as
the combined MRP for the Laptop and Laptop bags as only the Purchase
Order price can be collected by the Appellant for the sale of imported laptops
and bags which were tailormade for supply to ELCOT. In this regard, the
Appellant submits that in the case of PG Electroplast v. CCE [2014 (307)
E.L.T. 787 (Tri. - Del.)] in the context of supply of Television Sets to ELCOT,
the Tribunal has accepted the valuation of such televisions under Section 4A
where MRP was declared as per the contract price/purchase order price to
ELCOT.

5.4 Therefore, even assuming without admitting that it is the purchase
price of bags that is to be deducted i.e., Rs. 225/-, it must be deducted
from the finally agreed ELCOT purchase order price and not the quoted
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price. Details of the quoted price (MRP affixed for supply to ELCOT) and
ELCOT purchase order price during the relevant period is shown below:-

Sl. Period of Import Quantity of Quoted Price ELCOT
No. Imports (inclusive of Purchase Order
VAT) Price per Unit
(with VAT)
(A)
1. May to August 200250 17,586 13,939
2012
2. Mar-April 2013 96095 18,097 16,790
3. May-June 2013 110000 18,097 16,790
4. May-Jun 2014 130950 Not Available 16,486

6. Without prejudice, Laptop bags sold in the normal market, are
purchased by the Appellant at Rs. 460.78/- and sold with an MRP of Rs.
1,499/-. Therefore, in any case, the MRP of the laptop bags in question
cannot be treated to be below Rs. 1,499/- :

6.1 In the impugned order, it has been held that the laptop bags in
question bearing MRP of Rs. 2,500/- have been purchased at a price of
Rs. 225/- whereas laptop bags sold in normal market bearing an MRP of Rs.
1,499/- have been purchased by the Appellant at Rs. 460.78/-. Therefore,
the MRP of the backpack procured at Rs. 225/- has been artificially hiked to
Rs. 2,500/- and subtracted from the purchase order price to arrive at the
MRP of the laptop.

6.2 In this regard, it is submitted that admittedly, the laptop bags for sale
in the normal market are purchased by the Appellant at Rs. 460.78/- and
sold with an MRP of Rs. 1,499/-. Therefore, in any case, the MRP of the
laptop bags in question cannot be treated to be below Rs. 1,499/- and the
same must be deducted from the ELCOT Purchase Order price to arrive
at MRP of imported laptops in case of redetermination of the value.

7. Extended period of limitation cannot be invoked in the present case:

7.1 Show Cause Notice dated 08.08.2017 has been issued in respect of
imports made during the period 09.05.2012 to 09.06.2014 by invoking
extended period of limitation under Section 28(4) of Customs Act, 1962. The
Appellant submits that the entire demand in the impugned order has been
made by invoking extended period of limitation.
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7.2 It is submitted that the Department was aware of the entire gamut of
the transaction as early as July 2013. The following series of events clearly
evidence that the department was aware of the supply of laptops along with
laptop bags in as early as 12th July 2013.

7.3 It is submitted that the first visit was conducted by SIIB as early as
02.07.2013 and 16331 Nos. of laptops were seized on 02.07.2013 and
pursuant to request of the Appellant vide letter dated 04.07.2013, the goods
were provisionally released on 23.07.2013. On 04.07.2013, Mr. Alok Dubey,
Chief Financial Officer, in his statement under Section 108 of Customs Act,
1962, also submitted a brief note on their valuation methodology stating
that the 16,331 laptop notebooks are meant for supply to Tamil Nadu
schools; that these laptops are intended to be sold with carry case and all
required software at the MRP of Rs. 16,899/- inclusive of laptop carry case.
The Appellant also enclosed a working sheet involving calculation of MRP in
respect of import laptops.

7.4 Pertinently, on 12.07.2013, Mr. B K Prakash, in his statement, stated
that they have received orders from ELCOT for supply of 1,10,000 Nos. of
laptop computers with carry bag. They purchased the backpacks at Rs, 225/-
inclusive of tax to supply along with the laptops. When specifically
questioned as to why they declared a low MRP of Rs. 14,399/- when the
actual sale price for the laptop supplied to ELCOT is Rs. 15,990/-, he stated
that the laptop sale price was inclusive of the cost of the carry bag also and
therefore the combined price of the laptop and carry bag has to be taken
into consideration while comparing the sale price to ELCOT. In fact, on
20.09.2013, Mr. BK Prakash was specifically questioned by the Department
as to who decided on the high MRP of Rs. 2500/- for the laptop bag
purchased at a low price of Rs. 225/-.

7.5 This clearly establishes that all the facts relating to procurement of
bags locally for Rs. 225/-, supply of laptops along with bags to ELCOT at
Purchase Order price, were within the knowledge of the Department as early
as 04.07.2013/12.07.2013. Resultantly, the Appellant submits that
invocation of extended period for issuance of Show Cause Notice after a
period 4 years from the date Department came to know about the impugned
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imports and the valuation methodology adopted cannot be sustained as no
suppression can be alleged on part of the Appellant.

7.6 In CCE v. Essel Propack Ltd., [2015 (323) E.L.T. 248 (S.C.)] it was
held that since all the information was already available with the
department, extended period cannot be invoked. The said principle was also
laid down in CCE v. Spicejet Ltd. [2023 (79) G.S.T.L. 271 (Tri. - Del.)] and
Ajit India Pvt. Ltd. v. CCE [2018 (19) G.S.T.L. 659 (Tri. - Mumbai).

7.7 It is argued that the impugned order must be set aside on this ground
alone. In Highland Dye Works Pvt. Ltd. v. CCE [2000 (121) E.L.T. 502
(Tribunal), it has been held that when all available information was supplied
to the Department on the date of the search, extended period of limitation
cannot be invoked. The said decision has been affirmed by the Hon'ble
Supreme Court in Commissioner v. Highland Dye Works Pvt. Ltd. [2006
(198) E.L.T. A66 (S.C.)]. The afore-mentioned principle has been laid down
subsequently in Vaspar Concepts (P) Ltd. v. CCE [2006 (199) E.L.T. 711
(Tri. - Bang.)]

7.8 In any case, the Appellant submits that the issue involved in the
present case namely, determination of MRP of imported laptops when such
laptops are used to make a composite supply of laptop and laptop bag
(which is domestically procured) for a single price is legal and interpretative
in nature. Therefore, the Appellant submits that there is no question of
suppression or mis-declaration of facts. Therefore, extended period of
limitation cannot be invoked and the resultantly, the entire differential duty
demand must be set aside.

8. In the absence of substantive provisions in Customs Tariff Act, 1975
interest, penalty, confiscation and fine cannot be imposed:

8.1 In the present case, the interest, penalty, confiscation and the
redemption fine has been imposed in relation to demand of additional
customs duty leviable under Section 3(1) of the Customs Tariff Act, 1975.
However, it is to be noted that the CTA has limited machinery provisions and
therefore it borrows various provisions from the Customs Act for
implementation of its provisions. Section 3(8) of the CTA (now Section 3(12)
of CTA) is the borrowing provision regarding additional customs duty.
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"(8) The provisions of the Customs Act, 1962 (52 of 1962), and the
rules and regulations made thereunder, including those relating to
drawbacks, refunds and exemption from duties, shall, so far as may
be, apply to the duty chargeable under this section as they apply in
relation to the duties leviable under that Act."

8.2 The Appellant submits that, on a reading of the above provision, it is
clear that Section 3 of CTA which levies duties other than Basic customs
duty borrows the procedural provisions of Customs Act, however substantive
provisions relating to penalty, confiscation, fine and interest from the
Customs Act is not explicitly borrowed.

8.3 In this regard, the Bombay High Court in Mahindra & Mahindra Ltd.
v. Union of India [2022 (10) TMI 212 - BOMBAY HIGH COURT] has
considered a similar issue on levy of interest and penalty in relation to CVD
and held that in the absence of specific provisions for levying of interest or
penalty due to delayed payment of tax, the same cannot be levied/charged
unless the statute makes a substantive provision in this behalf. This decision
of the Hon'ble Bombay High Court has been affirmed by the Hon'ble Apex
Court in Union of India Vs Mahindra and Mahindra Ltd, [2023 (8) TMI
135 - SC ORDER]. Further, the Review Petition filed by the Department has
also been dismissed vide order dated 09.01.2024 in Review Petition (Civil)
Diary No. 41195/2023.

8.4 Further, the Tribunal in Acer India Private Ltd. v. CC, Chennai,
2023-VIL-998-CESTAT-CHE-CU, has also affirmed the above view and held
that even in cases where differential CVD is payable, there shall be no
recovery of interest or confiscation of goods or imposition of fine since the
Customs Tariff Act has not borrowed the relevant provisions. Therefore, the
imposition of interest, fine and penalty may set aside as being without
authority of law.

9. The Ld. Authorised Representative Shri P. Narasimha Rao appeared
and argued for the Department.

9.1 It is submitted by the Ld. A.R that the appellant had declared a lesser
MRP at the time of import with intent to evade payment of appropriate CVD
on the imported goods. Thereafter, the MRP declared on the goods has been
18

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altered by affixing higher MRP contending that purchase order with ELCOT
was for supply of laptop computers with carry bags. The definition of RSP as
given in Central Excise Act, 1944 and the Legal Metrology Act, 2009 would
show that it is the maximum price at which the commodity in packaged form
may be sold to the ultimate consumer. The ultimate consumer in this case is
the students. The goods did not have markings to mean that it is for free
distribution. It is therefore incumbent upon the appellant to declared the
correct MRP at the time of import. In the present case as the MRP of the
imported goods was altered after import so as to evade appropriate payment
of CVD, the Department has redetermined the RSP as per Central Excise
(Determination of Retail Price of Excisable Goods) Rules, 2008. Rule 6 has
been applied by the adjudicating authority to arrive at the redetermined
MRP. Appellant had deducted Rs.2,500/- as price of carry bag from the
purchase order price of the goods. However, it has come to light that they
have obtained laptop bag for Rs.225/- and therefore appellant cannot deduct
Rs.2500/- per bag to arrive at the MRP of the composite goods.

9.2 The decision in the case of Nitco Tiles Vs CC (Import) Mumbai -
2014-TIOL-1544-CESTAT-MUM was relied by the Ld. A.R to argue that in the
said decision a similar issue was considered. It is prayed by Ld. A.R that
appeal may be dismissed.

10. Heard both sides.

11. The main issue that arises for consideration is whether the rejection of
MRP declared on the laptops imported by appellant and redetermination of
the MRP is legal and sustainable. The other issues that arise consequently
are (i) whether the order of confiscation of the impugned goods, the demand
of differential Countervailing Duty (CVD) along with interest, the imposition
of Redemption Fine and penalties are sustainable or not.

11.1 According to department, the appellant has undervalued the goods
imported by declaring a lesser MRP and thus evaded payment of
Countervailing Duty (CVD).
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11.1.1 It is to be noted that the imports were registered under Special
Valuation Branch as the importer and supplier were admittedly related
parties. The SVB Order No.465/2013 dt. 25.04.2013 was passed accepting
the transaction value with its' foreign supplier in terms of Rule 3 of Customs
Valuation (Determination of Price of Imported Goods) Rules, 2007. The Basic
Customs duty, if any has to be discharged by appellant on the basis of the
transaction value agreed by the parties. In the present case, the imported
laptops were exempted from payment of Basic Customs Duty (BCD) as well
as Special Additional Duty of Customs (SAD) in terms of Notification
No.24/2005-Cus. dt. 17.3.2012 respectively. The laptops being goods
covered under the Legal Metrology Act, 2009 read with Legal Metrology
(Packaged Commodities) Rules, 2011, it is incumbent for the appellant to
declare and affix the MRP on the goods at the time of import. The
Countervailing Duty (CVD) becomes payable on goods imported on which
MRP is required to be declared. The allegation of the Department is that
appellant declared a lower MRP at the time of import and thus evaded
payment of appropriate CVD.

11.2 In the SCN dt. 8.8.2017, the Annexures II and III gives the details of
the imports done vide various Bills of Entry and the MRP declared for the
imported laptops. In Annexure II -

(i) The details show import for the period May 2012 to August 2012
and supplied to ELCOT. The MRP declared at the time of import is
Rs.12,500/- and is proposed to be redetermined as Rs.17,361/-.

(ii) Annexure II also includes imports for the period March 2013 to
April 2013 and supplied to ELCOT. The MRP declared by appellant is
Rs.14,399/- and it is proposed to redetermine as Rs.17,872/-.

(iii) Annexure II gives details of imports for the period May 2013 to
June 2013. The MRP declared by appellant is Rs.14,399/- and it is proposed
to be redetermined as Rs.17,872/-.

(iv) Annexure III gives details of imports from May 2014 to June
2014. The MRP declared by appellant is Rs.14,799/- and is proposed to be
redetermined as Rs.16,486/-.
20

Customs Appeal No.41786 of 2019

12. The facts reveal that the appellant had entered into contract with
ELCOT to supply laptop with carry bag. Admittedly, appellant has not
imported the carry bags. While supplying the goods to ELCOT, the appellant
has altered the MRP and affixed stickers showing higher MRP on the
composite supply of laptop and bag. This is the genesis of the dispute.
According to appellant, as they were clearing the imported laptop with
locally purchased carry bag and inclusive of its' VAT, the MRP had to be
altered and had affixed the higher MRP on the goods while supplying to
ELCOT.

13. As per the Tender issued by ELCOT, Para 4 of the Tender document
speaks about the scope of work. Para 4.1.1 provides for the laptop computer
specification. Para 4.1.2 provides for Backpack specification. Para 4.4.2
reads as under :

"Traceability Identification

The laptop computers supplied under the scheme are meant to be distributed to the students
in Tamil Nadu, in order to prevent the misuse of the laptop computers screen printing / tamper-
proof sticker of lay out to be specified by ELCOT (Government logo, image and scheme name)
shall be marked on the top side of the laptop computers and front side of the laptop computer
backpack".

14. The letter issued by ELCOT to appellant dated 17.4.2013 and the
purchase order dt. 30.05.2013 is reproduced as under :

/ LEFT BLANK WITH PURPOSE /
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15. The purchase price is Rs.15,990 plus 5% TNVAT (15,990 + 799.50 =
16,789.50). The above documents would show that the purchase price
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Customs Appeal No.41786 of 2019

agreed by appellant and ELCOT was for supply of laptop with carry bag /
backpack. It also included supply of user manual in Tamil and English as a
single booklet and Do's and Don'ts instruction guide in Tamil and English.
The appellant has purchased backpack locally. In such circumstances the
appellant, no doubt, is entitled to add this value while supplying to ELCOT. It
is not a case where only the imported laptop computer is supplied to ELCOT.
According to appellant, they procured the backpack which has market price
of Rs.2500/- at a negotiated price of Rs.225/-. The appellant has affixed the
new increased MRP on the basis of purchase price agreed with ELCOT. This
purchase price includes the price of laptop computer, backpack, the booklet,
instruction guide etc.

16. The appellant while declaring the MRP at the time of import has
arrived it by deducting the market price of the backpack (Rs.2500/-) from
the purchase price [Rs.16,789.50 (-) Rs.2500 = Rs.14,289.50]. A slightly
high MRP has been declared, on each piece of laptop computer imported.
The statement of Shri Alok Dubey of appellant company reads as under :

"10. Shri Alok Dubey, Chief Financial Officer (CFO), M/s Acer India Pvt. Ltd in his
statement dated 12.05.14 under Sec 108 of Customs Act, 1962 interalia elaborated
his role as CPO in the M/s Acer India Pvt. Ltd.'s participation in tenders floated by
Elcot, RaiComp and OCAC. When enquired about the prices quoted by them for
tenders floated by the above stated state government agencies during 2011-2014,
the basis for the quoted prices and the actual cost of the laptop (inclusive of duty,
logistics cost, VAT and profit margins), Shri Alok Dubey stated that he would
furnish all details in due course. Explaining the process of arriving at MRP of the
laptop that was declared to Customs, Shri Alok Dubey stated that the MRP is
decided based on Purchase Order price; that the Customer Purchase Order prices
are for a bunch of items including Acer laptops; that they would deduct the MRP of
bought out items from the total purchase order price to arrive at the MRP of
laptops; that in case of laptops imported for the Elcot project, the MRP of the
backpack , ie. Rs. 2,500/- was deducted from the ELCOT Purchase Order price of
Rs. 16,789.50/- to arrive at the MRP of the laptop, ie. Rs. 14,289/-; that the MRP
declared for Customs purpose was higher than this; that it was usual for the
clearance department to declare a sl1ghtly high MRP in some cases for Customs
purposes; that the purchase price of the backpacks was Rs 220.59 plus CST; that
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the MRP of Rs. 2500/- was decided by their vendor and that no instruction was
given by them to their vendor to affix the stickers showing MRP of Rs. 2500/-."

17. It is noteworthy to mention that as per SCN itself the increased MRP
was affixed as a combined MRP of both laptop and backpack as Rs.16,899/-.
Investigation conducted by visit of officers to the warehouse revealed that
the higher MRP is affixed as combined MRP and not of laptop computer
alone. The second para of impugned order reads as under :

"2. It was discovered by the departmental officers that there were 16,331
Nos. of "ASPIRE E1-431 Part No.NX. M8VSI.001" laptop computers with Tamil
Nadu Government Logo pasted in the form of sticker on the carton boxes and a
rubber stamping with the words "Box 1&2 shipped with combined MRP of
Rs.16,899/-." In the said godown. On enquiry, it was confirmed that the laptop
bags were purchased locally and packed in a box and that a combined MRP of
Rs.16,899/- had been affixed in respect of both laptop computer and the laptop
gag. Copies of several tax invoices billed to various schools in Nilgiris District were
also found and detained."

18. On the basis of this combined new MRP, department has arrived at a
conclusion that the appellant has misdeclared the MRP at the time of import.
According to department, if Purchase Order is taken as the basis of MRP, the
said MRP is to be inclusive of all taxes and costs involved. The MRP declared
at the time of import was lesser than the transaction value. The department
has thus rejected the MRP declared at the time of import and proceeded to
redetermine the MRP to demand differential CVD. According to department,
since the final bid price with M/s.ELCOT is inclusive of all cost structures, it
implies that the quoted price which is inclusive of VAT 5% is to be the actual
MRP with the backpack. The department thus redetermined the MRP by
deducting the price of bag (Rs.225/-) from the quoted price. (i.e. Rs.17,586
(-) Rs.225 = Rs.17,361/-). The table in para 23 (xv) of the SCN gives the
details of method of redetermination of MRP. The table as noticed in para 23
(xv) of SCN is as under :
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Customs Appeal No.41786 of 2019

PERIOD OF QTY OF QUOTED PRICE QUOTED PRICE PRICE OF BAG REDETERMINED
IMPORT IMPORTS W/O VAT WITH VAT WITH CST MRP OF
LAPTOP
APR-JUN 200250 16749 17586 225 17361
AUG2012
MAR-APR 96095 17235 18097 225 17872
2013
MAY-JUN 110000 17235 18097 225 17872
2013

19. The Ld. Counsel appearing for appellant has vehemently argued that
such redetermination of MRP is not sustainable as there is no machinery in
Section 3 (2) of Customs Tariff Act, 1975 to redetermine the MRP of
imported article. Let us proceed to examine this contention. Section 3 of
Customs Tariff Act, is reproduced as under :

SECTION 3. Levy of additional duty equal to excise duty, sales tax, local taxes
and other charges. -- (1) Any article which is imported into India shall, in addition,
be liable to a duty (hereafter in this section referred to as the additional duty) equal to
the excise duty for the time being leviable on a like article if produced or
manufactured in India and if such excise duty on a like article is leviable at any
percentage of its value, the additional duty to which the imported article shall be so
liable shall be calculated at that percentage of the value of the imported article :

.........

Provided that in case of an article imported into India,--

(a) 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 article; and

(b) where the like article produced or manufactured in India, or in case where such like article is not so produced or manufactured, then, the class or description of articles to which the imported article belongs, is--

(i) the goods specified by notification in the Official Gazette under sub-section (1) of section 4A of the Central Excise Act, 1944 (1 of 1944), the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale price as the Central Government may, by notification in the Official Gazette, allow in respect of such like article under sub-section (2) of section 4A of that Act; or

(ii) the goods specified by notification in the Official Gazette under section 3 read with clause (1) of Explanation III of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale price as the Central Government may, be notification in the Official Gazette, allow in respect of such like article under clause (2) of the said Explanation.

Customs Appeal No.41786 of 2019 Explanation. -- Where on any imported article 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."

20. The above provision states that for payment of CVD on imported goods notified under subsection (1) of Section 4A, the value of the imported article shall be deemed to be the RSP declared on the imported article less such amount of abatement. The proviso to Section (3) itself stipulates how the value has to be determined for imported goods to which Legal Metrology Act, 2009 and Rules thereunder apply. There is no provision envisaged herein for redetermination of the MRP. The proviso to subsection (2) of Section 3 merely refers to subsection (1) of Section 4A to indicate the class or description of goods notified. Subsection (2) of Section 4A is referred for allowing abatement on the declared MRP to determine the value for payment of CVD. This proviso to subsection (2) of Section 3 does not use the words that 'the entire provision of Section 4A would be applicable'.

21. Though Section 4A was introduced w.e.f. 14.5.1977, there was no provision for ascertaining (or redetermining) the price (RSP) in situation of violation of the provisions. Subsection (4) to Section 4A for ascertaining or redetermining the RSP came to be introduced only w.e.f. 14.5.2003. Subsection (4) then merely said that the RSP of the goods shall be ascertained in prescribed manner. The Rules 2008 putting forth the prescribed manner or the method of ascertaining was introduced by Notification 13/2008 (NT) dt. 1.3.2008 only. The adjudicating authority has resorted to Rule 6 of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008. These Rules are as under :

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);

Customs Appeal No.41786 of 2019

(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 :

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.

Customs Appeal No.41786 of 2019 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."

As per Rule 3 as above states that the Rules would apply in case of redetermination of sale price (RSP) of excisable goods under subsection (4) of Section 4A of the Central Excise Act. There is no mention that it would be applicable to Section 3 of Customs Tariff Act. Pertinently, Section 3 of Customs Tariff Act, though refers to Section 4A does not adopt it to determine the assessable value.

22. It would also be beneficial to reproduce Section 4A of Central Excise Act, 1944 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.

(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.

Customs Appeal No.41786 of 2019 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."

23. It can be seen that even though a methodology to ascertain the RSP is laid down, the same will apply only in situations of (a) and (b) of subsection (4) of Section 4A. On examining the facts, the appellant has adopted a new RSP for the combined goods of laptop computer + carry bag + booklet + Instruction guide. The department has redetermined the RSP of the imported laptop computer alleging misdeclaration of MRP. As there is no methodology or machinery for redetermining the MRP of goods imported for the purpose of payment of CVD, we hold that such re-determination of MRP is against the provisions of law.

24. The Tribunal in the case of ABB Ltd. Vs Commissioner of Customs, Bangalore - 2011 (272) ELT 706 (Tri.-Bang.) considered this issue for the period prior to 1.3.2008 (disputed period 3.1.2003 to 31.3.2007) and held that there is no machinery / provisions for ascertaining RSP, when the RSP is not declared by importer on imported articles. The differential CV Duty demand, interest and penalties were set aside. The provisions under Section 3 of Customs Tariff Act, 1975 for CVD on notified goods remain to be the 31 Customs Appeal No.41786 of 2019 same and this case is therefore squarely applicable. The relevant paras are reproduced as under :

"2. Facts of the case in brief are as follows. Pursuing intelligence that M/s. ABB Ltd., Bangalore (ABB) was importing electrical apparatus falling under Chapter Heading 85.36 of Customs Tariff Act, 75 (CTA) and Central Excise Tariff Act (CETA, '85) and selling the same from their warehouse to their channel partners (dealers) & others, mis-classifying them under 8538 of CTA & CETA in the Bills of Entry without declaring their Retail Sale Price (RSP) for the assessment of CVD under Section 3 of the CTA read with Section 4A of Central Excise Act, 1944 (CEA) and Notification No. 13/2002-C.E. (N.T.), dated 1-3-2002. They paid lower duty than the CVD due.

... ... ....

17. We find that in view of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 issued on 1-3-2008, it is abundantly clear that in the absence of such rules issued in terms of sub-section (4) of Section 4A of the CEA, there was no statutory machinery to determine the retail sale price in respect of goods manufactured and cleared by a manufacturer without declaring the RSP on such goods. In the absence of a similar machinery to determine the relevant RSP in CTA, no demand of differential CVD could have been validly raised. In this connection, we rely on the following observations of this Tribunal in the case of Millennium Appliances India Ltd. v. Commissioner of C. Excise, Hyderabad [2009 (248) E.L.T. 713 (Tri.-Bang.)] on the applicability of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 prior to 1-3-2008 :

"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 - 2007 (218) E.L.T. 166 (T) (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 (sic) so, then the amount paid by the appellant is not a tax, which the revenue cannot kept (sic) with it."

18. Excerpts from the Apex Court's judgment in the case of National Insurance Co. Ltd. (supra) were cited by the revenue in support of the claim that the retail sale price could be validly determined even in the absence of Central Excise 32 Customs Appeal No.41786 of 2019 (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 following the principles informing the legislative policy prescribing RSP as the value. We find that the judgment elaborately deals with interpretation of the language of a statute in such a manner to effectuate the intention of the legislature. In the case on hand, we are not faced with the task of interpreting a provision which can accommodate more than one meaning. We are also faced with the argument of the assessee that when RSP was not declared on the packages, the same had to be ascertained in the manner prescribed in the statute. As regards the CVD levied under CTA on goods notified for RSP based assessment, CTA does not have similar provisions as contained in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. In Millennium Appliances India Ltd. case (supra) relied on by the assessee, this Tribunal had held that for the period prior to 1-3-2008, the provisions brought into force on 1-3-2008 could not be applied. As regards the need to determine the RSP not declared on the package by the assessee for the period prior to 1-3-2008, we are not able to distinguish the case on hand from Millennium Appliances India Ltd. case. In that case also RSP was not declared on the package and had to be determined. Following the above decision of the Tribunal, we hold that the impugned order adopted a method to determine the RSP without sanction of law.

19. We find that the principle of purposive construction cited by the learned Special Consultant for the Revenue envisages interpretation of provisions in such a manner that an outcome intended by the legislature is not frustrated. We do not think that the said principle provides for, nor is it competent for the Tribunal, to supply by construction, a mandatory provision absent in the statute. The demand for differential duty so determined, the interest due and the penalty equal to the demand imposed are set aside. In the circumstances we do not consider it necessary to deal with other disputes and controversies. The appeal is allowed."

24.1 This decision was followed by Tribunal in the case of Commissioner of Customs Vs V.J. Traders - 2019 (366) ELT 909 (Tri.-Del.). The import was of various paint items which were liable to CVD based on MRP declared. The department entertained doubts regarding MRP declared, and proceeded to demand differential CV duty on redetermined MRP on the basis of market enquiry. The Commissioner (Appeals) set aside the demand holding that the adjudicating authority could not redetermine the MRP in absence of any enabling provisions in the Customs Tariff Act, 1975, as held in the case of M/s.ABB Ltd. Against such order, the department had filed appeal before the Tribunal. The Tribunal observed that even though department has filed appeal before Hon'ble Apex Court against the decision of Tribunal in the case of M/s.ABB Ltd. (supra), the decision would not loose its precedential value and would be applicable. The relevant para reads as under :

Customs Appeal No.41786 of 2019 "4. On careful consideration of the grounds of appeal by the Revenue, we note that grounds of Revenue is with reference to suppression of facts on import in misdeclaring the MRP and non-applicability of the cited case laws relied upon by the Commissioner (Appeals). In this connection, we note that the Commissioner (Appeals) categorically recorded that there is no dispute in respect of description, classification and quantity of the impugned goods and the appellant had declared RSP. He, therefore, found that the adjudicating authority could not proceed to determine the MRP/RSP in absence of any enabling provisions in the Customs Tariff Act, 1975 as held by the Tribunal in ABB Ltd.

(supra). He also relied on the other decided cases holding similar view. We note that the decision of the Tribunal has not been stayed, though the appeal is still pending before the Hon'ble Supreme Court. As such, we have no reason to interfere with the findings recorded by the impugned order, which has relied on the decision of the Tribunal not reversed by any higher authorities. Accordingly, the appeal is dismissed."

24.2 The Ld. A.R has relied upon the decision in the case of Nitco Tiles (supra). There was difference of opinion between the Members and it was referred to Third Member for resolving the difference of opinion. The Member (Judicial) has taken the view that once any RSP has been affixed by an importer and duty has been paid (based upon such affixed value) and later on, if it is found that the affixed RSP is not true and correct, even in such a situation, the duty already paid is as per law and nothing more is required to be recovered for the reason that there is no machinery in Section 3(2) of Customs Tariff Act, 1975 to redetermine the RSP.

24.3 On the other hand, the Member (Technical) had taken the view that reference to Section 4 (1) and Section 4A (2) of the Central Excise Act is fully applicable to the Explanation to Section 3(2) to Customs Tariff Act, 1975, thereby meaning that if RSP is found to be incorrectly affixed/declared, then the same can be redetermined for payment of Excise Duty and Countervailing Duty in case of imports.

24.4 The Third Member has agreed with the view taken by Member (Technical). However, it has to be seen that in the said case the facts show that the goods imported declaring RSP have been sold over and above the RSP affixed on the packages. In the present case, the goods imported have been supplied along with carry bags and it is not a case where only the goods imported are sold. Further, the Member (Judicial) in the said case had relied upon the decision of the Tribunal in the case of ABB Ltd. (supra) whereas there is no reference to the said decision by the third Member to hold the view that Section 3 of the Customs Tariff Act, 1975 envisages 34 Customs Appeal No.41786 of 2019 provisions for redetermination of RSP. We therefore hold that this issue is covered by decision in the case of M/s.ABB Ltd. (supra) and the case law relied upon by Ld. A.R is not applicable to the present case, as distinguishable on facts.

25. Similar view was taken in the case of Commissioner of Customs (I) Nhava Sheva Vs King Kaveri Trading Co. - 2019 (370) ELT 1049 (Tri.- Mumbai). The relevant para reads as under :

"5. Learned Counsel for the respondent, while admitting that the demand of additional duties of customs were being effected under Section 4A of Central Excise Act, 1944, submits that the practice was given up from 9th July, 2009 after informing the Customs authorities. We also find from the decision of ABB Ltd. v. Commissioner of Customs, Bangalore [2011 (272) E.L.T. 706 (Tri.-Bang.)] that the fundamental issue is the correctness of application of the Rules framed under Section 4/4A of Central Excise Act, 1944 to an assessment of additional duties of customs under the Customs Tariff Act, 1975. It is seen from the provisions therein that, for the purpose of additional duties of customs, the default mechanism is 'SECTION 3. xxx (2) For the purpose of calculating under sub-sections (1) and (3), the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of--

(i) the value of the imported article determined under sub-section (1) of Section 14 of the Customs Act, 1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and

(ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of 1962), and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include --

(a) the duty referred to in sub-sections (1), (3) and (5);

(b) the safeguard duty referred to in sections 8B and 8C;

(c) the countervailing duty referred to in section 9; and

(d) the anti-dumping duty referred to in section 9A:' However, the proviso requires that the value of the imported article be deemed to be the 'retail sale price' declared on the imported article less such amount of abetment, as by notification allowed. It is, therefore, apparent from Section 3 of the Customs Tariff Act, 1975 that no provision exists for ascertainment of 'retail sale price' in the same manner as provided for in Section 4A of Central 35 Customs Appeal No.41786 of 2019 Excise Act, 1944. The purpose of Section 4A of Central Excise Act, 1944 has been clearly articulated when it was incorporated in the statute. On the other hand, Section 3 of Customs Tariff Act, 1975 was intended to ensure that the valuation adopted for customs purpose, would have to conform to the price at which the goods are intended to be sold in packages that are statutorily required to carry such prices on them. Hence a declaration of 'retail sale price' would suffice for acceptance as value for computation of additional duties of customs.

6. The respondent herein has taken a position that the goods are not required, under the provisions of Standards of Weights and Measures Act, 1976 or the Rules made thereunder, to declare so on the packages of import. There is, therefore, no provision for determination of retail sale price in the event of disagreement by the proper officer of customs with the declaration. In these circumstances, and in the absence of declaration of retail sale price, the adoption of another price by the proper officer of customs does not constitute the appropriate assessment. For this reason, we find no merits in the appeal of Revenue, which is dismissed."

26. The Larger Bench of the Tribunal in the case of M/s.Ocean Ceramics Ltd. Vs Commissioner of Customs, Central Excise (Appeals) Rajkot Interim Order Nos.01-23/2024 dt. 23.01.2024 had occasion to analyse the issue and held that the Central Excise (Determination of RSP of Excisable Goods) Rules, 2008 are not procedural in nature and cannot be given retrospective effect. Further, that the RSP cannot be ascertained by any other methodology. This case though rendered under issue arising under Central Excise Act is relevant to appreciate the applicability of Rules, 2008. The relevant paras are as under :

"89. Thus, for the reasons stated above, it is not possible to accept the views expressed by the Division Bench of the Tribunal in Schneider Electrical.

Conclusions

(i) When sub-section (4) of section 4A of the Central Excise Act, as substituted in 2003, specifically provides that the RSP shall be ascertained in the prescribed manner and the prescribed manner is the manner to be prescribed by the rules to be framed under section 37 of the Central Excise Act read with sub-section (4) of section 4 of the Central Excise Act, the RSP has to be ascertained only in terms of the 2008 Rules;

Customs Appeal No.41786 of 2019

(ii) It is a settled principle of law that a tax or a cess or a duty can be levied strictly in accordance with law and a taxing statute has to be strictly construed. In the present case, the words used in sub-section (4) of section 4A are that the RSP shall be ascertained in the prescribed manner. Thus, any duty of excise which is collected not in accordance with the manner prescribed, would be without authority of law;

(iii) It, therefore, follows that it would be impermissible for any adjudicating authority to ascertain the RSP by any other methodology, for such an ascertainment would be contrary to the statutory prescription contained in sub-section (4) of section 4A and would have the effect of empowering an adjudicating authority to determine the manner of ascertaining the RSP;

(iv) The 2008 Rules are not procedural in nature and cannot, therefore, be given any retrospective effect;

(v) Even, otherwise a rule framed by the delegatee of the legislature does not have retrospective effect, unless the statutory provision under which it is framed allows retrospectivity, either by use of specific words to that effect or by necessary implication; and

(vi) It is, therefore, not possible to accept the views expressed by the Division Bench in Schneider Electrical that the 2008 Rules are procedural in nature and, therefore, can be applied retrospectively.

90. The reference made by the Division Bench to the Larger Bench of the Tribunal is, accordingly, answered in the following manner:

(i) It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which date the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force;

(ii) In view of the answer to the first question, there is no necessity of answering the second question; and 37 Customs Appeal No.41786 of 2019

(iii) It is not necessary to answer the third question as both learned counsel for the appellant and the learned special counsel appearing for the department have stated that this question may not be answered by the Larger Bench."

(emphasis supplied)

27. Moreover, in the present case, though the adjudicating authority has stated that Rule 6 of 2008 is applied to redetermine RSP, it can be seen that the method of arriving at the redetermined MRP is not within the principles or provisions of Section 4A of the Central Excise Act & Rules. The methodology adopted by adjudicating authority is to deduct the negotiated price of the backpack (Rs.225/-) from the Purchase order price. The Purchase order Price or bid price is inclusive of items which are not imported. Further, the department has no case that such backpack can be obtained at Rs.225/- from market. All these factors would lead to the conclusion that the redetermined MRP cannot be sustained. Consequently, the demand of differential duty also cannot be sustained and require to be set aside. Ordered accordingly.

28. The Ld. Counsel had adverted to the decision in the case of PG Electroplast Ltd. Vs Commissioner of Central Excise & Service Tax, Noida - 2014 (307) ELT 787 (Tri.-Del.) to argue that in the said case, it was held that for the supplies made by appellant therein to M/s.ELCOT, the MRP was required to be declared and provisions of Section 4A would be applicable even though the goods are intended for free supply to poorer sections of population of Tamil Nadu on behalf of Government of Tamil Nadu.

29. The Ld. Counsel has put forward arguments on the grounds of limitation also. The show cause notice is dated 08.08.2017. the imports are made during the period 09.05.2012 to 09.06.2014. The facts reveal that the officers have visited the warehouse on 2.7.2013 and 16331 numbers of laptops were seized. The Department was thus aware of the entire situation in 2013 itself. The statements were also recorded in 2013. Thereafter, show cause notice has been issued after 4 years alleging suppression of facts with intent to evade payment of Customs duty invoking the extended period. In CCE v. Essel 38 Customs Appeal No.41786 of 2019 Propack Ltd. (supra) it was held by the Hon'ble Supreme Court held that when all the information was already available with the department, the extended period cannot be invoked. The said decision has been followed in the case of CCE Vs Spicejet Ltd. (supra) and other cases. So also, in the present case, the issue is with respect to redetermination of MRP of the composite supply of laptop and laptop bags. The issue as to whether there is undervaluation of MRP when the goods are in a composite supply form is debatable and is interpretational in nature. Taking all these aspects into consideration and following the decision of the Hon'ble Apex Court in CCE Vs Essel Propack Ltd. (supra), we are of the considered opinion that there are no grounds for invoking the extended period. The show cause notice is time-barred and the demand cannot sustain on the ground of limitation also.

30. The appellant has argued that confiscation of goods, interest demand, penalty and redemption fine imposed cannot be sustained in relation to CVD leviable under Section 3 (1) of Customs Tariff Act, 1975. The Hon'ble Bombay High Court in the case of Mahindra & Mahindra Ltd. v. Union of India (supra) had considered the said issue and held that interest and penalty in relation to CVD cannot be demanded in the absence of specific provisions for levy of interest, penalty in the Customs Tariff Act, 1975. The said decision was upheld by Hon'ble Apex Court as reported in 2023 (8) TMI 135-SC. Following the same, we hold that the confiscation of goods, interest on CVD, redemption fine and penalties cannot sustain on this ground also.

31. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.




                   (Order pronounced in open court on 08.05.2024)




            sd/-                                                      sd/-
(VASA SESHAGIRI RAO)                                     (SULEKHA BEEVI C.S.)
  MEMBER (TECHNICAL)                                       MEMBER (JUDICIAL)


MK/gs
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     Customs Appeal No.41786 of 2019

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