2014 (1) TMI 1642 - AT - Central Excise

Valuation of goods - Classification of goods - Valuation u/s 4 or 4A - Difference of opinion - Majority order - Whether the appellants are required to affix MRP on their product as per the provisions of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 or not - Held that - As the decision of the Hon ble High Court of Bombay in the case of Larsen & Toubro Ltd. (2008 (2) TMI 645 - HIGH COURT BOMBAY) has not been set aside by the Hon ble Apex Court. Therefore in the light of the judgment in the case of Shri Chamundi Mopeds Ltd. 1992 (4) TMI 183 - SUPREME COURT OF INDIA the judgment of the Hon ble High Court of Bombay in the case of Larsen & Toubro Ltd. (2008 (2) TMI 645 - HIGH COURT BOMBAY) is a law of land as on today. Therefore, we hold that the appellants are required to affix MRP on the impugned goods. Whether the list price with suitable adjustment for VAT and local taxes can be accepted as an accurate and reasonable substitute for the MRP - Held that - A careful examination of the provisions of sub-section (2) reveals that two conditions are required to be satisfied for application of Section 4A. The first condition is that there should be a requirement under the Standards of Weights and Measures Act, 1976 or the Rules made thereunder or under any other law for the time being in force to declare the RSP on the packages of the goods. The second condition is that the goods should be notified under sub-section (1) of Section 4A. If these two conditions are satisfied, then notwithstanding anything contained in Section 4, the value for the purpose of assessment of duty will be the retail sale price minus the amount of abatement, if any, as specified by the Central Government. Therefore, once the goods are specified under Section 4A(1) and there is a statutory requirement to declare RSP on the retail sale packages of the goods, the question of application of Section 4 would not arise at all. In the present case, there is no dispute on the fact that on the retail packages the appellant-manufacturers were required to declare the RSPs and the goods were also notified under the provisions of Section 4A(1). If that be so, it cannot be contended that the valuation of the goods have to be done under Section 4 of the Act and not under Section 4A. Thus, there is a contradiction in the findings and conclusions drawn by the learned Member (Judicial) that prior to 1-3-2008 the goods were liable to be assessed for excise duty purposes under Section 4 of the Act and not under Section 4A. Whether for the period prior to 1-3-2008, the maximum retail price of the impugned goods can be determined by the assessing officer using reasonable/best judgment method based on the materials available and consistent with the provisions of Section 4A of the Central Excise Act, 1944, in the absence of a machinery provision available for determination of the MRP of the product - Held that - Central Government acquired the powers to ascertain in the prescribed manner the retail sale price of such goods and the retail sale price so ascertained shall be deemed to be retail sale price for the purpose of the Section vide Finance Act, 2003 which substituted sub-section (4) of Section 4A. The rules were notified only w.e.f. 1-3-2008. The question is, prior to 1-3-2008 whether the provisions of the said Rules could be applied for determination of RSP using the best judgment method - If one carefully goes through the provisions of Section 4A and the Rules, 2008 cited above, it can be seen that there is no determination of RSP envisaged in the legal provisions. The declaration of RSP is mandated by the provisions of the Packaged Commodities Rules and the Standards of Weights and Measures Act and RSP by definition is the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale. Neither the Standards of Weights and Measures Act nor the Rules made thereunder provides for determination of RSP. It merely defines what RSP is. Since the declaration of RSP is mandated by the Standards of Weights and Measures Act or the Rules made thereunder, Excise law cannot prescribe a method for determination of RSP since the declaration of RSP is not mandated by the Central Excise law. Therefore, what is provided under the Central Excise law is only the ascertainment of the RSP as against determination of RSP. In the present case, the charging section is Section 3 of the Central Excise Act and the rate of tax is prescribed in the Schedule to the Central Excise Tariff Act, 1985. The value for the purpose of assessment is the retail sale price as defined in the Explanation 1 to Section 4A of the Act. Thus, the taxable event, the rate of tax, the measure of the tax and the person liable to pay tax are separately provided for in the various provisions of the Central Excise Act, 1944 and the Rules made thereunder. Rules, 2008 apply only to a limited situation where the manufacturer fails to declare the RSP or tampers with or obliterates the RSP already declared. Therefore, the provisions are merely procedural and directory in nature and hence has retrospective operation. - charging section provides for the levy, the rate of tax is specified in the schedule, the person liable to pay the tax is the manufacturer of the goods under Rule 4 of the Central Excise Rules, 2002 and the measure of tax is defined under Section 4A. Thus, all the core ingredients of the tax system is specified in the law. The Rules 2008 merely provides for ascertainment of the measure of tax in a situation where it is not declared. There is absolutely no doubt that the MRP of the product can be ascertained by the assessing officer using reasonable/best judgment means based on the material available and consistent with the principles and the provisions of Section 4A of the Central Excise Act, 1944 even if rules for ascertainment of the same were not framed earlier and came about later - excise levy on the impugned goods is not on the transaction value but is on retail sale price. The appellant has circulated list price to their stockists which is exclusive of local taxes and octroi. The stockists cannot sell the goods at a price higher than those mentioned in the list price. This is explicitly mentioned in the list price itself. Revenue has adopted the list price with suitable adjustment for including the sales tax/VAT and octroi elements and from such value abatement has been given for arriving at the assessable value. In the absence of any such evidence, the additions made by the Revenue to the list price towards local taxes cannot be faulted at all so long as the reasonableness of the additions has not been rebutted by the appellants either before the adjudicating authority or before this Tribunal. Therefore, I do not find any infirmity in the determination of RSP of the goods manufactured by the appellants by adopting their list price and adding thereto the VAT/sales tax and octroi elements. From the facts available on record it is seen that the appellants were aware that they were required to declare RSP on the packages of the goods manufactured and sold by them. They were so advised by the Director of Legal Metrology as early as in 2002. However, in spite of being aware of their legal obligations, the appellants did not comply with the statutory directions. After a gap of five years they challenged the decision of the Director, Legal Metrology before the Hon ble Bombay High Court and the Bombay High Court directed the Director, Legal Metrology to pass a speaking order which the Director, Legal Metrology has done in 2007. - Thus, the appellants were fully aware of the legal requirements. In spite of such knowledge, the appellant chose not to comply with the law in complete defiance of the law. There was no reason for the appellant to entertain any reasonable belief that they were not required to declare the RSP on the packages. The question is when an appellant deliberately defies a statutory requirement, can they be allowed to get away with it and obtain the benefit under some other law. Appellant have deliberately contravened the provisions of Standards of Weights and Measures Act and the Packaged Commodities Rules made thereunder. Therefore, they have to suffer the consequences of the contraventions. For such contraventions the appellant cannot claim benefits under the provisions of Central Excise Act by holding that the appellant was not liable to discharge excise duty under Section 4A of the Central Excise Act. In the present case, a deliberate contravention of the Standards of Weights and Measures Act in utter disregard to the law was also a contravention under the provisions of Central Excise Act and these contraventions had been committed by the appellant with an intention to evade payment of legitimate Central Excise duty. In these circumstances, the invocation of extended period of time is completely justified and, therefore, the main demands made invoking the extended period of time is clearly sustainable. The appellants also resorted to subterfuge by making misdeclarations on the packages that they are meant for industrial consumers and not for retail sale. There was no exemption under Rule 34 of the PCR from declaration of MRP even if the goods were meant for industrial or institutional customers, if they were sold by numbers and displayed for sale by the stockists and retailers. The appellants agreements with the stockists required the latter to display these goods for sale and the stockists have also confirmed this fact in their statements given before the investigating authorities. There is also no dispute that the appellants goods are sold by numbers. Thus to circumvent the law, the appellants resorted to misdeclarations, which clearly reveals their guilty mind. Thus the charge of suppression of facts and wilful misstatement of facts with an intent to evade excise duty is writ large and established beyond doubt. In such circumstances, invocation of extended period of time for demand of duty is completely justified - Decided against assessee.

Summary

Issues Involved:
1. Whether the appellants are required to affix MRP on their products as per the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
2. Whether the demands for the period prior to 1-3-2008 are sustainable in the absence of machinery provisions to determine MRP.
3. Whether the list price can be adopted as MRP as per the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
4. Whether demands for the extended period of limitation are sustainable.

Issue-wise Detailed Analysis:

1. Requirement to Affix MRP:
The appellants argued that their products, meant for industrial use, were not subject to MRP declaration under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. However, the Hon'ble High Court of Bombay held that the appellants are required to affix MRP on the impugned goods. The Tribunal upheld this view, stating that the decision of the High Court is binding unless set aside by the Supreme Court. Therefore, the appellants are required to affix MRP on their products.

2. Demands for the Period Prior to 1-3-2008:
The appellants contended that prior to 1-3-2008, there were no machinery provisions to determine MRP, making demands for this period unsustainable. The Tribunal referred to several case laws and concluded that even in the absence of specific rules, the assessing officer could use reasonable/best judgment methods to ascertain the MRP based on available materials and consistent with Section 4A of the Central Excise Act. The Tribunal ruled that the demands for the period prior to 1-3-2008 are sustainable.

3. Adoption of List Price as MRP:
The appellants argued that the list price is merely indicative and cannot be used to determine MRP. However, the Tribunal found that the list price, with suitable adjustments for VAT and local taxes, is a reasonable and accurate substitute for MRP. The Tribunal noted that the appellants themselves used the list price for subsequent periods and upheld the adoption of the list price as MRP both before and after 1-3-2008.

4. Extended Period of Limitation:
The appellants claimed that they were under a bona fide belief that their products were not subject to MRP declaration, and thus, the extended period of limitation should not apply. However, the Tribunal found that the appellants were aware of their obligation to declare MRP and deliberately defied the law. The Tribunal concluded that the invocation of the extended period of limitation was justified due to the appellants' deliberate non-compliance and misdeclarations.

Majority Decision:
The majority decision of the Tribunal upheld the demands against the appellants, confirming that:
1. The appellants are required to affix MRP on their products.
2. The demands for the period prior to 1-3-2008 are sustainable.
3. The list price can be adopted as MRP.
4. The extended period of limitation is applicable.

Conclusion:
The appeals were dismissed, and the orders against the appellants were upheld, confirming the requirement to affix MRP, the sustainability of demands for the period prior to 1-3-2008, the adoption of list price as MRP, and the applicability of the extended period of limitation.