1998 (9) TMI 665 - AT - Central Excise

Summary

Issues Involved:

1. Interpretation of Statutory Provisions
2. Assessment of Maximum Retail Price (MRP)
3. Evidence of Price Fixation or Visualization
4. Circulation of Effective Prices (EPs)
5. Quantification of Differential Duty
6. Liability of Job Workers
7. Penalties on ITC and its Directors
8. Limitation Period for Demand

Summary:

1. Interpretation of Statutory Provisions:
The court referred to the decision in Smith v. East Ellen Rural District Council 1956 for the principle that clear statutory language must be followed even if it leads to strange results. In Smt. Sita Devi v. State of Bihar, it was noted that the language of the Bihar Agricultural Produce Markets Act, 1960, included "agricultural produce" within animal husbandry products, and irrationality in statutory interpretation cannot lead to striking down the Act.

2. Assessment of Maximum Retail Price (MRP):
The court held that the printed price is chosen by the manufacturer, and the manufacturer must modulate their activity and pricing strategy to avoid adverse consequences. The alleged unworkability of this interpretation does not affect its tenability.

3. Evidence of Price Fixation or Visualization:
The court examined various documents (A81F, A81A, A37A, A6, A16, A17, A12, A10, A86, A85) and concluded that ITC visualized or expected EPs higher than PPs. The documents indicated practices of ITC fixing or visualizing higher EPs.

4. Circulation of Effective Prices (EPs):
The court found that ITC was visualizing higher EPs and circulating the same to the trade. This was supported by evidence showing ITC's involvement in ensuring that cigarette packages were generally sold at EPs higher than PPs.

5. Quantification of Differential Duty:
The court directed that the maximum retail prices which should have been declared and printed on the packages must be determined by granting a deduction of 8% from the unit prices shown in A81F and A81A for periods A and B, respectively. For other periods, similar deductions were directed based on the documents and regional variations.

6. Liability of Job Workers:
The court exonerated job workers from liability, holding that they were dependent on ITC for particulars of MRP and ASP and had no knowledge of ITC's fraudulent actions. The job workers fulfilled their duty by paying duty based on the PPs declared by ITC.

7. Penalties on ITC and its Directors:
The court set aside penalties imposed on ITC and its directors under Rules 9(2), 52A(5)(c), and 209 of the Central Excise Rules, 1944. It was held that penalties could not be imposed under these rules as the removals were not clandestine and were made after following proper procedures.

8. Limitation Period for Demand:
The court held that the larger period of limitation under the proviso to Section 11A of the Act was rightly invoked due to ITC's deliberate suppression of facts and fraudulent actions. The demand for differential duty was not barred by limitation.

Conclusion:
The appeals were allowed to the extent indicated, exonerating job workers and setting aside penalties on ITC and its directors. The case was remanded to the Adjudicating Authority for fresh quantification of duty demand on ITC in accordance with the court's findings.