2012 (11) TMI 964 - AT - Central Excise

MRP valuation Interest on differential duty liability due to alternation of MRP at Depot - footwear submission of the appellants that alteration of MRP on the impugned goods amount to manufacture and therefore the liability to pay duty on the altered MRP arises only in the month of March 2006 Held that - Argument that alteration in the MRP would amount to manufacture, would also necessitate taking a new registration by the appellants for their depot and the duty payment has to be made on the impugned goods after taking credit in respect of the duty paid on the footwear bearing lesser MRP when earlier cleared from the factory - argument was not advanced earlier and the duty liability has to be worked out allowing credit on the duty paid earlier - matter remanded to the original authority for examination

Summary

Issues:
1. Whether interest is payable on the differential duty paid due to an increase in MRP on past clearances.
2. Whether the alteration of MRP amounts to manufacture under Section 2(f)(iii) of the Excise Act.

Issue 1: Interest on Differential Duty:

The appeal before the Appellate Tribunal involved a dispute over the payment of interest amounting to Rs. 86,209 on the differential duty paid by a public limited company manufacturing footwear. The company had increased the Maximum Retail Price (MRP) of the footwear in March 2006, including on unsold stock at their Regional Distribution Centers. The jurisdictional Deputy Commissioner issued a show-cause notice demanding interest under Section 11AB of the Excise Act, considering the duty paid by the company as differential duty on account of the MRP increase on past clearances. The company argued that no interest was payable as the duty was paid based on the MRP prevalent at the time of removal, and any subsequent increase should not affect the duty liability. The Appellate Tribunal, after considering the arguments, found that the interest was leviable based on the Supreme Court decision in SKF Limited case, even though the valuation was under Section 4A and not Section 4. However, the Tribunal also noted that the company's argument regarding the MRP revision not affecting the duty liability at the time of original clearance required further examination. Consequently, the impugned order demanding interest was set aside, and the matter was remanded to the original authority for re-examination.

Issue 2: Alteration of MRP as Manufacture:

The second issue revolved around whether the alteration of MRP on the footwear amounted to manufacture under Section 2(f)(iii) of the Excise Act. The company contended that the MRP alteration in March 2006 should be considered as the point from which excise duty liability arose, and since the duty was paid before the due date, no interest should be levied. The Appellate Tribunal found merit in this argument, acknowledging that the alteration of MRP could be viewed as a manufacturing activity, triggering duty liability from March 2006 onwards. However, this argument was not raised earlier in the proceedings, necessitating a re-examination at the original level. The Tribunal set aside the impugned order and remanded the matter to the original authority for further consideration, including the question of obtaining a new registration for the depot and calculating duty liability with credit for previous payments.

In conclusion, the Appellate Tribunal allowed the appeal by way of remand, highlighting the complexities surrounding the payment of interest on differential duty due to MRP revisions and the potential classification of MRP alteration as a manufacturing activity. The judgment emphasized the need for a detailed re-examination of the issues at the original level to ensure a fair and accurate resolution of the dispute.