2014 (12) TMI 822 - AT - Central Excise

Valuation of goods u/s 4 or 4A - Biscuits cleared to Municipal Corporation of Delhi under the National Programme of Nutritional Support of Primary Education - adjudicating authority held that the supplies of biscuits to MCD did not qualify to be called retail sale, MRP was not required to be printed thereon, the price printed on packages was not (true) MRP and the impugned goods were required to be assessed not under Section 4A but under Section 4 - suppression of facts - Held that - packages of 61gms. and 71gms. are not in accordance with the requirements of the SWM (PC) Rules and the contract price itself was fixed keeping in view that MCD supplied wheat (for making biscuits) free of cost. This obviously means that the so called MRP was legally not MRP in terms of SWM (PC) Rules; it was just a figure mentioned on the packages in the name of MRP. Further supplies to MCD were not even a sale at arms length because as per the contract under which the goods were supplied the MCD provided them free wheat. It is thus evident from the definition of retail sale price quoted earlier that the price at which MCD bought the impugned goods cannot be called MRP because that price was negotiated taking into account the fact that the appellants were given free supply of wheat. So, it is beyond doubt that what was mentioned on those packages was not MRP. Thus ground on which the appellants attempted to distinguish their case from the cases of Australian Foods Ltd. (2010 (3) TMI 18 - MADRAS HIGH COURT) and Nestle India Ltd. 2009 (5) TMI 766 - CESTAT, BANGALORE is not sustainable. From the foregoing there remains no doubt that the biscuits supplied to MCD are not eligible for assessment in terms of Section 4A and consequently the demand of differential duty is clearly sustainable. As regards the allegation of suppression of facts, it is evident that they had nowhere declared that they were getting free supply of wheat from MCD and in spite of being fully aware of this fact, they deliberately and misleadingly claimed that ₹ 2 printed on each of the packages was the correct MRP and that too for all packages ranging in weight from 61 gms. to 71 gms to 100 gms each. This shows that they were just printing a price in the name of MRP for the sake of making a claim for assessment under Section 4A and thereby evade duty by hoodwinking Revenue. Thus the suppression of facts and intent to evade duty are more than evident in this case. Both Shri Bajaj and Shri Maheshwari by virtue of their position knew of and allowed this modus operandi and thus abetted the evasion of duty which made the impugned goods liable to confiscation. In the circumstances mens rea on the part of the appellants is clearly evident making them liable to penalties adjudged by the adjudicating authority. - Decided against assessee.

Summary

Issues:
Assessment under Section 4A for supplies to MCD, Interpretation of MRP requirement, Allegation of suppression of facts, Imposition of penalties on directors.

Assessment under Section 4A for supplies to MCD:
The case involved the confirmation of a demand for duty on clearances of biscuits made to MCD under a contract. The appellants contended that the clearances fell under Section 4A due to the MRP printed on packages. They cited judgments and interpretations to support their position. However, the tribunal found that the supplies did not conform to the SWM (PC) Rules as the package weights were not in line with the specified quantities. Previous judgments highlighted that supplies to institutional buyers do not require MRP printing. The tribunal concluded that the biscuits were not eligible for assessment under Section 4A.

Interpretation of MRP requirement:
The appellants argued that the MRP printed on packages was valid as per their contract with MCD. However, the tribunal determined that the printed price was not a true MRP as it did not comply with SWM (PC) Rules. The tribunal emphasized that the price was negotiated considering the free supply of wheat by MCD, making the printed figure misleading. The tribunal rejected the appellants' attempt to distinguish their case from previous judgments and upheld that the printed price was not MRP.

Allegation of suppression of facts:
The tribunal found evidence of suppression of facts as the appellants did not disclose the free supply of wheat from MCD, which influenced the pricing. The deliberate attempt to claim the printed price as MRP for duty assessment indicated an intent to evade duty. The tribunal held that the appellants, including the directors, were aware of and allowed this practice, leading to penalties and confiscation of goods for duty evasion.

Imposition of penalties on directors:
The tribunal upheld the penalties imposed on the directors for their involvement in the suppression of facts and evasion of duty. The directors' knowledge and facilitation of the misleading pricing scheme demonstrated their culpability in the evasion, leading to the affirmation of penalties by the tribunal.

In conclusion, the tribunal dismissed the appeals, upholding the demand for duty, penalties on the directors, and the decision that the biscuits supplied to MCD were not eligible for assessment under Section 4A. The judgment emphasized the importance of compliance with SWM (PC) Rules and transparency in pricing to prevent duty evasion.