2016 (10) TMI 333 - AT - Customs

Mis-declaration of MRP at the time of import - demand of differential duty - import of toilet soaps - declared RSP per piece ₹ 5/- - replacement of the labels/stickers - Held that - there has been a clear facilitation and association with the activities of post-import sale of the goods at higher prices by affixing higher price (MRP) labels on the goods on the part of the appellant-importer. The importer has been in active knowledge and they rather facilitated the sale of the goods to be made at the higher price (MRP) than the price (MRP/RSP) they had declared to the customs. The appellant cannot absolve themselves from the responsibility that the goods carried different MRP labels of the price then what they had declared to the customs. The argument of the appellant that the wholesale distributor / dealer, who sold the goods at higher price causing short-payment of CVD is to be taken as deemed manufacture and differential duty should be charged from wholesaler/distributor, cannot cut much ice, when they themselves have through out been involved and in the full active knowledge of the fact that the goods were being sold at the higher price (MRP) than what they had declared to the customs. The decision in the case of PLANET SPORTS PVT. LTD. Versus COMMISSIONER OF CUSTOMS, NEW DELHI 2004 (10) TMI 209 - CESTAT, NEW DELHI relied upon where it was held that it was incumbent upon the importer to declare the MRP at which the imported goods were to be sold and not any other price and demand of duty, confiscation and penalty were upheld. The demand of differential duty upheld - penalty reduced to ₹ 6,97,212/- - appeal disposed off - decided against appellant, with modification in the amount of penalty.

Issues Involved:
1. Demand for differential duty based on post-import sale price exceeding declared MRP.
2. Legal obligation of importers to monitor post-import sale prices.
3. Tampering with MRP by wholesale dealers.
4. Liability of deemed manufacturers for revised MRP.
5. Flow back of funds from wholesale dealers to the importer.
6. Allegation of wilful suppression, fraud, etc.
7. Justification for demanding differential duty from the appellant.

Issue-wise Detailed Analysis:

1. Demand for Differential Duty Based on Post-Import Sale Price Exceeding Declared MRP:
The appellant, M/s. Mathewsons Exports & Imports (P) Ltd., faced a demand for differential duty of ?34,86,064/- due to the enhancement in the value of imported goods. The demand was based on findings that the goods were sold at prices higher than the MRP declared at the time of import clearance.

2. Legal Obligation of Importers to Monitor Post-Import Sale Prices:
The appellant argued that there is no legal obligation for importers to monitor post-import sale prices to ensure they do not exceed the declared MRP. The appellant contended that the tampering with MRP was done by wholesale dealers after the clearance of goods from customs.

3. Tampering with MRP by Wholesale Dealers:
The appellant claimed that any increase in MRP was due to actions taken by wholesale dealers, which should render those dealers liable for any additional duties. The appellant highlighted that the wholesale dealers would become deemed manufacturers under Section 2(f)(iii) of the Central Excise Act.

4. Liability of Deemed Manufacturers for Revised MRP:
The appellant argued that the change in MRP by wholesale dealers should be considered as manufacturing, making those dealers liable for central excise duty on the enhanced MRP. The appellant maintained that they should not be held responsible for the actions of the wholesale dealers.

5. Flow Back of Funds from Wholesale Dealers to the Importer:
The appellant asserted that there was no evidence of any flow back of funds from the wholesale dealers to the appellant due to the change in MRP. The department did not allege any such flow back, thus weakening the case against the appellant.

6. Allegation of Wilful Suppression, Fraud, etc.:
The appellant informed customs about the non-fixture of MRP stickers on certain cartons, which led to the investigation and subsequent demand for differential duty. The appellant argued that this proactive disclosure should negate any allegations of wilful suppression or fraud.

7. Justification for Demanding Differential Duty from the Appellant:
The department argued that the appellant was aware of the operations leading to the sale of goods at higher prices and facilitated these actions. The Commissioner’s findings indicated that the appellant played an active role in evading the correct payment of duties.

Judgment Analysis:

The tribunal examined the facts, submissions, and case laws presented by both parties. It was found that the appellant, in association with distributors, replaced MRP stickers to sell goods at higher prices than declared to customs. The investigation revealed that the MRP declared to customs was consistently lower than the actual MRP at which the goods were sold to consumers.

The tribunal agreed with the Commissioner’s findings that the appellant was actively involved in facilitating the sale of goods at higher prices and could not absolve themselves of responsibility. The tribunal referenced decisions from the CESTAT, Delhi, which supported the conclusion that the appellant was liable for the differential duty based on the actual MRP at which the goods were sold.

The tribunal upheld the demand for differential duty but reduced the penalty imposed on the appellant to ?6,97,212/- (20% of the original penalty) under Section 114A of the Customs Act, 1962. The appeal was partly allowed, and the order was modified to the extent of the reduced penalty.

Conclusion:
The tribunal confirmed the demand for differential duty and recognized the appellant’s involvement in the misdeclaration of MRP. However, the penalty was reduced considering the circumstances of the case. The appeal was partly allowed, modifying the impugned order accordingly.

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