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2018 (12) TMI 390 - AT - CustomsShort payment of CVD on imported goods - it was alleged that subsequent to the import of the goods, the appellant has been affixing a higher RSP on the products, as per the Price List available with the appellant - disputed period April, 2005 to November, 2005 - this matter is now placed before for setting aside difference of opinion - the Learned Member (Judicial) has held that the impugned order is liable to be set aside and the appeals be allowed, whereas the Learned Member (Technical) has held that the duty demands, interest and penalties have to be confirmed and only the redemption fine needs to be revisited, for which purpose, he proposed to remand the matter. Held that - The requirement of payment of CVD on the basis of MRP would arise, if the two conditions are satisfied, viz, (i) There shall be a requirement under Standards of Weights and Measures Act / Rules (later renamed as Legal Metrology Act) to declare RSP (Retail Sale Price) on such goods; and (ii) Such goods must be included under Third schedule to the Central Excise Act and attract duty of excise under Section 4 A of the CE Act. It may be noted that while the requirement to affix MRP is cast under SWM Act / Rules, what is relevant for the purposes of assessment of Customs duties is the MRP declared on such goods - There is no scope to go beyond the MRP declared. Hence, the observations made by Member Technical that the issue is one of misdeclaration and not mere change of MRP cannot be countenanced. It is apt to refer to the finding of the Member Judicial, in para 9 of the order, which is apposite. It is also fact, as rightly noted by the Member Judicial that the duty demand is based only on price lists and depositions, but there was no evidence that any higher MRP was affixed on the goods. Lack of any machinery provision in the Statute, to demand any differential duty if the MRP declared at the time of import was later changed or the goods are sold at higher prices - Held that - The Member Judicial has relied on a slew of decisions, wherein it has been consistently held that no demand of differential duty could be made in such cases, till 01.03.2008. A decision arrived at, after referring to several decisions on the same issue, could not be faulted - Further, the Member Technical has not recorded any contra view on this aspect. Hence, it cannot be said that there is any difference of opinion between the two members on this issue, i.e. as to whether duty demand could be made on the basis of higher MRP at which the goods were subsequently stated to be sold, in the absence of any machinery provision to do so, till the introduction of Central Excise (Determination of Retail Sale Price of excisable goods) Rules, 2008. Even if a higher MRP was affixed on the goods after their import, whether such activity would amount to manufacture? - Held that - Once the activity amounts to manufacture, it is only excise duty that can be demanded. In this connection, the Member Technical has observed that it is a separate issue and CVD is also payable as per the revised MRP. The decision of the Member Judicial, setting aside the duty demands, confiscation and penalties is correct in law and decision of the Member Technical to confirm the duty demand, confiscation (with reduction of redemption fine) and penalties cannot be subscribed to - the decision of the Member Judicial concurred with and the file returned to the Division bench to pronounce the majority decision.
Issues Involved:
1. Jurisdiction of the Head of Department (HOD) to act as President of the Tribunal. 2. Legality of demand of Countervailing Duty (CVD) based on altered Maximum Retail Price (MRP) post-importation. 3. Classification of post-importation activities as "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944. 4. Validity of penalties and confiscation orders. Detailed Analysis: 1. Jurisdiction of the Head of Department (HOD) to act as President of the Tribunal: The preliminary objection raised by the Revenue was based on Section 129C(5) of the Customs Act, which stipulates that the President of the Tribunal should resolve differences of opinion among members. The Revenue argued that the HOD, acting as the President due to the vacancy, cannot exercise these powers. The Tribunal referenced the High Court of Punjab and Haryana's decision in the Kapsons Electro Stampings case, which allowed the HOD to exercise all powers of the President in the interest of litigants. The Tribunal rejected the preliminary objection, emphasizing the necessity to continue judicial and administrative functions despite the vacancy. 2. Legality of demand of Countervailing Duty (CVD) based on altered Maximum Retail Price (MRP) post-importation: The appellant argued that CVD was appropriately paid based on the MRP affixed at the time of importation. The Directorate of Revenue Intelligence's (DRI) investigation alleged that the appellant affixed higher MRPs post-importation, leading to a short payment of CVD. The Tribunal noted that the Customs Tariff Act requires CVD to be paid based on the MRP declared at the time of import. The Tribunal found no statutory mechanism to demand differential duty based on a higher MRP affixed post-importation until the introduction of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. The Tribunal concurred with the Member Judicial that no differential duty could be demanded for the period before 01.03.2008. 3. Classification of post-importation activities as "manufacture" under Section 2(f)(iii) of the Central Excise Act, 1944: The appellant contended that altering the MRP post-importation constitutes "manufacture" under Section 2(f)(iii) of the Central Excise Act, making excise duty applicable rather than CVD. The Tribunal agreed that such activities amount to manufacture and that excise duty should be levied on the final product post-manufacture, not CVD on the imported goods. The Tribunal referenced the Starlite Components Ltd. case, which supported this interpretation, emphasizing that no CVD on MRP is required when subsequent manufacturing activities are involved. 4. Validity of penalties and confiscation orders: The Commissioner of Customs had confirmed a demand of ?48,24,238 in CVD, along with interest and penalties, and ordered confiscation of goods with a redemption fine of ?4.83 crores. A penalty of ?20,00,000 was also imposed on the Director of the appellant company. The Tribunal, agreeing with the Member Judicial, found that the duty demands, confiscation, and penalties were not sustainable in law due to the lack of evidence of higher MRP affixation and the absence of statutory provisions for demanding differential duty pre-01.03.2008. Conclusion: The Tribunal, by majority order, set aside the impugned order and allowed both appeals with consequential reliefs to the appellants, concurring with the Member Judicial's decision to nullify the duty demands, penalties, and confiscation orders.
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