2019 (12) TMI 786 - AT - Central Excise

Method of Valuation - section 4 or section 4A of Central Excise Act - Set Top Boxes for television sets under the brand name of TATA SKY - whether the duty of Central Excise discharged on MRP of ₹ 1499/- could be accepted for discharge of duty under section 4A of the Excise Act? HELD THAT - In exercise of the powers conferred by sub-section (1) and (2) of section 4A of the Excise Act, the Central Government issued a Notification dated 1 March, 2006 which was subsequently amended by Notification dated 24 January, 2008 by which Set Top Boxes for television sets were included as at Serial. No. 89B. It is not in dispute that the Respondent was paying Central Excise duty on the various models of Boxes manufactured and cleared on the basis of MRP printed on the boxes in terms of section 4A of the Excise Act after availing abatement as applicable from time to time with effect from 25 January, 2008. Prior to this date, the Respondent was paying Central Excise duty of the boxes on the transaction value under section 4 of the Excise Act - The Commissioner found that the Department could not substantiate that the goods in question were sold to ultimate consumers at a price that was higher than the printed MRP. While arriving at this finding, the Commissioner observed that none of the three grounds contemplated under section 4A of the Excise Act on account of which the Department could ascertain the retail price existed. In fact the Commissioner also examined two invoices which clearly indicated that the boxes were sold at ₹ 1,499/- by M/s TATA SKY Ltd. No evidence was produced by the Department to establish that the Boxes were sold to ultimate customers at a price higher than the MRP. When the conditions set out in sub-section (4) of section 4A of the Act for ascertaining the retail sale price of the goods were not satisfied, the Department cannot be permitted to ascertain the sale price of the goods. The MRP indicated in the Boxes would alone form the basis for determining the levy of Central Excise duty. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the Central Excise duty should be assessed based on the MRP under Section 4A of the Central Excise Act or on the transaction value under Section 4.
2. Validity of the reduction in MRP from ?2,999/- to ?1,499/- for Set Top Boxes and its implications on the excise duty.
3. Whether the Department can re-compute the MRP based on the cost of production and other factors.

Issue-wise Detailed Analysis:

1. Assessment of Central Excise Duty:
The primary issue was whether the Central Excise duty should be assessed based on the MRP under Section 4A of the Central Excise Act or on the transaction value under Section 4. The Respondent, engaged in the manufacture of Set Top Boxes, initially paid duty on the transaction value but shifted to MRP-based assessment following a notification on January 24, 2008. The Commissioner confirmed that the goods were notified under Section 4A, and hence the duty should be calculated based on the MRP minus the abatement. The Tribunal upheld this, stating that once goods are notified under Section 4A, the transaction value becomes irrelevant.

2. Reduction in MRP and its Implications:
The Department issued a show cause notice alleging that the reduction in MRP from ?2,999/- to ?1,499/- was not genuine and did not reflect the true market price. The Respondent argued that the MRP printed on the boxes was the correct basis for duty assessment. The Commissioner found no evidence that the boxes were sold to ultimate consumers at a price higher than ?1,499/-. The Tribunal agreed, noting that the Department failed to provide any proof that the actual sale price exceeded the printed MRP. The Tribunal emphasized that the burden of proof was on the Department to show that the printed MRP was not the actual retail sale price.

3. Re-computation of MRP:
The Department contended that the MRP should be re-computed based on the cost of production, arguing that the declared MRP was not sufficient to cover the manufacturing costs. The Commissioner and the Tribunal both rejected this argument, stating that the conditions under Section 4A(4) for re-computing the MRP were not met. The Tribunal cited the Supreme Court decision in I.T.C. Ltd. vs. Commissioner of Central Excise, New Delhi, reinforcing that the Department cannot re-compute MRP suo moto unless specific conditions are satisfied.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the Commissioner's order that the duty should be assessed based on the MRP of ?1,499/- as printed on the boxes. The Tribunal found no substance in the Department's arguments and confirmed that the conditions for re-computing the MRP were not met. The decision emphasized the overriding effect of Section 4A over Section 4 for goods notified under Section 4A and the necessity for the Department to provide concrete evidence when challenging the declared MRP.