2004 (9) TMI 103 - SC - Central Excise

Whether the declaration made by an assessee on a package of cigarettes disempowered the revenue from going behind the declaration? Held that - In our opinion the outcome of this would be equally illogical. It envisages an excise officer in one part of the country determining what would be the reasonable market price through out the country for that particular brand, an exercise which the Tribunal itself concedes would require the examination of the cost data and market considerations and would be a very complicated and time consuming impractical exercise which was rightly not provided for . And yet according to the Tribunal s and the Revenue s interpretation of the notification the 1985 and the 1983 , the Excise Officer would have had to do just that. Apart from the patent ipracticability of the matter, the question whether the price so fixed by the Excise authority is reasonable or not would itself be justiciable with the consequent blockage of revenue in the quagmire of litigation. That is precisely what the Notification had sought to avoid. The certainty of specific rates which was sought to be achieved by the notification has been undone by the adjudicating authority and the Tribunal. The notification had introduced a system for levy of excise duty on an experimental basis. If the experiment was a failure for whatever reason, it was open to the respondents to do away with it and replace the system by some other as it did in 1987. But as long as the notification stood, it had to be given effect to. In the view we have taken, there is no need to go into other questions debated before us

Issues Involved:
1. Interpretation of Exemption Notifications (1983 and 1985).
2. Allegations of Misuse of Concessional Rates.
3. Validity of Show Cause Notice.
4. Res Judicata.
5. Interpretation of "Sale Price" and "Maximum Retail Price" (MRP).
6. Applicability of Standards of Weights and Measures Act, 1976 (SWM Act) and Packaged Commodities Rules, 1977.
7. Finality of Declarations under the Notification.

Detailed Analysis:

1. Interpretation of Exemption Notifications (1983 and 1985):
The primary issue revolves around the interpretation of Notification No. 36/83 and Notification No. 201/85, which exempted certain categories of cigarettes from excise duty based on their retail sale price. The appellant argued that the "declaration" referred to in the notifications was the printed price required under the SWM Act and Packaged Commodities Rules. The Revenue contended that the printed price must reflect the actual retail price and that the appellant had under-declared prices to evade duty.

2. Allegations of Misuse of Concessional Rates:
The show cause notice alleged that the appellant had printed lower prices on cigarette packages to avail concessional rates under the notifications, while the actual retail prices were higher. The notice charged the appellant with controlling margins and prices clandestinely and reducing margins for wholesalers and retailers to manipulate the effective price.

3. Validity of Show Cause Notice:
The appellant challenged the show cause notice in the Calcutta High Court, which dismissed the writ petition and allowed the adjudication to proceed. The Division Bench clarified that all questions of fact and law could be urged before the Adjudicator, leaving the field open for the respondents to proceed with the show cause notice.

4. Res Judicata:
The Revenue argued that the issue of interpretation of the notification was barred by res judicata, as it had been decided by the Calcutta High Court. However, the appellant contended that the plea of res judicata was not raised at any stage before the adjudicating authority or the Tribunal and that the High Court had left all questions open for decision. The Supreme Court held that the plea of res judicata had to be specifically raised and could not be introduced at the appellate stage.

5. Interpretation of "Sale Price" and "Maximum Retail Price" (MRP):
The appellant argued that the sale price under the notification was the printed MRP, as mandated by the SWM Act and Packaged Commodities Rules. The Revenue contended that the printed price must be an honest declaration and reflect the actual retail price. The Supreme Court interpreted the phrase "may be sold" to mean "permitted to be sold" in accordance with the printed MRP, rejecting the Revenue's interpretation that the price should reflect the actual retail price.

6. Applicability of Standards of Weights and Measures Act, 1976 (SWM Act) and Packaged Commodities Rules, 1977:
The Supreme Court held that the notification's reference to the sale price must be understood in the context of the SWM Act and Packaged Commodities Rules, which mandate that the retail sale price must be printed on the package. The Court noted that the purpose of the notification was to fix the basis for levy of excise duty on the MRP, as printed on the package, and not on the actual retail price.

7. Finality of Declarations under the Notification:
The Court held that the printed MRP, as required under the SWM Act and Packaged Commodities Rules, was final for the purposes of the notification. The Excise Authority was limited to verifying the existence of the declaration in the prescribed form and could not question its correctness. The Court emphasized that the notification aimed to avoid disputes and litigation related to the determination of assessable value and to achieve certainty in the levy of excise duty.

Conclusion:
The Supreme Court allowed the appeal by the appellant (Civil Appeal No. 70 of 1999) and dismissed the appeal by the Revenue (Civil Appeal No. 6101 of 1998). The impugned demands raised against the appellant were set aside, and the Court held that the printed MRP, as mandated by the SWM Act and Packaged Commodities Rules, was the basis for calculating excise duty under the exemption notifications.

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