OFFENCES BY DEALERS – WHEHTHER MANUFACTURER IS LIABLE?

[Mr. M. GOVINDARAJAN]

Usually the manufacturers do not involve in trade activities. It may be done through dealers. If they are performing the trading functions also the same should be done in the separate premises and to get separate registration for manufacturing and dealership. In this article the point to be discussed is whether the manufacturer is liable for the offences committed by dealers with reference to decided case law.

In ‘Commissioner of Central Excise, Chandigarh V. Oscar Marketing Co. Private Limited’ – 2013 (6) TMI 364 - CESTAT NEW DELHI the respondents are engaged in the manufacture of color television sets.   They paid the central excise duty based on the MRP price on the television sets. The Revenue found that some of dealers sold these television sets on MRP higher than affixed by the respondent.   The department relied on the letter of assessee. Vide letter dated 3.7.1999 the assessee intimated the dealers that the prices are ex-factory and therefore, any expenses subsequent to the sale at factory gate, does not form part of the MRP which means to say that the freight and forwarding charges or any other expenses incurred subsequently by the dealers, do not form part of the MRP.   In another letter dated 7.12.1999 the respondents intimated that maximum price at which excisable goods in packaged form are being sold to the ultimate consumer includes all taxes local or otherwise, freight transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding and the alike.

On enquiry some dealers deposed that they were charging some extra amount from their client towards the cost of transportation and after sales service. The Revenue took the view that since the goods were sold on higher price than the MRP fixed on the television sets the respondent is liable to pay the differential duty. The lower authority confirmed the demand and imposed penalty of identical amount.

The respondent filed appeal before the Commissioner of Central Excise (Appeals). He observed that the main issue is that the respondent is selling his color televisions to his dealers and paying central duty at the declared MRP price at the factory gate under the provisions of Section 4A of the Central Excise Act, 1944. The Department alleged that their dealers were selling at the price higher than the maximum retail price declared by the respondent. The respondent contended before Commissioner (Appeals) as follows:

• Out of 100 dealers and clearance of about 1000 TVs, only 40 to 45 TVS were sold only by two dealers in reference by charging higher price than MRP, the same cannot be made a leading evidence to conclude the respondent is charging higher price than MRP;
• The amount charged in excess by dealer has never been passed to the respondent;
• Nowhere the dealers in reference have mentioned that amount charged by them in excess from their customers have been passed to the respondent;
• Since dealers have charged higher than price MRP, offence has been done by the dealers under the provisions of Weight and Measures Act and not by the respondent under the Central Excise Act;
• At the time of appointment all the dealers were told that they would not charge higher price than MRP which mentioned in the invoices issued by the respondent and the circulars were also issued to the dealers for price/MRP giving details such as distributors price, freight, distributors margin service margin, dealers margin, customs price etc.,

The respondent further relied on the judgment in ‘M/s Videocon International Limited V. Commissioner of Central Excise’ –2004 (3) TMI 111 - CESTAT, MUMBAI in which it was held that six instances cannot be made the leading evidence so as to conclude that the appellant was charging more prices from their customers than the one declared by them where there were around more than 12000 dealers. Further there is no averment in show cause notice that the extra amount collected by the dealer has flown back to appellant. The Commissioner (Appeals) set aside the order.

Aggrieved against the order of Commissioner (Appeals) the Department filed appeal before the Tribunal. The Revenue contended that the case law relied on by the respondent before Commissioner (Appeals) is not applicable to the present case. In this case two dealers who had sold at higher price than declared MRP constitute 6 to 7% of the total sale. The Tribunal held that even the contentions of the Revenue are accepted the balance 94/93% of the sales are with the same declared MRP. Even in respect of sale price of the two dealers, there is no evidence that the amount collected extra by the said dealers have flown back to the respondent or such extra amount was being charged by the dealers with the consent and knowledge the respondent. The Tribunal upheld the order of the Commissioner (Appeals).