2024 (9) TMI 1490 - AT - Central Excise

Undervaluation of final product cleared by the appellant - demand based upon the evidences such as the statements of various dealers who had stated that the tiles which are manufactured and cleared by the appellant are sold at a price more than the MRP/RSP declared on such tiles - HELD THAT - The orders impugned in the instant case were similar in the case to the orders impugned in the cases decided in the decision of Acme Ceramics 2014 (3) TMI 164 - CESTAT AHMEDABAD . When the matter came up before this bench, the aforesaid decision of Tribunal in the case of Acme Ceramics was doubted and the matter was referred to the Larger Bench - the Larger Bench held that ' It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which datethe Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force'. It is apparent that the interim order removes the doubts raised by this bench with respect to the decision in case of Acme Ceramics. Consequently, the earlier decision of Tribunal in the case of Acme Ceramics becomes a binding precedent decision that needs to be followed in the instant case. Consequently, following the decision in case of Acme Ceramics the matters are disposed of in identical terms - the demand for the period prior to 01.03.2008 are set aside as also the penalty imposed on the manufacturer assessee and other individuals. For the period post 01.03.2008, the demands are set aside and matters remanded back to the adjudicating authority to reconsider the same.

Issues Involved:
1. Demand of Central Excise duty due to undervaluation of final product.
2. Imposition of penalties on manufacturers.
3. Application of Section 4A of the Central Excise Act, 1944, and related rules.
4. Determination of Retail Sale Price (RSP) for periods before and after 1-3-2008.
5. Validity of re-determining RSP using best judgment method.
6. Liability of duty if RSP was manipulated fraudulently.

Issue-wise Detailed Analysis:

1. Demand of Central Excise duty due to undervaluation of final product:
The main dispute revolves around the demand for Central Excise duty due to undervaluation of ceramic/vitrified tiles manufactured by the appellants. The Revenue's case was based on evidence such as dealer statements indicating sales at prices higher than the declared MRP/RSP, and statements from shroffs/angadiyas about cash transactions. The Tribunal noted that for the period prior to 1-3-2008, the provisions of Section 4A(4) of the Central Excise Act were not operational as the rules for re-determination of RSP were not prescribed until Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008. Therefore, any redetermination of RSP by the Revenue for this period was deemed faulty and not in accordance with the law.

2. Imposition of penalties on manufacturers:
Penalties imposed on the manufacturers were also scrutinized. The Tribunal found that the manufacturers could not be held liable for duty based on re-determined RSP for the period prior to 1-3-2008 due to the absence of prescribed rules. Consequently, penalties imposed on the manufacturers and other individuals for this period were set aside.

3. Application of Section 4A of the Central Excise Act, 1944, and related rules:
Section 4A pertains to the valuation of excisable goods with reference to the retail sale price. The Tribunal emphasized that the statutory provisions under Section 4A(4) could not be operationalized until the rules were prescribed by the Central Government, which occurred on 1-3-2008. For the period before this date, the Revenue's attempts to re-determine RSP were found to be without legal backing.

4. Determination of Retail Sale Price (RSP) for periods before and after 1-3-2008:
For the period prior to 1-3-2008, the Tribunal concluded that the Revenue could not re-determine the RSP due to the lack of prescribed rules. For the period post-1-3-2008, the Tribunal remanded the matter back to the adjudicating authority to reconsider the determination of RSP as per the rules enacted from 1-3-2008. The adjudicating authority was directed to follow the principles of natural justice and verify the evidence, including granting cross-examination if necessary.

5. Validity of re-determining RSP using best judgment method:
The Tribunal found that the best judgment method for re-determining RSP was not permissible prior to 1-3-2008, as the statutory provisions did not allow for such a method. This view was supported by decisions in other cases such as M/s. Ravi Foods Pvt. Ltd. and M/s. Millennium Appliances India Ltd.

6. Liability of duty if RSP was manipulated fraudulently:
The Tribunal noted that if the RSP was altered or manipulated, it was essential to identify who made the alterations. The manufacturers could not be held liable unless there was evidence that they were responsible for the changes. In the absence of such evidence, the demand for duty based on re-determined RSP was unsustainable.

Conclusion:
The Tribunal set aside the demand for the period prior to 1-3-2008 and the penalties imposed on the manufacturers and other individuals. For the period post-1-3-2008, the matters were remanded back to the adjudicating authority for reconsideration in light of the prescribed rules and the directions provided. The decision in the case of Acme Ceramics was followed as a binding precedent.

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