Central Excise - Notification No. 201/85-C.E., dated 2-9-1985 as amended - Applicability of effective rates - Clarification regarding - Central Excise - 26/88-CX.3

Central Excise - Notification No. 201/85-C.E., dated 2-9-1985 as amended - Applicability of effective rates - Clarification regarding Circular No. 26/88-CX.3 Dated 5-10-1988 [From F. No. 81/65/87-CX.3] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Central Excise - Notification No. 201/85-C.E., dated 2-9-1985 as amended - Applicability of effective rates - Clarification regarding. Attention is invited to Notification No. 201/85-C.E., dated 2-9-1985, as amended (since rescinded), which prescribed concessional rates of duties of cigarettes (being cigarettes packed in approved packages) based on the adjusted sale price per one thousand. Various slab rates were in existence under this notification for different adjusted sale prices per one thousand. 2. 'Adjusted sale price' under this Notification meant the unit price arrived at by dividing the sale price of a package by the number of cigarettes in such package. 3. 'Cigarettes packed in approved packages' meant cigarettes which were packed for retail sale, in packages which - (a) contained 10 or 20 cigarettes; (b) bore a declaration specifying the maximum sale price thereof as the amount specified in the declaration, plus local taxes only; and (c) had surface designs approved by the Director (Audit) in the Direcorate of Inspection and Audit (Customs and Central Excise). 4. Explanation IV to this notification defined 'sale price' in relation to a package of cigarettes as the maximum price (exclusive of local taxes only) at which such package may be sold in accordance with the declaration made, in print, on such package. In other words, by virtue of this notification, the effective rates of duty on cigarettes were based on the 'maximum declared printed sale price' (exclusive of local taxes only) on the package of the cigarettes. Subsequently, instances came to the notice of the department that certain brands of cigarettes were being sold at a price other than the "declared maximum printed sale price." 6. Since the "declared maximum printed sale price" was not found to be bona fide, a number of demands were raised against these assessees who were alleged to have contravened the provisions of Notification No. 201/85-C.E., dated 2-9-1985, as amended. In most of the cases, the demands had been issued on the basis of the slab corresponding to the price at which such cigarettes were actually sold i.e., at a price other than the "maximum printed sale price." 7. Now a question has arisen that if the declaration of maximum printed sale price on a cigarette package was not found to be bona fide then whether the duty in such cases would be levied at the rate as prescribed in the said notification corresponding to the price at which the cigarettes were actually sold or at tariff rates. 8. The issue was twice referred to the Ministry of Law for their considered opinions. On both the occasions, they opined that, in the case of the nature referred to at para 7, it would not be open to read into the notification something which has not been mentioned therein, and the only appropriate course would be to levy duty at tariff rates. The matter has since been referred to the Attorney General of India for his considered opinion in view of the complexity of the issues involved and the overall implications. 9. In the meanwhile, the Board desires that, pending the receipt of Attorney General's opinion, immediate action should be taken by the concerned Collectors of Central Excise to safeguard the interests of revenue by raising demands of excise duty at tariff rates on cigarettes which have been sold at a price other than the "Declared printed maximum sale price" (exclusive of local taxes only), as per Notification No. 201/85-C.E., dated 2-9-1985, as amended. Demands already raised in this regard should be suitably revised. Adequate care should be taken to ensure that the demands are not time-barred. In this respect, the provisions of Section 11A of Central Excises and Salt Act, 1944 for raising demands within a period of five years should be judiciously made use of. All such demands should be kept pending till further orders from the Board.