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TMI Blog2008 (9) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... such procedure being followed, certainly the impugned order of the Settlement Commission giving benefit to the first respondent under section 4-A of the Act in respect of bulk quantities of Cookies manufactured by it and supplied to the institutional customers is not proper, hence it is set aside - 11028 of 2007, - - - Dated:- 23-9-2008 - P. Jyothimani, J. REPRESENTED BY : Shri T.S. Sivagnanam, SCGSC, for the Petitioner. Shri Aravind P. Datar, Sr. Counsel for M/s. V.S. Jayakumar, for the Respondent. [Order]. - By consent of both parties, the main writ petition itself is taken up for final disposal. 2. The writ petition is filed by the Commissioner of Central Excise, Chennai-II Commissionerate against the impugned order of the second respondent dated 6-12-2006, which has been passed as admission-cum-final order on an application filed by the first respondent for settlement of the proceedings initiated against it by means of a show cause notice issued by the writ petitioner dated 31-7-2006. 3. The short facts leading to passing of the impugned order by the second respondent are as follows : (a) The first respondent is a manufacturer of Cookies and Dough falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,42,888/- paid towards interest on the Central Excise Duty. Further, penal action was proposed under Section 11-AC of the Central Excise Act, 1944 and under Rule 25 of the Central Excise Rules apart from Rule 15(2) of the CENVAT Credit Rules, 2004. (f) The first respondent, without replying to the show cause notice, has filed an application before the second respondent for a relief under Section 32 of the Central Excise Act, 1944, for settlement of case as contemplated under Section 32E of the Act. According to the petitioner, the second respondent/Settlement Commission, instead of applying Section 4 of the Act, has applied Section 4-A of the Act. Under Section 4, the valuation of goods is to be made on the transaction value as per the contract between the parties while under Section 4A the value is arrived at on the basis of MRP declared on the packages. In addition to that, under Section 4A, the goods must be in conformity with the provisions of the Standards of Weights and Measures Act, 1976. (g) The goods in question, viz., Cookies were not having MRP declared on the packages and that is sufficient to say that the value has to be assessed under Section 4 of the Act, since M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, the consideration of the case by the second respondent under Section 4-A, which applies to cases where the value actually represents the MRP is not proper and therefore, the order is erroneous; that the second respondent Commission has exceeded its jurisdiction by virtually acting as an executing authority by granting leave to the first respondent to which it is not entitled especially in the confirmed case of clandestine removal; that the second respondent is not empowered to decide whether the goods would come under Section 4 or 4-A of the Act and the same is beyond its jurisdiction; that the power of the second respondent to grant immunity from fine or penalty or interest would arise only in cases where the assessees make full and true declaration of their liability for payment of the duty; that the second respondent is not entitled to consider the legality of the orders and by deciding the issue of assessment of clearings under Section 4-A, the second respondent has exceeded the jurisdiction; that the second respondent failed to consider Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, and in view of the same it ought to have dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry about the payment of duty. Taking advantage of the said conduct of the first respondent, the petitioner officials have foisted a false case of clandestine removal, suppression etc., while it is admitted that at the relevant point of time the first respondent/assessee was not paying duty on Dough and cleared Dough without payment and at the time of inspection, the officials of the writ petitioner seized two computer systems along with certain records from the first respondent Company and certain documents were also taken away from the first respondent company at Spencer's Plaza, Mount Road, Chennai. 5(c). It is stated by the first respondent that it was not able to maintain proper documents for movement of Dough and the movement was made due to the reason that it was not having sufficient storage facility and therefore, without permission it was sent outside for cold storage since the same had to be kept in minus 20 degree centigrade and whenever necessary it was brought back to the factory for baking, etc. and thereafter for manufacturing Cookies. 5 (d).It is also the case of the first respondent that the petitioner has also found on checking with M/s. Snowman Frozen Food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the petitioner would submit that the officials of the petitioner Department when visited the first respondent Company on 19-1-2006 and 21-6-2006, scrutinised its records and found that the Dough of 2,20,813 Kgs. having the value of Rs. 1,49,04,162/- were removed during the period from 1-3-2005 to 31-12-2005 without payment of duty and without payment of an amount equal to duty as required under CENVAT Credit Rules, 2004 and Cookies were also removed to various customers, and it was a contractual sale not coming under MRP sale, and it was based on the said investigation, a show-cause notice came to be issued on 31-7-2007. 6(a). According to the learned counsel, in normal circumstances, the first respondent ought to have replied to the show-cause notice for adjudication, but the first respondent has resorted to remedy under Section 32-E of the Act and inspite of the fact that the petitioner Department has raised an objection about maintainability of such a petition under Section 32-E of the Act, the second respondent has granted partial immunity from interest and full immunity from penalty and prosecution. According to the learned counsel, the transaction value has to be taken as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission ought to have arrived at such a conclusion that there is no Dough made for retail distribution. 7. On the other hand, it is the contention of Mr. Arvind P. Datar, learned senior counsel appearing for the first respondent that it is true that the first respondent was not aware of the duty payable on Dough from 1-3-2005 and it was for the first time when the petitioner officials visited the factory on 19-1-2006, the same was revealed and accordingly, for the Dough cleared by the first respondent between 1-3-2005 and 31-12-2005 to the extent of Rs. 23,84,000/-, the first respondent accepted the full liability and paid the entire duty. However, the dispute which is in existence is only in respect of liability to pay duty on whole sale price of Cookies supplied to Jet Airways, Taj Group of Hotels, GRT Grand Hotels, etc. which depends upon the question as to whether the duty has to be paid on whole sale price or retail price. 7(a). According to the learned senior counsel, the product is notified under Section 4-A of the Act and therefore, duty is payable only on MRP irrespective of the nature of customer and that was the point decided by the Supreme Court in Jayanthi Foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survive since the amount has been paid in full and the second issue as to whether Section 4 or 4-A of the Act is applicable, by virtue of the judgement of the Supreme Court in Jayanthi Food Processing (P) Ltd., the matter has been settled and there is no illegality or infirmity in the impugned order of the second respondent. It is also his contention that the Settlement Commission, being the quasi-judicial authority, passed orders on appreciation of facts and interpretation of law and inasmuch as the proceedings before this Court is not an appeal, but a writ petition under Article 226 of the Constitution of India, even if the view of the Settlement Commission is not plausible, the same cannot be interfered under Article 226 of the Constitution of India by relying upon the judgement of the Supreme Court in Jyotendrasinghji v. S.I.Tripathi [AIR 1993 SC 1991]. 8. On a reference to the factual matrix in this case, it is found that the basic issue that is to be decided is two-fold, viz., (i) the alleged conduct of the first respondent in clearing Dough without payment of duty during the period between 1-3-2005 and 31-12-2005; and (ii) the levy of duty payable on the wholesale pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual price in respect of bulk supply to the institutional customers and demanding an amount of Rs. 33,82,246/- towards Central Excise Duty and education cess at 2% of Rs. 67,645/- and for appropriating the said amount in addition to the appropriation of Rs. 2,42,888/- paid towards interest on the Central Excise duty. That apart, in the show-cause notice it was proposed to impose penalty on the first respondent under section 11-AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002 and also Rule 15(2) of the CENVAT Credit Rules, 2004. 12. The show-cause notice issued by the petitioner to the first respondent dated 31-7-2006 is in accordance with section 11-A of the Central Excise Act, 1944 which enables the authority to issue such show-cause notice in cases where duty has not been levied or paid or has been short-levied or short-paid or refunded, whether or not such non-levy or non-payment, short-levy or short-payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods including the cases where any fraud, collusion or wilful mis-statement or suppressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived, the additional amount of excise duty accepted to be payable by him and such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or otherwise of such excisable goods, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided : Provided that no such application shall be made unless,- (a) the applicant has [filed returns] showing production, clearance and central excise duty paid in the prescribed manner; (b) a show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; and (c) the additional amount of duty accepted by the applicant in this application exceeds two lakh rupees: Provided further that application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the Appellate Tribunal or any Court : Provided also that no application under this sub-section shall be made for the interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985 (5 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission. (4) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons to pay the amount referred to in sub-section (3), within the time specified in that sub section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments, if the assessee furnishes adequate security for the payment thereof. (5) Where the additional amount of duty referred to in sub-section (3) is not paid by the assessee within the time specified or extended period, as the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of eighteen percent per annum or at the rate notified by the Central Board of Excise and Customs from time to time on the amount remaining unpaid, be recovered, as the sum due to Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the provisions of Section 11. (6) Where an application is allowed to be proceeded with under sub section (1), the Settlement Commission may call for the relevant records from the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be liable to pay simple interest at the rate of eighteen per cent per annum or at such other rate as notified by the Central Board of Excise and Customs on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid. (11) Where a settlement becomes void as provided under sub-section (9) the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement became void." 17. Under section 32-I of the Act, the Settlement Commission is also having additional powers which are vested in a Central Excise Officer under the Central Excise Act and during the time when the settlement application is made and the same is allowed to be proceeded with under section 32-F of the Act, the Commission has exclusive jurisdiction to exercise the powers of Central Excise Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any offence under this Act in relation to that case; or (iii) the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission under section 32-L, then, he shall not be entitled to apply for settlement under section 32-E in relation to any other matter." 19. The Chapter dealing with the settlement of cases enables for the settlement of disputes in a summary manner wherein such settlement is possible without prolonging the adjudicatory system which is exercised by the Central Excise Officer. In cases where the issue involved relates to the complicated questions of fact which are to be ascertained on proper adjudication, the usual method of adjudication by Central Excise authority is the proper and appropriate method. 20. In the present case, after the receipt of show-cause notice issued by the petitioner, by which a case against the first respondent in the form of proceeding has been initiated as defined in section 31-C of the Act, the first respondent instead of replying to the petitioner by way of an answer to the show-cause notice, thereby proceeding with the adjudicatory mechanism, has resorted to settlement proceeding b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l position and find out as to whether the manufacture was for retail distribution especially in the absence of indication of MRP, the contractual value should have been taken into consideration for assessment under section 4 of the Act or not, the second respondent Settlement Commission in fairness ought to have referred it to the Central Excise Officer for adjudication. 24. It is also relevant in the circumstances that while dealing with the first respondent's case regarding immunity from interest and penalty, the second respondent Settlement Commission in categoric terms has held that in fact there was intention on the part of the first respondent to evade duty in the following words, which are as follows : "7......In view of the clandestine nature of clearances, we are not convinced about their argument that the applicants had no intention to evade duty. Accordingly, we are not inclined to extend complete immunity from interest." 25. On such categoric finding, it is not known as to how the second respondent Settlement Commission has directed payment of simple interest at the rate of 10% p.a. on differential duty apart from granting the benefit of assessment to the first re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociated that they have interest, directly or indirectly, in the business of each other. Explanation. - In this clause - (i) "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) "place of removal" means- (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place on premises wherein the excisable goods have been permitted to be deposited without [payment of duty;] [(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory,] from where such goods are removed; (cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;] (d) "transaction value" means the price actually paid or payable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section. Explanation 1.- For the purposes of this section, "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale : Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly. Explanation 2. - For the purposes of this section, - (a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price; (b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture is alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing (P) Ltd., v. Commissioner of Central Excise, Rajasthan [2007 (215) E.L.T. 327 (S.C.) = (2007) 8 SCC 34] settles the entire issue. The Supreme Court in categorical terms has held that in order to decide whether a particular item of goods is to be assessed under section 4-A of the Central Excise Act, the following factors must be present: "(i) The goods should be excisable goods; (ii) They should be such as are sold in a package; (iii) There should be requirement in the Standards of Weights and Measures Act or the Rules made thereunder or any other law to declare the price of such goods relating to their retail price on the package; (iv) The Central Government must have specified such goods by notification in the Official Gazette; (v) The valuation of such goods would be as per the declared retail sale price on the packages less the amount of abatement. If all the said factors are applicable to any goods, then alone the valuation of the goods and the assessment of duty would be under Section 4-A of the Act." 29. In the said paragraph the Hon'ble Supreme Court has made it very clear that only if all the above said five factors are applicable to any goods, the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by that, the Department has come up before us in the present appeals. 74. Shri Subba Rao, learned counsel appearing on behalf of the appellant Revenue drew a parallel with Jayanti Food case and urged that the valuation is bound to be under Section 4 of the Act as the Tribunal had incorrectly held that the "package" would be a "retail package". Learned counsel relied on the definition of "wholesale package" under Rule 2(x) of the SWM (PC) Rules and pointed out that the "package" in question came within the definition of "wholesale package" as there are a number of retail packages in the form of mineral water bottles in that one package and further the said package is not intended for sale directly to a single consumer. These bottles which were of 200 ml capacity were not meant for sale directly to a single consumer. He, therefore, urges that this matter was identical with Jayanti Food case and, therefore, we should take a view that the valuation should be on the basis of Section 4 and not under Section 4-A of the Act as has been done by the Tribunal. Though the Tribunal has relied on the judgement passed by it in Jayanti Food, we find that there is no parallel in between Jayanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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