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TMI Blog2010 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... - It is well settled that when the statutes create an offence and an ingredient of the offence is a deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires `mens rea' as a necessary constituent of such an offence. But when factually no fraud or suppression or mis- statement is alleged by the revenue against the respondent in the show cause notice the imposition of penalty under Section 11 AC is wholly impermissible. - 1921-1923 OF 2003 - - - Dated:- 10-12-2010 - D.K. JAIN, ASOK KUMAR GANGULY, H.L. DATTU, JJ. J U D G M E N T GANGULY, J. 1. These statutory appeals (Civil Appeal Nos. 1921-1923 of 2003) have been filed under Section 35-L (b) of the Central Excise Act, 1944 (the Act), against the judgment and final Order No. 353-355/2002-A, dated 8th August, 2002, passed by the Customs, Excise and Gold (Control) Appellate Tribunal, Bench-A, New Delhi. 2. The material facts are that the respondent- assessee, M/s. Pepsi Foods Ltd. is engaged, inter alia, in the manufacture of edibles, marketed under the names of Potato Chips, Baked Cheetos Balls, Monster Munch, etc. These are covered under Chapter Sub-Headings 2001.10 and 1904.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew Delhi. The Tribunal overruled the decision of the Appellate Authority inter alia stating that "...Merely because a deeming provision as contained in the 3rd proviso has to be applied regarding the price of the goods sold in the course of wholesale trade to a related person, it cannot be contended that there was no sale at all to the related person at the factory gate, as alleged by the Revenue. The place of removal, therefore, continues to be the assessee's factory. The depot premises of the related person from where the goods are sold cannot be treated as place of removal for the purpose of Section 4 (4) (b). Therefore, the appellant is fully justified in contending that the cost of transportation from the place of removal, namely, factory to the place of delivery shall be excluded from the price to arrive at the assessable value in terms of Section 4 (2)." 7. Thus aggrieved, the Revenue appealed before this Court under Section 35-L (b) of the Act. 8. It is an admitted fact here that M/s. Frito- Lay is "related person" of the M/s. Pepsi Foods Ltd. (Snacks Foods Division). The expression "related person" has been specifically defined in Section 4 (4) (c): "4. Valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons) who sell such goods in retail; 10. In these appeals the Revenue contends that in a sale of excisable goods between an assessee and a related person under Section 4 (1) (a) (iii) of the Act (as it was prior to its amendment in 2000) the `normal price' for the sale is deemed to be the one at which the goods are ordinarily sold by the `related person' to the whole sellers. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and 28th February 1999. Almost the same period was considered by this Court in its decision in Akay Cosmetics (supra). In the present case it is not disputed by the respondent that M/s. Frito Lay India is its related person under Section 4(4)(c). The facts discussed in Akay Cosmetics (supra) substantially resemble the facts of this case, except of course the difference in the items manufactured. In para 25 of Akay Cosmetics (supra) (page 774 of the report) this Court formulated the key question, which is: "how and when the assessable value of the manufactured product is to be determined?" 13. Having posed that question, the learned judges answered the same in para 28, (page 777 of the report) inter alia, holding as follows: "Under section 4 (2), it was provided that where the price of the excisable product for delivery at the place of removal was not known and the value was determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery had to be excluded from such a price. The reason is important. Section 4 (2) is a residuary section and applied only to cases whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to paras 2 and 7 of the judgment in Akay Cosmetics (supra). The learned counsel submitted that in Akay Cosmetics (supra), freight charges claimed was the one between the depot of the related person to the place of the unrelated dealer. Obviously there are some factual differences that are noted in para 2 of the said judgment, but that does not impinge upon the ratio on the interpretation of Section 4(1)(a)(iii) of the Act which is quoted above. 17. Therefore, the finding of the Customs, Excise and Gold (Control) Appellate Tribunal, Bench- A, New Delhi, which is quoted above and which upholds the contention of the respondent that it is justified in claiming exclusion of freight charges arising between the factory gate of the respondent to the depot of the related person, cannot be sustained. This Court finds that in the facts and circumstances of this case, Section 4 (2) is not applicable. This Court, therefore, affirms the order-in-original but with a rider. 18. In the instant case in the order-in-original a penalty has been imposed which is equal to the amount of duty. Such penalty has been imposed in exercise of power under Section 11 AC of the Act. Section 11 AC of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the House of Lords in Vane v. Yiannopoullos, (1964) 3 All ER 820, and the opinion of Lord Reid at page 823]. 22. In Vane (supra), the word `knowingly' was used in the statute as a condition of creating liability. 23. The aforesaid dictum of Lord Reid has been followed by this Court also. A reference in this connection may be made to the decision in Union of India v. Rajasthan Spinning Weaving Mills reported in 2009 (238) E.L.T. 3 (S.C.). This Court considering Section 11 AC of the Act held in para 19 at page 12 of the report as follows: "19. From the aforesaid discussion it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section." 24. Following the aforesaid well settled principles, this Court quashes that part of the order-in-original which imposes penalty without any finding of fraud or mis-statement against the respondent. This part of the order-in-original is quashed. Save as aforesaid, the order-in-original is upheld. These appeals filed by the revenue are allowed to the extent indicated above. No costs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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