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TMI Blog2019 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008? Matter referred to Larger Bench. - E/235/2008, E/1282/2009-DB, E/1283/2009-DB, E/1293/2009-DB, E/10735/2013-DB - A/10071-10093/2019, I/5-27/2019 - Dated:- 10-1-2019 - E/235/2008, E/1282/2009-DB, E/1283/2009-DB, E/1293/2009-DB, E/10735/2013-DB, E/10736/2013-DB, E/10868-10871/2013-DB, E/11751/2013-DB, E/11752/2013-DB, E/11891/2013-DB, E/11892/2013-DB, E/12814/2013-DB, E/12815/2013-DB, E/13099/2013-DB, E/13100/2013-DB, E/13258-13260/2014-DB, E/13424/2014-DB, E/13810/2014-DB Ocean Ceramics Ltd., Arvind Ceramics, R Kumar, Crystal Ceramics Industries Pvt Ltd, Century Tiles Ltd, Ganpatlal Dayalal Patel, Sterling Ceramics, Shri R Kumar, Shri Divyeshbhai N Patel, Shri Arvindbhai N Patel, Dharmendrabhai Patel, Nice Ceramics Pvt Ltd, Sanyo Cera Tiles Pvt Ltd, Mittalbhai Bhikhabhai Patel, Santro Tiles Ltd, Prakashbhai Dahyabhai Patel, Oscar Ceramics, Shri Manshuklal Mavjibhai Patel, Mahedrabhai Amichandbhai Patel, Asian Tiles Limited Versus C.C.E. S.T.-Rajkot, C.C.E. S.T.-Ahmedabad-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce look reasonable. Similarly in some cases, it was alleged that the expense incurred in local transportation, transit insurance, loading, unloading transit insurance etc were being suppressed to enable declaration of low RSP. 2.3 It was also alleged that for transfer of cash from dealers to appellants within the state mostly the services of Angadias was being used, however for collection of cash outside the State mostly appellants own representatives were being used. Another method used for collection of cash from dealers was through the bank accounts and discounting using the services of Shroffs. Intricate mechanisms was evolved to transfer cash using the Shroffs as the intermediaries to hide the appellants interest. 2.4 It was also noticed that immediately after cases were booked in many cases, the appellants had revised the Retail Sale Price significantly upwards. Notice alleged that it indicated that prior to booking of the case the RSP were artificially suppressed. 2.5 From the above, it is seen that the Revenue had unearthed certain evidence which suggested that an elaborate mechanism to enable suppression of Retail Sale Price was evolved. While the actual sales too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) LTD (Supra) was not available. He pointed out that the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) was not taken in consideration in case of Suzuki Ceramics (Supra) as at the material time there was a stay on the said decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). He pointed out that now there is no stay on the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) and therefore there are two conflicting decisions of Tribunal on the same question of law. In these circumstances the matter needs to be referred to the larger bench of Tribunal. Reliance was, interalia, places on the decision of Hon Apex Court in the case on Mahindra and Mahindra 2015 (315) ELT 161 (SC). 5 We have gone through the rival submissions. The core question of law that needs to be decided before other issues are taken up is if it is permissible in law to redetermine RSP prior to notification of rules under Section 4A(4) of CEA, 1944, by issue of notification 13/2008-CE(NT) on 1.3.2008. 5.1 The legislative history of the taxation on the basis of RSP is as follows. The section 4A of CEA, 1944, was introduced in 1997 as follows Section 4A. Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It can be seen that even in 1999 there was no specific mention about the manner in which revenue authorities could ascertain RSP in case of misdeclaration/ non declaration/ amendments etc. 5.3 In 2003, a new sub-section (4) was substituted which read as under :- (4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer - (a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or (b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llennium Appliances India Ltd 2009 (248) E.L.T. 713 (Tribunal), M/s. Ravi Foods Pvt. Ltd 2011 (266) E.L.T. 399 (Tribunal)., M/s. ABB Ltd. 2011 (272) E.L.T. 706 (Tri. - Bang.). Another bunch of cases was decided in the decision reported in case Suzuki Ceramics (Supra), which in turn relied on the decision in case of ACME (supra). 6.1 The appellants are harping on the fact that the facts of these cases are identical to the facts in the group of cases decided in the case of Suzuki Ceramics (Supra) and in case of ACME(supra), and therefore Tribunal is bound to follow those decisions. 6.2 It is seen that the decision in case of SCHNEIDER ELECTRICAL INDIA (P) LTD specifically decided with following specific questions of law crystallized by the bench which was referred to the third member. The questions of law were as under As there is a difference of opinion between the Members of the Bench, the matter may be placed before the Hon ble President to refer it to a 3rd Member to decide the following : DIFFERENCE OF OPINION (1) The demands for the period prior to 1-3-2008 are not sustainable as there was no machinery provisions available to determine MRP of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2008 under Section 4A read with Rule 6 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. (3) Demand for the extended period is sustainable as the appellants have resorted to subterfuge and misdeclarations with an intent to evade excise duty. The answer to the first question referred to third member is based on the following arguments 29. I have carefully considered the rival submissions. It will be useful at this juncture to examine the provisions of Section 4A which reads as under : Section 4A. Valuation of excisable goods with reference to retail sale price. - (1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply. (2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Act mentioned in the non obstante clause. It is equivalent to saying that in respect of the provisions of the Act mentioned in the non obstante clause, the provision following it will have its full operation, or the provisions of embraced in the non obstante clause will not be an impediment for the operation of the enactment of the provision in which the non obstante clause occurs. The Hon ble High Court of Andhra Pradesh in the case of Tirupati Udyog Ltd. v. Union of India - 2011 (272) E.L.T. 209 (AP) inter alia held that non obstante clause is a legislative device to give overriding effect to certain provisions over some contrary provisions found either in the same or some other enactment. 29.1.1 Therefore, once the goods are specified under Section 4A(1) and there is a statutory requirement to declare RSP on the retail sale packages of the goods, the question of application of Section 4 would not arise at all. In the present case, there is no dispute on the fact that on the retail packages the appellant-manufacturers were required to declare the RSPs and the goods were also notified under the provisions of Section 4A(1). If that be so, it cannot be contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h these rules. RULE 4. Where a manufacturer removes the excisable goods specified under sub-section (1) of Section 4A of the Act, - (a) without declaring the retail sale price on the packages of such goods; or (b) by declaring the retail sale price, which is not the retail sale price as required to be declared under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or rules made thereunder or any other law for the time being in force; or (c) by declaring the retail sale price but obliterates the same after their removal from the place of manufacture, then, the retail sale price of such goods shall be ascertained in the following manner, namely :- (i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods; (ii) if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of RSP since the declaration of RSP is not mandated by the Central Excise law. Therefore, what is provided under the Central Excise law is only the ascertainment of the RSP as against determination of RSP. If one carefully reads the Rules, 2008, it can be seen that, it applies only to a limited situation where the manufacturer or a packer does not declare the RSP at the time of removal of the excisable goods from the factory or tampers or obliterates the RSP declared subsequent to such removal. In such a situation, the Rules provide for ascertainment of RSP. This rule, by its very nature, applies and applies only to the assessing officer. It does not apply to the manufacturer or the packer. In other words, though it is called rules, the Rules, 2008 is in effect and in fact a guideline for ascertaining the RSP in a situation where a manufacturer/packer does not declare the RSP or tampers with or obliterates the RSP already declared subsequent to the removal of the goods. In other words, the Rules is only directory in nature and the said rules also provide that if the RSP cannot be ascertained by following the methods therein, then the same can be ascertained in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed. 13. The distinction between substantive law and procedural provisions has been indicated in Black s Law Dictionary (Sixth Edn., p. 1203) as follows : As a general rule, laws which fix duties, establish rights and responsibilities among and for persons, natural or otherwise, are substantive laws in character, while those which merely prescribe the manner in which such rights and responsibilities may be exercised and enforced in a court are procedural laws . 14. In Salmond s Jurisprudence (Twelfth Edn., p. 462), the distinction between substantive law and law of procedure is indicated in the following words: What, then, is the true nature of the distinction? The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions - jus quod ad actiones pertinet - using the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 4A of the Act. Thus, the taxable event, the rate of tax, the measure of the tax and the person liable to pay tax are separately provided for in the various provisions of the Central Excise Act, 1944 and the Rules made thereunder. Rules, 2008 apply only to a limited situation where the manufacturer fails to declare the RSP or tampers with or obliterates the RSP already declared. Therefore, the provisions are merely procedural and directory in nature and hence has retrospective operation. 29.2.9 The reliance placed by the appellants on the cases of Consumer Online Foundation (supra), Mohammad Hussain Gulam Mohammad (supra), Dhrangadhra Chemical Works Ltd . - (1973) 2 SCC 345 do not help the case of the appellants. In the Consumer Online Foundation (supra) the basic issue was levy of user development fee by the Airport Authority at a rate as may be prescribed by the Rules. Inasmuch as the rules were not framed, the Apex Court held that the levy was ultra vires. The rate of tax is a core part of the tax system and is substantive in nature and it was in that context, the levy was held ultra vires when the rules for fixing the rates were not framed. Similarly, in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainment of duty due to deficiency in quasi-judicial procedure, it can be made good with the use of the implied power in conjunction with the established rule of construction that power to do something essential for the proper and effectual performance of the work which the statute has in contemplation may be implied. It was held in that case that the basic principle is that the Courts must endeavour to ascertain the legislative intent and purpose, and then adopt a rule of construction which effectuates rather than one that may defeat these. The purpose of introduction of Section 4A was to enable assessment of certain class of goods to duty on the basis of retail sale price declared on the packages which was a statutory requirement under the Standards of Weights and Measures Act or the Rules made thereunder or under any other law. Thus the legislative intention is crystal clear. Merely because an errant/defiant manufacturer fails to declare the RSP in gross contravention of the law, it cannot be held that the executive is powerless to deal with the matter and has to be a helpless spectator. 29.2.12 A somewhat similar issue arose for consideration before the Hon ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998 (98) E.L.T. 78 (Mad.), the Hon ble High Court of Karnataka in the case of Inspector v. S.T. Venkatramappa - 1986 (24) E.L.T. 484 (Kar.) held that a machinery provision in a fiscal statute should be so interpreted as to make the charging provision of that statute effective. Again in Associated Cement Co. Ltd. v. Commercial Tax Officer - AIR 1981 SC 1887 it was held that : It is settled law that a distinction has to be made by Court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. The Courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated. The Hon ble Apex Court in the case of ITW Signode India Ltd. v. Collector of Central Excise - 2003 (158) E.L.T. 403 (S.C.) held that - A retrospective effect indisputably can be given in case of curative and validating statute. In fact curative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at effect. Be that as it may, the majority decision of the Tribunal is stayed by the Hon ble High Court of Bombay. Hence, the said decision of the Tribunal cannot be considered as a precedent judgment. It is seen that the core question in dispute in both the cases, ACME as well as SCHNEIDER ELECTRICAL INDIA (P) LTD, was a pure question of law. The question being if it is permissible for revenue to ascertain RSP in case of in situations envisaged in subsection 4A(4) prior to 1.3.2008. Essentially the relevant facts are common in both the cases, i.e ACME (Supra) and SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). In both the cases the power of Revenue to ascertain RSP was tested for period prior to 1.3.2008, in cases where situation envisaged in subsection (4) of the section 4A of CEA 1944 arose. In these circumstances individual facts of the case cannot be treated as different so long as in both the cases, admittedly, the situation envisaged in subsection 4A(4) has arisen. In both the cases, ACME (Supra) and SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), it is admitted that on facts a situation envisaged in subsection 4A(4) has arisen and in that circumstances the power of authorities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of opinion between the two members was referred to the third member. Therefore the bench in the case of ACME did not give any weightage to the observations made by member in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra). The tribunal in the case of Suzuki Ceramics (Supra) did not consider the decision in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) as there was a stay on the operation of said order by Hon High Court of Bombay. Ld AR pointed out that the stay on the order of tribunal in the case of SCHNEIDER ELECTRICAL INDIA (P) LTD has been lifted and the matter is now pending in Ho ble Apex court. Thus the argument that there are contrary decisions of tribunal on this issue, one in the case of ACME (Supra) and other in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra) and therefore matter needs to be referred to the Larger Bench has significant force. 7 In the case of ACME (Supra) the following has also been observed 15. We also find that in the cases in hand, on factual matrix also, there is a strong case in favour of the assessee i.e. manufacturer of tiles. The statements recorded of the individuals of manufacturer of the tiles, specifically state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire case is absence of evidence as to there being alteration of RSP; inasmuch as when the investigations were conducted by the authorities, we find that the investigating authorities have not seized a single carton of the offending goods in the Pan India operation at different dealers premises, wherein different RSP was declared. It would be beyond imagination that the dealers could not have had any stocks of glazed/vitrified tiles received from the appellants, in their hands when the investigation took place. In the absence of such a crucial evidence, we are unable to hold that the appellant herein can be saddled with a liability of Central Excise duty based upon redetermined RSP, for the period prior to 1-3-2008. It is seen that the proposition is that if the dealers have altered the RSP then the liability should be on the dealers. We respectfully disagree with the proposition. It ignores the evidence that the money in cash was flowing back to the appellants in the said cases. The entire conspiracy/ fraud / modus operandi was organized by the appellants in those cases. Alteration in the RSP too was being done at the behest of the appellants in the said cases. The section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit in cash through an elaborate network of angadias, shroffs and personal representatives. Thus all the alteration of RSP happened at the behest of appellants in that case and therefore they remained the manufacturers. 8 Moreover, in the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 have been notified. In the said rule the Retail Package, Retail Sale and Retail Sale Price has been defined as under: * (p) retail package means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages: Provided that for the purposes of this clause, the expression ultimate consumer shall not include industrial or institutional consumers. (q) retail sale , in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer. (r) retail sale price means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on the package ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration for such sale. In the instant case the price is not the sole consideration of sale and therefore there is violation of CEA, 1944, also apart from the provision listed in sub section 4A(1). Restriction mentioned in the sub-section 4A(4) regarding prescription of the manner of determination of RSP only when there is violation of provisions listed in sub-section 4A(1) only. Those restrictions apply only when RSP is not in conformity with the provisions mentioned in Sub-Section 4A(1). Section 4A of CEA, 1944, is not a provision of law that requires affixing of RSP as per sub-section 4A(1), but it is a provision of law that determines duty on the basis of RSP. In the present case the allegation is that the RSP was increased after clearance from the factory and price was not the sole consideration for sale. In these circumstances the specific provision of clause (b) of to section 4A comes into effect. It provides that Expanation2: - For the purposes of this section,- (a) -- (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 altered to increase the retail sale price, such a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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