By TIOL News Service

MUMBAI, OCT 11, 2013: ALL the three appellants are manufacturers of goods falling under chapter heading 85.36 of the CETA, 1985 which heading goods came to be notified for assessment based on the Retail Sale Price in terms of section 4A of the CEA, 1944 by notification 13/2002-CE(NT) dated 01/03/2002.

None of the manufacturers affixed MRP on their products which were sold to their dealers/distributors from their factory or depots and the reasoning given was that their products were not covered by P.C. Rules inasmuch as the goods were not a pre-packed commodity and were not sold by weight, measure or number. The appellants were also making the following declaration on the packing ‘ Specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing of any industry, mine or quarry. For industrial use only and not intended to be displayed for sale at a retail outlet '.

The appellants are also having printed price list which is called as List Price for all the products sold by them to their dealers. The List Price forms the basis for arriving at the sale price between the appellants and their dealers; the appellants offered discount from the list price to arrive at the basic sale price which is inclusive of excise duty and central sales tax, wherever applicable. The dealers sell the goods to their customer and charge Sales Tax/VAT, as applicable. The appellants determined the assessable value of goods on the basic price at which goods were sold to the dealers, in terms of Section 4 of the Central Excise Act.

Revenue issued demand notices demanding differential duty along with interest and penalty on the ground that products manufactured by the appellants are pre-packed commodity under Rule 2(l) of the Packaged Commodity Rules; that as the products are sold by the dealers in retail there is a statutory requirement to affix the MRP under the PC Rules and the excise duty has to be discharged in terms of section 4A of the CEA, 1944. Therefore, the show cause notice proceeded to determine the MRP as equal to the List Price + VAT + Octroi as no MRP was affixed on the products. The assessable value was arrived at after granting abatement of 40% from such MRP.

In the case of Schneider Electrical India (P) Ltd., the demand for the extended period of limitation was dropped and that for the normal period was confirmed.

Similar demands were raised against by M/s Larsen & Toubro Ltd. & its Vendors and against M/s Siemens Ltd. by their jurisdictional Commissionerates and the same were confirmed in totality.

All the above appellants are before the CESTAT.

Inter alia, the following submissions were made –

+ as the goods are meant for Industrial use, provisions of Standard of Weights & Measures and the Packaged Commodities Rules, 1977 are not applicable and consequently duty is not required to be paid in terms of s. 4A of the CEA, 1944;

+ Larsen & Toubro Ltd. and Siemens Ltd. both preferred Writ Petitions before the Bombay High Court and it was held vide order dated 29/02/2008 [2008-TIOL-141-HC-MUM-CX] that the provisions of Section 4A of the Act are attracted. Therefore, the demands, for the period prior to this date cannot be demanded from the appellants as they were under bona fide belief that provisions of Section 4A are not applicable to their case.

+ the Civil Appeal filed by Larsen & Toubro Ltd. against this order has been admitted by the Apex Court and same is pending disposal and hence the decision is in jeopardy.

+ even if goods are notified under Section 4A there is no legal obligation on the appellants to print MRP on the package of the goods under Standard of Weights and Measures Act, 1976 or Standard of Weights and Measures (Packaged Commodities) Rules, 1977 or under any other law for the time being in force in view of Board Circular No. 625/16/2002-CX dated 28th February, 2002; Jayanti Food Processing Pvt. Ltd. Vs. CCE (2002-TIOL-49-CESTAT-DEL), and Titan Industries Ltd. Vs. Commissioner of Customs, Chennai (2007-TIOL-1297-CESTAT-MAD).

+ Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules,2008 were introduced vide Notification No.13/2008-C.E.(N.T.) dated 1.3.2008 and as such they cannot apply for period prior to 01/3/2008 as there were no machinery provisions available to determine MRP of the Product; demand for the period prior to 1.3.2008 is not sustainable. ABB Ltd. Vs. Commr.of Customs, (2011-TIOL-792-CESTAT-BANG) & Ravi Foods Ltd. Vs. Commr. of Central Excise, Hyderabad (2011-TIOL-966-CESTAT-BANG) refers.

 + demands for the period post 1.3.2008 are also not sustainable since the list price has been assumed to be retail sale price which is not correct proposition and the Revenue ought to have followed the provisions of rule 4 of the Rules, 2008 which mandates conducting enquiries in the retail market on a sample basis.

+ the decision in the case of Larsen & Toubro (supra) is based on the decision of Apex Court in the case of Whirlpool of India Ltd. Vs. Union of India (2007-TIOL-191-SC-CX-LB). which decision is in jeopardy as the Apex Court in the case of Subhash Arjundas Kataraia (2011-TIOL-121-SC-MISC) has doubted the said decision and referred the matter to Larger Bench of the Apex Court. Therefore the decision of Larsen & Toubro Ltd. of the Bombay High Court is not a good law.

The Revenue representative justified the order of the adjudicating authority and submitted that in view of the Gujarat High Court decision in Gujarat Heavy Chemicals Ltd. (2011-TIOL-383-HC-AHM-ST) the law as on date is applicable and, therefore, the decision of the Bombay High Court has precedential value. Furthermore, the fact that no procedure was prescribed by the Central Government before 1.3.2008 for ascertainment of value u/s 4A does not mean that the provisions of Section 4A ibid are not enforceable because if such a view is taken the provisions of Section 4A ibid shall become redundant; in the case of Sushil Agarwal Vs. CC, Mumbai-I Tribunal has held that when no machinery provisions are expressly provided for in the law, there is no bar in adopting a reasonable provision to make the law operational. Reliance is also placed on the decision in MahimPatram Private Ltd. Vs. Union of India (2007-TIOL-23-SC-CT). It is also submitted that the price lists adopted by the appellants in their marketing chain continues to guide the stockists as well as the retailers as to the maximum retail sale price and hence the manner of computing the AV u/s 4A is most reasonable.

The issues involved were crystallized by the Bench as under -

(a) Whether the appellants are required to affix MRP on their product as per the provisions of Standard of Weights and Measures (Packaged Commodities) Rules, 1977 or not?

(b) Whether the demands for the period prior to 1.3.2008 are sustainable or not as there were no machinery provisions available to determine MRP of the product?

(c) Whether the list price can be adopted as to determine MRP as per the Rule 4(a) (ii) of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 or not? And

(d) Whether demands for the extended period of limitation are sustainable or not?

The Member (Judicial) took the following view -

+ As the decision of the High Court of Bombay in the case of Larsen & Toubro Ltd. has not been set aside by the Apex court, therefore in the light of the judgment in the case of Shri Chamundi Mopeds Ltd. AIR 1992 Supreme Court 1439, the judgment is a Law of land as on today and, therefore, the appellants are required to affix MRP on the impugned goods.

+ demands for the period prior to 1.3.2008 are not sustainable as there is no machinery provisions to determine the MRP of the product in the absence of MRP affixed on the product.

+ In the absence of fact that at which price the goods were finally sold in retail, the mere presumption that the retailer might have sold the goods on the basis of list price is not the conclusive evidence to ascertain the MRP. As the Revenue has failed to produce the evidence of retail sale price, therefore, the value adopted by Revenue as retail sale price is not sustainable. Accordingly, the demands confirmed in the impugned order are not sustainable for the period post 1.3.2008.

+ The issue (of affixation of MRP) was settled by the Bombay High Court on Writ Petition filed by the appellants', therefore, the extended period of limitation is not invokable.

In fine, the Member (Judicial) held that the appellant succeed on merits and hence the orders of the adjudicating authority are not sustainable and the appeals are allowed.

The Member (Technical) had a variance of views on issues (b), (c) & (d) (supra) and hence he recorded a separate order in this regard.

+ Retail Sale Price can be determined based upon the reasonable/best judgment of the assessing officer, consistent with the provisions of Section 4A. There can be no prohibition to the assessing officer to keep in mind the Rules notified on 1.3.2008 if assessment is being done after 1.3.2008 and is for period prior to 1.3.2008. A view that assessing officer cannot adopt any reasonable/best judgment method to ascertain MRP, in the interim period, can lead to absurd situations. For example, an assessee manufacturing goods covered under Section 4A may clear the same without declaring MRP and claim zero duty liability as MRP is not declared; assessing officer cannot determine the MRP and whole object of Section 4A of the Central Excise Act, 1944 would be rendered redundant and ineffective. Demands for period prior to 1.3.2008 cannot be considered as unsustainable due to the fact that Rules were not prescribed to ascertain the MRP of the product. In our view, MRP is to be determined using reasonable/best judgment method consistent with Section 4A. Further, there can be no bar using the guidance provided by new Rules.

+ It is interesting to note that even after the present issue cropped up, appellants continued to clear the goods without declaring MRP but assessing the goods under Section 4A i.e. MRP basis and MRP is arrived at based upon List Price, VAT and Local Taxes. Appellants are disputing the List Price method for the period covered in these cases while themselves adopting the List Price for the subsequent period. We also note that after these show cause notices were issued, all the appellants have started paying duty on the basis of list price. When the appellants themselves now use list price as the basis for determining MRP, there is no reason, not to use the same for past period. In our view, in the present cases list price (with suitable adjustment for VAT/local taxes) is a very accurate and reasonable substitute for MRP and accordingly hold so.

+ In case of appellant Siemens Ltd., in one notice extended period is invoked. It is seen that they had approached Director, Legal Metrology to exempt goods under Rule 34(a) on 20.3.2002 which was rejected on 30.4.2002. However, they took the matter to the Hon'ble Bombay High Court after 6 years i.e. in 2008, which upheld the orders of Director, Legal Metrology. Similarly Larsen & Toubro Writ Petition was also filed in 2007, when they were given a clarification by Director, Legal Metrology in 2002 itself. The delay of five years speaks about their willful intentions. These products were notified under Section 4A(1) of the Central Excise Act in 2002, after that there was no reason for the appellants to pay duty under Section 4. Even if they had any delusional assumption, they should have approached the excise department for clarification and should have resorted to provisional assessment in the meantime. The conduct of the appellants in approaching authorities other than excise authorities for excise duty only support willful intention to somehow evade excise duty. In view of this as also other facts enumerated in the impugned orders, we hold that extended period of limitation is correctly invoked.

In view of the difference in opinion, the matter is referred to the Third Member.

 In passing : We will keep you posted – relay, pushbutton, switchgear, circuit breaker come what may!

(See 2013-TIOL-1502-CESTAT-MUM)