By TIOL News Service

MUMBAI, AUG 17, 2018: THE appellant is engaged in import of electronic goods of various types, which were being cleared by them on payment of basic customs duty as also additional duty of customs (countervailing duty (CVD)).

Acting on an intelligence that the appellant was subsequently altering the MRP declared in respect of the said goods, investigations were carried out by the Revenue. During the course of investigation, statements of the Director of the firmwas recorded and it was found that the appellant had declared the invoice value for the purpose of assessment of basic customs duty along with declaration of the MRP as per the sticker attached to the said goods, for the purpose of countervailing duty.

However, it was found in certain cases that the goods were subsequently refixed with the higher MRP, as per the price list circulated by the importer and the goods were cleared and sold at higher MRP.

Revenue, therefore, entertained a view that there was a mis-declaration of the MRP declared by the appellant at the time of import inasmuch as the MRP has been subsequently enhanced.

Accordingly, proceedings were initiated for confirmation of demand in respect of the previous imports made by the appellant as also the differential duty of CVD required to be paid in respect of the live Bills of Entry. Notice also proposed to confiscate the goods and to impose penalties.

The appellant contested the demand by submitting that there could only be a demand of central excise duty inasmuch as the activity undertaken by them in respect of the notified goods constituted a deemed manufacture under Section 2(f)(iii) of the CE Act. As the duty raised against them is duty of customs, which is not payable by them, they prayed for vacating the SCN.

In the alternative, it is also submitted that even the duty of excise would not be leviable since they would be entitled to the benefit of SSI Notification No. 8/2003-CE dated 01.03.2003. And further more, even if they are required to pay any excise duty they would be entitled to the Cenvat credit of CVD so paid on the impugned goods upon importation.

As regards the statement of the Director, the appellant submits that the same was recorded under coercion and stands retracted by him and which, in any case, cannot take the place of legal evidence.

The adjudicating authority did not find favour with the above pleas of the assessee and accordingly confirmed the demands by rejecting the MRP declared at the time of import of the goods, along with confirmation of interest. Further, penalties were also imposed upon the appellants.

The said order of the Commissioner is impugned before the CESTAT.

The Member (Judicial) considered the submissions and inter alia observed -

+ MRP, for the purpose of being adopted as assessable value, is required to be  actually declared  on the goods. The Revenue's entire case is based upon the price list so recovered by them from the importer read with the statements. There is no evidence of the fact that the appellants have actually affixed the imported goods with stickers bearing high MRP.

+ As regards evidentiary value of the statement of Shri Rakesh Dugar and other representatives of distributors of retail shops, it is to be kept in mind that the same are only to the effect that the goods were sold in open market at higher MRP. There is virtually no direct evidence on record to show that the goods were actually affixed with the stickers of higher MRP. Admittedly, the Standards of Weights and Measures Act require a person to affix the goods being sold in the market with a sticker of MRP. In the absence of any evidence of actual affixation of the higher MRP sticker to the goods in question, we find no justification for upholding the Revenue's case.

+ We note that the period involved in the present appeal is from April 2005 to November 2005 ie, before issuance of Notification No. 13/2008 - CE (NT) dated 01.03.2008, vide which the Rules were framed for re-determining the correct RSP, in a case where the RSP declared on the package was sought to be rejected.

+ It stands held that Notification No. 13/2008 - CE (NT) issued on 01.03.2008 providing for Central Excise (Determination of Retail Sale price of Excisable Goods) Rules, 2008, providing manner of ascertaining the retail price when the same is not declared, cannot be made applicable retrospectively and the demand for CVD was set aside on the ground that during the relevant period there was no manner prescribed for ascertaining RSP. [Suzuki Ceramics & Ors. 2014-TIOL-2494-CESTAT-AHM relied upon ].As such by following the above decisions, on this count, we find no reasons to uphold the demand.

+ Even if the Revenue's allegations that the goods in question were affixed with stickers of higher MRP are accepted, we note that such allegations by the Revenue would lead to inevitable conclusion that the goods, after clearance from the customs, underwent manufacturing process (in view of s.2(f)(iii) of CEA, 1944).

+ If that be so, even according to the Revenue's own case, which is to the effect that the appellant had affixed higher MRP stickers on the imported goods, the activity undertaken by them is required to be held as manufacturing activity. If that be so, the resultant product would be a manufactured product different than the one imported by the appellant. As such, it cannot be held that there was a change in MRP of the imported goods.

+ Merely because in the present case, detailed and elaborate manufacturing process has not been undertaken by the importer, but keeping in view that the law itself, in terms of the provisions of Rule 2(f)(iii), makes the said simple process of change in MRP as a manufacturing activity, the resultant product has to be held as a manufactured product and hence excisable. In such a scenario, we agree …that it is the duty of excise which was required to be considered by the lower authorities and no differential duty of CVD can be confirmed against them.

+ It is well settled law that the duties confirmed, if not found to be sustainable, cannot be substituted with the other kind of duties which the appellant may be required to pay, if there is no proposal in the notice to that extent and the adjudication has not dealt with the said aspect. In such a scenario, we hold that the countervailing duty confirmed in the impugned order is not sustainable.

+ The impugned orders also confirm duty in respect of the live consignments, on the ground that the appellant, after clearance of the same, would change the MRP as they have done in the past clearances. Such a view of the Revenue is based upon the assumptions and presumptions and the duty is being demanded in respect of a violation on the ground that the appellant "may" commit that violation. Such apprehension on the part of the Revenue cannot be upheld and duty confirmation on the said ground or the confiscation of the goods that the appellant "may" after clearance of the goods, change the MRP, is unsustainable on the face of it.

In fine, the Member(J) set aside the impugned order and allowed the appeals with consequential relief.

However, the Member (Technical) had a differing view.

Starting off by mentioning that the facts are 'simple', viz. the appellants had printed a MRP much less than the actual MRP prevalent at the time of import, the Member (T) observed that the issue which needed determination is if, in these circumstances when the MRP is wrongly declared to the custom, the CVD can be demanded based on the actual MRP prevalent at that time.

After extracting the proviso to sub-section 3(2) of the Customs Tariff Act, 1975, the Member (T) observed that it is apparent that the requirement of law is not mere affixing the MRP but it is a declaration of the MRP.

Adverting to the statement of the Director of the company, and the contents of paragraph 12 of the impugned order-in-original, it was observed that it was apparent that the RSP was mis-declared to Customs for the purpose of evading duty and that the RSP was not changed after import but the same was misdeclared at the time of import.

It was further observed -

“17.4 … The appellants are seeking to take shelter in the fact that the law requires them to pay CVD on the basis of the 'Declared' RSP. The argument being that even if the price is 'misdelared', the same has to be accepted as a 'misdeclaration' is also a 'declaration'. I am of the view that the onus of declaring the correct RSP is on the appellant in view of the requirements of the Standards of Weights and Measures Act, 1976 (60 of 1976), Any other view would result in perpetuating a fraud.

17.5 … A change of RSP after import can only be a matter of charging Central Excise Duty and not of changing the Assessable Value for the purpose of CVD under the Customs Tariff Act 1975. It is apparent from the facts of the case that it is not a case of change of RSP after import but it is a case of misdeclaration of RSP prevalent at the time of import. At the time of import, the importer was affixing much higher RSP on domestic sale of the similar goods imported earlier. It was obligatory on the part of importer to declare the prevailing RSP of the goods at the time of import. In any case the action under Customs Act can be initiated on account of this mis-declaration. Action under customs for misdelcaration of RSP is independent of any other action sanctioned by any other law.

17.6 … The appellants, knowingly and with intention to defraud, affixed a lower RSP before Customs (An RSP lower than their whole sale price in some cases) and after clearance from Customs affixed the correct RSP for sale in the retail market. It is a clear case of fraud played on revenue in order to avoid the duty…and not a case of mere change of RSP after clearance.

18. In these circumstances the provisions of the Customs Act can be invoked to demand CVD short paid. This action is independent of the possibility of invoking the provisions of the Central Excise to demand duty of as deemed manufacture. Consequently the demand of duty and interest is confirmed."

In view of the difference of opinion, the matter is referred to the President for resolution by a third Member.

(See 2018-TIOL-2550-CESTAT-MUM)