Valuation by actual sale realisation governs where declared retail price is fictitious; suppression supports extended limitation and penalty.

Where evidence shows that the declared retail price is fictitious and cigarettes are sold above the marked price through a controlled distribution network, the actual sale realisation governs valuation and excess collections may be treated as flow-back. The Tribunal held that NETCO, as the job worker that manufactured the goods, was liable for the differential duty attributable to the cigarettes, and that intentional suppression and misstatement of price justified invocation of the extended limitation period. On the same factual findings of undervaluation, misdeclaration, and evasion, the penalty was sustained.

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Issues: (i) whether the cigarettes were sold at a price higher than the marked retail price and whether the excess realisations flowed back to GTC; (ii) whether the differential duty was correctly demanded from NETCO and whether the extended period of limitation was available; (iii) whether penalty was justified.

Issue (i): whether the cigarettes were sold at a price higher than the marked retail price and whether the excess realisations flowed back to GTC.

Analysis: The evidence on record, including search materials, statements recorded during investigation, bank drafts, chits, and market enquiries, established that the cigarettes were sold above the price marked on the packets. The marked price was not treated as genuine because the goods were marketed through a controlled distribution network and the excess collections were routed through conduits and unaccounted remittances. The Tribunal also found that the practice of embossing, instead of properly printing, the marked price supported the conclusion that the declared price was not the real selling price.

Conclusion: The higher sale price and the resulting flow back were proved against the appellants.

Issue (ii): whether the differential duty was correctly demanded from NETCO and whether the extended period of limitation was available.

Analysis: The Tribunal held that manufacture was the event of levy and that NETCO, being the job worker that manufactured the cigarettes, was the person liable for the duty attributable to the goods. Since the declared price was intentionally mis-stated and the real sale price was suppressed, the case fell within suppression and fraud based invocation of the extended limitation period. The plea of denial of natural justice and cross-examination was rejected because the adjudication was founded on a chain of corroborative evidence and the request for cross-examination was considered premature in the circumstances.

Conclusion: The duty demand against NETCO and the invocation of the extended period were upheld.

Issue (iii): whether penalty was justified.

Analysis: Once the Tribunal found a deliberate scheme of undervaluation, misdeclaration, and flow back of sale proceeds, the conduct of both appellants was held to be contumacious and aimed at evading duty. On that basis, the imposition of penalty was sustained.

Conclusion: Penalty was rightly imposed.

Final Conclusion: The appeals failed in substance, and the Tribunal affirmed the duty demand and penalty, while clarifying that NETCO would bear the duty liability.

Ratio Decidendi: Where evidence shows that the declared retail price is a fictitious figure and the real sale price is recovered through a controlled marketing chain, the actual sale realisation governs valuation, the job worker remains liable for duty on the manufactured goods, and suppression justifies invocation of the extended limitation period.

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