2023 (3) TMI 437 - SC - Central Excise

Supreme Court Upholds Customs Duty Valuation, Emphasizes Conservative Approach

COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD Versus M/s J.R. ORGANICS LTD.

The Supreme Court affirmed the Customs Excise & Service Tax Appellate Tribunal's decision regarding the valuation of goods for customs duty. It ... Valuation of Specially Denatured Spirits (SDS) - Rejection of the highest rate - respondent-assessee, contended that upon a proper valuation in terms of Rule 6(p)(ii) of the Central Excise Rule, 1994, the value of SDS was determinable on the basis of its in-house production at Kaptanganj - extended period of limitation - penalty - HELD THAT:- This Court is of the opinion that the impugned order cannot be faulted. This Court in its judgment reported as AK ROY AND ANOTHER VERSUS VOLTAS LIMITED [1972 (12) TMI 37 - SUPREME COURT] held that No data was placed before the High Court by the appellant to show that the 22 per cent discount did not represent 'trade discount' is a percentage deduction from the regular list or catalogue price of goods. As there was no case for the appellants that there was any secret arrangements between the wholesale dealers and the respondent in respect of the sales to them or that the price of the articles was understated in the agreements or that any extra-commercial advantages to the dealers were taken into account in fixing the price we do not think that we should go into the question whether the discount allowed to the wholesale dealers was 'trade discount' or not for the purpose of the explanation. In view of the clear principle enunciated by this Court which is that the most conservative price is to be taken into account while determining the value of goods, CESTAT approach and conclusions, in the opinion of this Court cannot be faulted. The impugned order of the CESTAT is accordingly affirmed. Appeal dismissed. Issues:1. Valuation of goods for customs duty determination based on Rule 6(p)(ii) of the Central Excise Rule, 1994.2. Proper method of determining the value of goods for customs duty.3. Interpretation of the term 'wholesale cash price' in the context of customs duty valuation.Issue 1: Valuation of goods for customs duty determination based on Rule 6(p)(ii) of the Central Excise Rule, 1994:The appeal stemmed from the Customs Excise & Service Tax Appellate Tribunal's (CESTAT) order dated 27.07.2009, following a remand order by the Supreme Court in CA No. 4975/2002. The respondent-assessee contended that the value of Specially Denatured Spirits (SDS) should be determined based on in-house production at Kaptanganj, Uttar Pradesh, as per Rule 6(p)(ii) of the Central Excise Rule, 1994. The original order, however, disagreed and confirmed the demand in the show cause notices. Subsequently, CESTAT allowed the appeal, stating that the method used by the Commissioner was incorrect.Issue 2: Proper method of determining the value of goods for customs duty:Upon remand by the Supreme Court, CESTAT revisited the case and emphasized the importance of determining the normal price of goods for customs duty valuation. It cited the need to adopt the most conservative price, not the highest, to maintain the character of the normal price. The revenue contended that the Commissioner's discretion in valuing the goods based on factors like material characteristics and nearest ascertainable value was valid. However, the Court upheld CESTAT's decision, emphasizing the need for a conservative approach in determining the value of goods for customs duty purposes.Issue 3: Interpretation of the term 'wholesale cash price' in the context of customs duty valuation:The Court referred to the case of A.K. Roy Vs. Voltas Limited to interpret the term 'wholesale cash price' concerning customs duty valuation. It highlighted that the price must be conservative in every respect and free from any loading for post-importation charges. The judgment emphasized the distinction between wholesale and retail prices, emphasizing the need to consider sales to the trade. The Court affirmed CESTAT's approach of considering the most conservative price while determining the value of goods for customs duty, ultimately dismissing the appeal and upholding the impugned order.In conclusion, the Supreme Court affirmed CESTAT's decision regarding the valuation of goods for customs duty, emphasizing the importance of adopting the most conservative price and interpreting the term 'wholesale cash price' in the context of customs duty valuation.