TaxTMI 
TaxTMI 
2012 (11) TMI 596
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....s of Section 4A of the Central Excise Act ("the Act" for short) on Ceramic Tiles, based on the maximum retail price affixed on the package in terms of the provisions of the Standards of Weights and Measures Act, 1976. A notification was issued being Notification No. 13/2002-C.E. (N.T.), dated 1-3-2002 providing for abatement of 45% from such MRP for the purpose of determining the assessable value of ceramic tiles. Vide another Notification No. 6/2002-C.E., dated 1-3-2002, Central Excise duty at the rate of 8% is attracted on the tiles manufactured in a factory not using electricity, provided no Cenvat credit is availed on the duty paid on input. 3. DGCEI gathered intelligence that at Morbi, over 200 manufacturers of ceramic tiles, including the present petitioner No. 1 were engaged in large scale evasion of Central Excise Duty and other taxes by declaring only a part of actual Maximum Retail Price ("MRP" for short) and consequently, determining a lower assessable value after availing abatement of 45% on such lower MRP. Officers conducted coordinated search operations, which could not be completed on account of hostile atmosphere and attitude of the manufacturers and their emp....
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....the applicant was not declaring colours and designs of the tiles manufactured and sold, nor were they mentioned in the invoices. It objected to the method adopted by the petitioner for arriving at additional duty as also non-declaration of MRP of tiles sold for the period in question on their Central Excise invoices, the Settlement Commission after affording opportunities to both the sides settled the case under Section 32F(7) of the Act laying down the terms and conditions as follows :- "25. In view of the foregoing discussions, the following terms and conditions are laid down under sub-section (7) of Section 32F of the Act for settlement of the case : Central Excise Duty : The differential duty in this case is settled at Rs. 15,82,961/- (Rs. 15,50,070/- + Rs. 32,891/-) (Rupees Fifteen Lakhs Eighty Two thousand Nine Hundred Sixty One Only). The applicant has deposited Rs. 15,00,000/- (Rupees Fifteen Lakhs Only) and the balance shall be paid within the period of 30 days. Interest : The applicant shall calculate the interest liability on the duty specified above and pay the same within 30 days. The Revenue is given the liberty to check the calculation for its correctne....
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....clared shall need to be recorded. It is also the case of the petitioner that while approaching Settlement Commission it had re-worked retail sale price for each removal i.e invoice wise by adding realized amount by way of cheque, average cash amount, cost of transportation, retailer's profit and excise duty on the revised MRP plus VAT/CST. The petitioner contended that in most of the cases even after addition of cash amount in the amount received through cheques plus tax, it would not exceed retail sale price declared on the goods. It is only with an intention to buy peace of mind, the duty liability is accepted on higher side. It is the case of the petitioner that the Settlement Commission instead of verifying the correctness of declaration made by the petitioner, arbitrarily reduced duty liability by accepting ad-hoc retail sale price and allowed 10% notional reduction in weightage average retail sale price arrived at by the investigating agency on the basis of retail sale price declared by the petitioner firm for the subsequent year 2008-09. As the amount to be calculated was for the period being 19-4-2007 to 15-2-2008, this method was not acceptable to the petitioner. 10.&emsp....
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.... negative sum eventually. He also further urged that it would not only have cascading effect as there are 200 other manufacturers who are waiting on the fence, but the same would lead to a chaotic situation for the Revenue. He urged this Court to consider the fact that though DGCEI needs to investigate in the allegation of large scale evasion of the tax and duties, the officials were not permitted to do so by the manufacturers, their employees etc. This very attitude, on the part of the manufacturers, which included the petitioner, requires to be deprecated severely and in the wake of this glaring facts, deduction of 10% as is done by the Settlement Commission is, in no any manner found sustainable from any angle. It is also the say of the Revenue that only theoretical basis is adopted by the Settlement Commission and thereby he has travelled outside his jurisdiction. 13. The Revenue challenged this order by reiteratively emphasizing that this was classic case of large scale evasion of Central Excise Duty and other taxes where the officials were not permitted to carry out even its functions of enquiring into this evasion. Not only they were obstructed from doing their duty, b....
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.... such a situation, firstly, the authority, sought to be relied upon, if is looked at, before the Apex Court in the case of Paul Industries (India) v. Union of India (supra), challenge was to the decision of dismissal of the writ petition by the High Court challenging the correctness of the order passed by the Settlement Commission. The Apex Court held that the High Court was obliged to go into the question as to whether the original order passed by the Settlement Commission was in accordance with law or not. It was argued before the Apex Court that while passing the original order and fixing the duty, the Settlement Commission did not take into consideration the value of lowest transaction. The Apex Court held that since questions raised were pure questions of law, High Court was not justified in not going into the merits of the original order. Relying on this decision, learned Senior Advocate Mr. Trivedi submitted that the question raised in these petitions is a pure question of law, in as much, as under the existing provision of Central Excise Act and other provisions applicable to the present case, there was no authority with the Settlement Commission to arrive at the MRP in a m....
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....ods 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, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette. (3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods. (4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer- (a)....
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....emoval, where the sale price of such goods on the package is not declared or the same is tempered with or obliterated, Retail Sale Price needs to be ascertained for which rules have been made, known as the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 notified by Central Board of Excise & Customs vide Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008, have come into being. These rules have substituted earlier Notification No. 54/96 of 1996 dated 31-10-1996 and Rule 4 of these rules read as thus :- "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, the....
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....y it issued the show cause notice levying the differential duty of Rs. 19,43,037/- including the demand of additional interest and penalty. Present petitioner M/s. Suzlon was keen to settle the case. It approached the Settlement Commission but they maintained that there was enhanced extra consideration of Rs. 35/- per box as against the single average of the highest and the lowest extra consideration. However, they do not subscribe to the correctness of the basis on which the demand for differential duty had been raised. According to the petitioner it had admitted the enhanced liability to the tune of Rs. 13,46,967/- by raising extra consideration of Rs. 35/- per box. They worked out the detailed consideration to such admitted additional duty liability but they severally objected to the concept of weightage average of MRP, in as much as Rule 4 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 had been followed for the same. According to the Revenue the petitioner had not come up with full admission of the duty liability and had not disclosed the actual MRP at which the goods were sold to the dealer. In absence of any information, the only alt....
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.... and general provisions of the Section 4A(4) of the Act. The main concern of the applicant in adopting the weighted average price of subsequent period is that revised price should be higher in the normal course compared to the existing price. The Bench finds that this argument is quite reasonable and that whenever there is price revision, due allowance is given towards inflation and other cost escalation factors such as higher price of inputs. Taking these aspects into consideration, the Bench finds that it is reasonable to accept a notional upward price revision of 10% for the subsequent period in this case to arrive at the MRP for the relevant period. Accordingly, the Bench considers that the most practical approach to settle the revised duty liability is by extending the proportionate reduction in weighted average MRP of the subsequent period i.e. (2008-09) by a factor of 10% to arrive at the average MRP for the relevant period under the SCN, that in 19-4-2007 to 15-2-2008. 22. Accordingly, the additional duty liability on account of undervaluation given in Annexure D to the SCN has been reworked as follows :- Quality of the floor tiles manufactured and cleared as per inv....
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.... the weighted average MRP by the factor of 10% is wholly unacceptable and, therefore, as rightly submitted by the learned advocate for the Revenue, the possibility cannot be ruled out that eventually this reduction could bring weighted average MRP to nil and it would result into ridiculous preposition. As the policy adopted by the Settlement Commission is neither legal nor in any manner conducive to the object of the Act and as the same is challenged by both the sides and as fallacy of reasoning had been well made out, we are of the firm opinion that this entire basis cannot be sustained and the same needs to be set aside. In this premise, the order of the Settlement Commission shall have to be quashed in these proceedings. We are conscious of the decision of the Apex Court given in case of Union of India v. Ind-swift Laboratories Ltd. (supra) that findings of facts recorded by the Commission or questions of facts are concerned, the same are not open to examination by the High Court. However, the same can be interfered with when order is contrary to the provision of the Act. Having found the order of Settlement Commission contrary to the settled principles and provisions of law, th....