TaxTMI 
TaxTMI 
2004 (9) TMI 103
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....eferred to as the 'Rules') and Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The 1985 notification which replaced the 1983 notification was in similar terms except that the rates of excise duty and the categories of the cigarettes entitled to be exempted were different. In substance however, as far as the question of interpretation is concerned, there was no material difference between the 1985 and the 1983 notification. The necessity of our going into the other issues raised in these appeals would depend upon what interpretation we put on these Notifications. Between the 1983 Notification and the 1985 Notification as well as after the 1985 Notification there were other notifications which are not of any consequence as far as the issues raised in the appeal are concerned, and are not required to be referred to in greater detail. If we have said the 1983 notification for the first time introduced the concept of levying excise duty with reference to the retail sale price of cigarettes instead of the whole sale price at which the manufacturer sold cigarettes at the time and place of their removal under Section 4 of the Act. The retail sale pr....
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....cigarettes, the appellant had unofficially fixed effective prices being the actual price of its cigarettes and communicated the same to the WDs, SWDs and retailers; that the effective price was generally higher than the printed declared price and that the appellant had, therefore, deliberately printed false prices on the packs. The show cause notice concluded with the charge that the appellants had printed lower sales prices with the intention of evading payment of appropriate duty in contravention of the provisions of Rule 9(1), Rule 52 and Rule 52A of the Rules and that by availing of the exempted rates the appellant had contravened the 1983 and 1985 notifications as amended from time to time. It was said that the appellant, its Directors and OCMs had not only rendered themselves liable to payment of duty short paid but also rendered themselves liable for penalties under the provisions of Rule 9(2), Rule 52A, Rules 209 and 210. 4.A writ petition was filed by the appellant in the Calcutta High Court challenging the validity of the show cause notice. This was dismissed. An appeal was preferred before the Division Bench which was also dismissed. While dismissing the appeal, the D....
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.... appeal (C.A. No. 70 of 1999). The Revenue also filed several appeals (Civil Appeal Nos. 6101-6113/1998) before this Court being aggrieved by the directions of the Tribunal to re-determine the duty demand on the appellant, the setting aside of the duty liability of the OCMs and the quashing of the penalties against the appellant, its Directors and the OCMs. On 15th January, 1999 the appeals filed by the Revenue (Civil Appeal Nos. 6102/98, 6103/98, 6110/98, 6111/98, 6112/98 and 6113/98) in respect of penalties imposed on the Directors were dismissed by this Court. Civil Appeal Nos. 6104-6109/98 filed by the Revenue relating to the duty demand against the OCMs' were admitted restricted to the question relating to their liability for 6 months only. As far as the Revenue's appeal against the appellant (Civil Appeal No. 6101/98) and the appellant's appeal against the Revenue (Civil Appeal No. 70/99) were concerned, they were admitted. The adjudication proceedings for re-computation of the duty demand pursuant to the Tribunal's order were, however directed to continue but no order was to be passed. 9.The adjudication proceedings were concluded and the duty liability of the appellant w....
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....ial Importance) Act, 1957 (58 of 1957), respectively. Explanation. - For the purpose of this notification - (1) "adjusted sale price", in relation to each cigarette contained in a package of cigarettes, means the unit price arrived at by dividing the sale price of such package by the number of cigarettes in such package : Provided that, - (a) where such cigarettes are packed in packages containing the same number of cigarettes but the sale prices of such packages are different, the adjusted sale price in relation to each such cigarette shall be the unit price arrived at by dividing the highest of such sale prices by the number of cigarettes in such package, and (b) where such cigarettes are packed containing different number of cigarettes, the unit price for each such package shall be determined by dividing the sale price of each such package by the number of cigarettes therein and the highest of such unit prices shall be the adjusted sale price in relation to each such cigaret....
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....ption was to be granted only if the MRP was the price at which the cigarettes were in fact or should have been sold by the retailers. Reference has also been made to the legislative history and the context in which the Notification was issued to buttress the submission. Without prejudice to this contention, the appellant's Counsel took us through volumes of material to prove that the MRP fixed and printed on the cigarette packets was on the basis of a reasonable and an honest exercise. 14.The respondent has stated that the declaration of price (MRP) was required to be an honest declaration and that the definition of the sale price in Explanation III to the notification contemplated that a package would ordinarily be sold at the price declared and that the sale price declared or printed would have to have a co-relation with the price at which such package was likely to be sold. Otherwise it would give the assessee the freedom to print any price knowing that the package would not be sold in accordance with the declaration made on such package. It has further been submitted that the Excise Authorities are entitled and in fact are bound to determine the truth of such a declaration j....
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.... and this was also the basis on which the Special Leave Petitions were withdrawn by the appellant. It is submitted that in any event this Court was not bound by the decision of the High Court since that order merged in the order of the Adjudicating Officer which in turn merged with the decision of the Tribunal. The order of the writ Court was, according to the appellant, an interlocutory order and not final. Besides, it is argued, there was no question of res judicata when what was to be decided was a pure question of law and not of fact. 16.There can be no doubt that the Division Bench had rejected the interpretation sought to be put by the appellant on the notification. This is apparent, particularly from paragraphs 98, 110 to 115 of the judgment as reported in 1991 (53) E.L.T. 234. But there are other paragraphs in the judgment which appear to suggest that the Court was merely taking a prima facie view of the matter and it was for the Adjudicating Authority to finally decide all the questions including questions of fact (vide paragraphs 5 and 175). Although it is more than likely, as has been rightly contended by the Revenue, that the Division Bench had not intended to leave ....
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....n was argued at length by both parties before the adjudicating authority and the Tribunal, both of whom decided the issue independently of the High Court's decision. 18.Doubtless, the principle of res judicata is a fundamental doctrine of law that there must be an end to litigation. [See Daryao v. The State of U.P. 1962 (1) SCR 574] but the plea of res judicata has to be specifically and expressly raised. [See : Medapati Surayya v. Tondapu Bala Gangadhara Ramakrishna Reddi - AIR (35) 1948 PC 3, 7]. This view has been recently reiterated in V. Rajeshwari v. T.C. Saravanabava - 2003 (10) Scale 768, where it is said that the foundation of the plea of res judicata must be laid in the pleadings. If this was not done, no party would be permitted to raise it for the first time at the stage of the appeal. The only exception to this requirement is when the issue of res judicata is in fact argued before the lower Court. In this case not only had the plea not been taken by the Revenue at any stage before any of the authorities, but arguments exactly to the contrary had been put forward by the respondent. We will not permit the plea to be raised now. In the circumstances, it is not necessar....
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.... India, (1969) 2 SCR 481. The item provided for ad valorem "plus the excise duty for the time being leviable on pig iron or steel ingots, as the case may be" in respect of iron or steel products. The assessee had manufactured wires out of steel rods which had been imported. No excise duty was leviable on steel ingots because it was manufactured outside the country. The Excise authorities contended that the word "leviable" referred to the rate and not to the actual levy of excise duty on the steel ingots used in the manufacture of the iron and steel products. This submission was accepted by the majority by saying :- "It is said that the item should be strictly construed, it being a taxing enactment. But no rule or principle of construction requires that close reasoning should not be employed to arrive at the true meaning of a badly drafted entry in an Excise Act. I believe I am not stretching the language of the entry against the subject, but it appears to me that in the context of the scheme of the Excise Act this is the only reasonable construction to give to the (Emphasised)entry". 23.Presumably the phrase "badly drafted" was used to mean that the language of the Entry was ....
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....mode of computation of such interest was laid down in sub-section (6) of that Section, namely, from January 1 of the financial year in which the estimated tax was paid. The assessee neither submitted any estimate nor paid any tax. He was charged with interest under Section 18A(8). The assessee challenged this on the ground that since he had not paid tax at all it was not possible to calculate interest in the manner laid down in sub-section (6). In rejecting the submission of the assessee, this Court said sub-section (8) only laid down the machinery for assessing the amount of interest for which liability was clearly created and that the reference to subsection (6) provided the machinery to calculate the amount of interest. It was held that in interpreting such "machinery provisions", the rule is that that construction should be given which makes the machinery workable. 27.The second exception is : If two constructions are possible and a strict construction would lead to an absurd result then the construction which is in keeping with the object of the statutory provision or in keeping with equity could be accepted. This was the view expressed in Commissioner of Income Tax. v. J.H....
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....can indicate "possibility" as held by the Division Bench, or "capability" as submitted by the Revenue, it is also used as denoting "permission". A person may do something if he is permitted to. It appears to us that it is in this third sense that the word 'may' has been used in the notification because it has been qualified with the phrase 'in accordance with'. Reading these two phrases 'may be sold' and 'in accordance with' together, the definition of 'sale price' in relation to a package of cigarettes would mean the MRP (exclusive of local taxes) at which such package is permitted to be sold in conformity with the printed price. If the word 'may' is construed to mean 'likely' or 'can' then the phrase 'in accordance with' would be rendered meaningless as it would be open to the retailer to sell it at such price as he may think fit notwithstanding the printed MRP. Indeed that is exactly how the Tribunal construed the phrase "may be sold" by saying :- "These words clearly suggest that the declared printed price must be such that the packages may be or can be or are capable of being sold at such price. The declared price may be such that the packages may not be or cannot be or are....
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....purpose of determining the slab applicable for the purpose of determining the rate of duty applicable." 33.What the Revenue would have us do and what the Tribunal has in fact done, is to shift the basis for levy of excise duty under the exemption notification from the MRP actually printed on the package to a price which is to be deemed to be the printed price. All this is done in order to avoid what the Tribunal considered could not have been the object of the notification viz., "a situation where it would be open to a manufacturer to deliberately and successfully "under declare" the price by declaring a price less than the price at which he knows the package may be sold". 34.The object of the notification was to firmly fix the basis for levy as we have expatiated later and the interpretation we have put on the notification is in keeping with this object. Furthermore the reasoning of the Tribunal, apart from being contrary to the principles enunciated in Innamuri Gopalan (supra), proceeds on the basis that 'may' means "likely", an interpretation which cannot be correct for the reasons already stated. As against this if we were to construe the word 'may' as 'permitted', which ....
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....tion or sale by the retailer is statutorily prescribed under the 'the SWM Act' and the Packaged Commodities Rules. The provisions of the SWM Act have been given overriding effect by the non-obstante provisions of Section 3 of the Act. Section 39 of the Act provides for a declaration to be made on the package by every manufacturer specifying, inter alia, the unit sale price of the commodities in the package and the sale price of the package. Under Section 83 of the SWM Act, the Central Government has been given power to make rules for carrying out the provisions of the Act by notification. In exercise of these powers, the Central Government framed the Packaged Commodities Rules. Rule 2(r) defines 'retail sale price' as meaning : "the maximum price at which the commodity in packaged form may be sold to the ultimate consumer, inclusive of all taxes, transport charges and other dues; Rule 23 (2) provides that : "No retail dealer or other person shall make any retail sale of any commodity in packaged form at a price exceeding the retail sale price thereof. {Explanation. - For the removal of doubts, it is hereby declared that a sale, distribution or delivery by a wholesale de....
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.... Union Territories. The Committee have been informed that a number of cases have been booked by the various State Governments for the violation of the provisions of the said Rules but they have yet to be apprised of the action taken in the matter." 39.If the consumer fails to demand the MRP or the State authorities do not enforce the statutory requirements, the system under the notification breaks down, but that does not legally justify an interpretation of the notification by presuming an illegality on the part of the retailer. 40.The Revenue's case then is that the notification was required to be worked out without reference to the SWM Act and Packaged Commodity Rules. In other words, what was required was a separate declaration for the purposes of the Notification. The reasons given in support of this argument are (1) the SWM Act had not been extended to Sikkim at the relevant time where the cigarettes were being manufactured and sold; (2) If the SWM Act and Packaged Commodity Rules were repealed or made inapplicable to cigarettes in future, the notification would continue to operate on its own force; (3) The notification did not refer to the SWM Act or to the Packaged Com....
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....e, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; 42.It is true that the proviso does not refer to the SWM Act or the Packaged Commodities Rules, but it does not specifically refer to fixation under any other enactment either. All that it requires is that the price must be the maximum price fixed under a law 'for the time being in force'. What is important is that the proviso statutorily recognizes that the price which may not be the actual price received, could form the basis of levy of excise duty. As was said in Aluminium industries Ltd. v. Collector Central Excise, Bhuvaneshwar 1998 (9) SCC 404, that by virtue of this proviso a legal fiction has been created. The price fixed under any law for the time being in force has to be taken as the normal price of the goods irrespective of the actual amount realized. In any event with the new system of levy of excise duty on cigarettes being introduced in 1983 linking excise duty to the retail price printed. Rule 8 of Central Excise Rules was amended by the introduction of Sub-rule (3). Sub-rule (3) provides : "An exemption under sub-rule (1) or sub-rule (2) in respect of any excisab....
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.... may be verified. But when all that is stated in the declaration is a requirement to be fulfilled by another, what is to be enquired into is the compliance with the requirement and not the correctness of the declaration itself. The Revenue has failed to keep in mind the distinction between different kinds of declarations. Most of the cases cited by the Revenue in this context deal with the first and second kinds of declaration where the declaration asserts a present or future state of affairs and seeks to certify as true, facts which may be questioned by the authority which is called upon to act on such certification whereas declarations under the notification fall into the third category. 45.Declarations to be furnished in Form 'C' by registered purchasing dealers under Section 8(1) of the Central Sales Tax Act, 1956 which certify that the purchasing dealer is a registered dealer in respect of commodities mentioned in the declaration, are illustrative of the first kind of declaration. Thus it was held in the State of Madras v. M/s. Radio and Electricals Ltd. - [1966] Suppl. S.C.R 198 that the Sales Tax Authority was competent to scrutinize the certificate to find out whether it....
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....stoms Authority in taking action against the person by going into the truth of the declaration. 47.Examples of the third kind of declaration are usually to be found where assessment under Statute A is dependent upon a basis provided by Statute B. In such case, the assessing officers under Statute A cannot question the basis. That is within the province of the authorities under Statute B. 48.In the decision of Union of India v. M/s. Rai Bahadur Shreeram Durga Prasad (P) Ltd. - 1969 (1) SCC 91, the furnishing of a declaration under Section 12(1) of the Foreign Exchange Regulation Act, 1947 was a pre-condition to the export of goods under the Customs Act, 1962. This Court said that the correctness of the declaration could not be questioned by the Custom Authorities on the ground that the declaration under Section 12(1) of FERA was incorrect. Similarly, in M. Narasimhaiah v. Deputy Commissioner for Transport - 1987 (Supp.) SCC 452, the Karnataka Motor Vehicles Taxation Act provided for taxation with reference to a number of passengers which the vehicle was permitted to carry. The assessee had a permit issued under the Motor Vehicles Act, 1939 which permitted him to carry a number....
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....for all, I propose to fix specific rates of duty in respect of cigarettes. These rates of duty would be linked to their retail sale price printed on the cigarette packs". 50.It appears that this is how the Central Board of Central Excise also (understood the scheme. The 34th Report of the Public Accounts Committee (1985-86) records the evidence of the Chairman, Central Board of Excise and Customs. He said : "In this case in 1982 and 1983 we opted for the 'specific rate of duty'. For the purpose of calculation since the printing of the price is a legislative requirement, we will go by that and have 'specific duty'. Another system is ad valorem which has created enormous problems…………………………. What we are interested is to collect a certain amount of duty from a particular industry. The rate of duty is accordingly fixed. Ad valorem duty is based on the value of the goods. 'Specific rate' is directly related to the product. So, it was decided that we could adopt a formula linked to 'printed retail price' for classification of the goods for deciding the amount of duty that this particular commodity should bear …………………………………………. Even....