CESTAT Sets Aside Pre-2008 Excise Demands on RSP Redetermination, Remands Post-2008 Cases

Ocean Ceramics Vs Commissioner of Central Excise & Service Tax (CESTAT Ahmedabad)

These appeals were filed by various manufacturers of ceramic tiles against demands of central excise duty and imposition of penalties. The Tribunal noted that the issues involved had already been decided in Acme Ceramics vs Commissioner of Central Excise, 2014 (303) ELT 542 (Tri. Amd.), which concerned valuation of ceramic/vitrified tiles under Section 4A of the Central Excise Act, 1944.

In Acme Ceramics, the dispute related to demands of central excise duty on the allegation of undervaluation for two periods—before and after 1 March 2008. The Revenue relied upon statements of dealers and shroffs/angadiyas, alleging that the tiles were sold at prices higher than the declared Maximum Retail Price (MRP)/Retail Sale Price (RSP), that cash amounts had been collected, and that the manufacturers had increased prices after investigation. The Revenue also relied upon weighted average calculations to redetermine the RSP.

The Tribunal examined Section 4A of the Central Excise Act, 1944, including Section 4A(4), and the definitions contained in Section 2. It observed that although Section 4A(4), introduced with effect from 14 May 2003, contemplated ascertainment of the correct retail sale price where the declared RSP was incorrect, the manner of such determination had not been prescribed until the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force through Notification No. 13/2008-C.E. (N.T.) with effect from 1 March 2008. Consequently, for the period prior to 1 March 2008, there was no prescribed statutory mechanism for redetermining the RSP. The Tribunal held that, in the absence of prescribed rules, the Revenue could not redetermine the RSP by adopting a best judgment method or any other method not provided by law.

The Tribunal further observed that the adjudicating authority had confirmed demands based on suppression of turnover and alleged undervaluation. It held that where goods were covered by Section 4A, and no statutory machinery existed prior to 1 March 2008 for redetermining the RSP, such demands were unsustainable. It also found that there was no corroborative evidence identifying the exact quantity of goods allegedly cleared clandestinely or connecting the alleged suppressed turnover with specific clearances.

On the factual aspects, the Tribunal noted that the manufacturers consistently stated that they cleared tiles bearing the declared RSP from the factory on an ex-factory basis and that transportation was arranged by purchasers. If the RSP was subsequently altered before sale to consumers, the Department had failed to establish who made such alterations. The Tribunal observed that no evidence showed that the manufacturers altered the RSP or instructed dealers to do so. It also noted that the investigation did not result in seizure of any cartons showing altered RSPs and that no dealer stated that the manufacturers directed alteration of the RSP. In these circumstances, the Tribunal held that the manufacturers could not be saddled with duty liability merely on the basis of a redetermined RSP for the period prior to 1 March 2008.

Regarding the period after 1 March 2008, the Tribunal observed that although the statutory rules for determination of RSP had come into force, the Department was required to determine the RSP strictly in accordance with those rules. It held that the matter required reconsideration, including examination of evidence, grant of cross-examination where necessary, determination of whether the declared RSP was false to the knowledge of the manufacturer, and computation of duty strictly under the 2008 Rules. Accordingly, it remanded the post-1 March 2008 issues to the adjudicating authority for fresh consideration in accordance with law and principles of natural justice.

The Tribunal also noted that demands relating to alleged clandestine removals had not been pressed during hearing and therefore upheld those demands along with interest and equal penalty without examining them on merits.

In the present batch of appeals, the Tribunal recorded that the impugned orders were similar to those considered in Acme Ceramics. Although a Division Bench had earlier doubted the correctness of that decision and referred three questions to a Larger Bench, the Larger Bench, by Interim Order Nos. 1-23 of 2024 dated 23 January 2024, held that it was not permissible to ascertain the retail sale price for clearances made prior to 1 March 2008, when the 2008 Rules were not in force. In view of that answer, it found no necessity to answer the second question, while the third question was left unanswered as requested by both sides.

The Tribunal held that the Larger Bench’s decision removed the doubts previously expressed regarding Acme Ceramics, making it a binding precedent. Following that precedent, it disposed of the present appeals on identical terms. Accordingly, the demands and penalties relating to the period prior to 1 March 2008 were set aside, while the demands for the post-1 March 2008 period were set aside and remanded to the adjudicating authority for reconsideration in accordance with the findings recorded in Acme Ceramics.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

These appeals have been filed by various manufacturers of tiles against demand of central excise duty and imposition of penalties.

2. Similar issues were earlier decided vide the decision in the case of Acme Ceramics vs Commissioner of Central Excise, 2014 (303) ELT 542 (Tri. Amd.). In the said decision, following was held:

“8. We have considered the detailed submissions made by both sides and perused the records as also the written submissions filed by both sides after the conclusion of hearing.

9. Essentially, the dispute in these cases relates to the demand of Central Excise duty due to undervaluation of final product cleared by the appellant in two periods i.e. prior to 1-3-2008 and post-1-3-2008.

10. The undisputed facts are that the appellants are manufacturer of ceramic/vitrified tiles and the said tiles are covered under the provisions of Section 4A of Central Excise Act, 1944 (hereinafter referred to as ^„the Act‟) and are discharging MRP declared on the boxes cleared from their factory premises. It is also undisputed that the appellant assessees are selling their final product ex-factory and the transportation arrangements are made by the purchasers themselves.

10.1 The entire case of the Revenue as adjudicated by the lower authorities has confirmed the demand based upon the evidences such as the statements of various dealers who had stated that the tiles which are manufactured and cleared by the appellant are sold at a price more than the MRP/RSP declared on such tiles; statements of various shroffs/angadiyas who had stated that the appellants were handed over an amount in cash which were collected from various dealers and that the appellant-assessee have increased their prices of the final product after the massive investigation which was carried out; application of weighted average and redetermination of RSP is permissible even prior to 1-3-2008 and post-1-3-2008.

11. For the period prior 1-3-2008 as well as post-1-3-2008, the basic statutory provision which needs to be considered by us are the provisions of Section 4A of the Act and the provisions of Section 2(g) and 2(h) of the Act which are reproduced herein below :-

Section 4A : Valuation of excisable goods 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 Legal Metrology Act, 2009 (1 of 2010) of 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) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or

(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture,

then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section

Explanation 1. – For the purposes of this section, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale:

Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.

Explanation 2. – For the purposes of this section, –

(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;

(b) where the retail sale price declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;

(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.

Section 2. Definitions. – In this Act, unless there is anything repugnant in the subject or context, –

(f) “manufacture” includes any process –

(i) incidental or ancillary to the completion of a manufactured product,

(ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or

(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer;

and the word “manufacturer” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;

(g) “prescribed” means prescribed by rules made under this Act;

12. For the period prior to 1-3-2008, we have to record that the provisions of sub-section (4) of Section 4A were enacted in the statute which is reproduced hereinabove, if read, would indicate that if the manufacturer declares retail price which is not the correct retail price as required to be declared under the provisions of the Act, then the ascertainment of such retail sale price will be done in a prescribed manner. We fine that though the provisions of sub-section (4) of Section 4A was brought into statute from 14-5-2003, how to redetermine the RSP in the case of misdeclared RSP was not “prescribed” by the Central Government till the issuance of Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008. This would effectively mean that the Legislature in its wisdom has considered a situation wherein the RSP which is declared could be wrong RSP, thought of remedying the situation by inserting the provision of sub-section (4) in Section 4A, but had not prescribed the rules how the redetermination has to be done till 1-3-2008. It can be seen from the definition of the word “prescribed” as enshrined in Section 2(g) of the Act (as reproduced hereinabove) that it is very clearly stated that it can be done only by the rules made under this Act. Closer perusal of Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008 indicated that the said notification was issued in exercise of powers conferred by Section 37 read with sub-section (4) of Section 4A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules. It can be seen from the above preamble to the Notification No. 13/2008-C.E. (N.T.), Central Government made the rules as applicable for sub­section (4) of Section 4A w.e.f. 1-3-2008. In the cases in hand, for the period prior to 1-3-2008, the entire exercise of the Revenue in re-determining the RSP, even if RSP is not in accordance with the law, is faulty and not in accordance with the law, as prescribed manner of redetermination of RSP was brought into statute only from 1-3-2008. We find that once the Central Government has not framed the rules for re-determining the RSP in a case where the RSP declared on the package was sought to be rejected, though being empowered, authorities had no power to re-determine the RSP in any manner; more so in a manner adopted in these appeals. It is also provided in the statute, that as per sub-section (4) of Section 4A of the Act, the manner has to be prescribed only by the Central Government by rules, which came into force only from 1-3-2008, which would also indicate that the provisions of Section 4A(4) could not have been operationalised, till the manner for ascertaining the RSP was prescribed by framing the rules. In the absence of any rules for re­determination of RSP, the contentions of ld. Special Counsel for the Revenue that the Revenue can adopt best judgment method for ascertaining the said RSP, is against the provisions of the law and cannot held as correct, as the provisions of Section 4A of the Act do not indicate any other manner for ascertainment of the RSP based upon the best judgment method prior to 1-3-2008. The law on this is settled by the decision of Apex Court in the case of Gulam Mohammad & Anr v. State of Bombay & Others – AIR 1962 SC 97. We also find that if the Legislature prescribes that if the thing is to be done in a particular manner, then the same has to be done in the stated manner only, is the law which is settled by the Apex Court. We find that our this view is fortified by the decision of the Co-ordinate Bench of the Tribunal in the case of M/s. Ravi Foods Pvt. Ltd., wherein similar issue came before the Bench. In the case of M/s. Ravi Foods Pvt. Ltd., the Revenue sought to redetermine the RSP of the goods which were covered under the provisions of Section 4A of the Act, by adding the value/amount received not accounted for by the appellant therein. The relevant paragraphs from the said judgment are reproduced herein below.

12. We find that the provisions of Section 4A during the relevant period needs to be considered for coming to a conclusion whether the amount quantified by the authorities in the show-cause notice as indicated hereinabove would stand test of law or not. The provisions of Section 4A are as under :-

SECTION 4A. Valuation of excisable goods 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) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or

(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture,

then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.

Explanation 1 — For the purposes of this section, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale :

Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.

Explanation 2. — For the purposes of this section, –

(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;

(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;

(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.

It can be seen from the above reproduced Section 4A of the Central Excise Act, 1944, that the said section provides for determination of duty payable on excisable goods on the basis of RSP as per the provisions of Standards of Weights and Measures Act, 1976 and Rules made thereunder. It is undisputed that in the month of December, 2001 and January, 2002, the appellants filed monthly returns indicating the assessable value after availing the abatement in accordance to the notification issued under the said section i.e. 65% of the MRP. There is also no dispute that the MRP which was declared on the goods cleared during the relevant period was either obliterated or scored out. It can be seen from the above reproduced Section 4A that sub-section (4) was introduced by the Legislature w.e.f. 1-3-2008. It is also to be noted that the recalculation or re-quantification of an amount received in excess of the MRP declared and collected from the customers has to be done in a prescribed manner. The provisions of MRP Valuation Rules under sub­section (4) of Section 4A was introduced w.e.f. 1-3-2008 wherein the Central Government prescribed a procedure to be followed for re­determination of RSP and MRP in case where assessee has collected an amount in excess of the RSP/MRP declared. This re-determination has to be done, failing which the RSP/MRP cannot be revised by the authorities. We find that the C.B.E. & C. vide Circular No. 334/1/2008-TRU, dated 29­2-2008 made it clear that the MRP Valuation Rules are effective from 1­3-2008. This would indicate that prior to 1-3-2008, there was no procedure to revise the MRP and demand the duty even though there being a provision under sub-section (4) of Section 4A of the Central Excise Act, 1944. In the absence of any legal machinery during the relevant period, re-determination of RSP/MRP by the Department is without any authority of law. We find that in the case of Millennium Appliances India Ltd. v. CCE, Hyderabad [2009 (248) E.L.T. 713 (Tri. – Bang.)], this Bench on this point has held as under :-

“9. Another issue involved in this case is regarding the situation that arises where there are no clear cut statutory provisions to arrive at the value. We find that strong force in the contentions raised by the appellants on the provisions of Section 4A of the Central Excise Act (as is reproduced in Para 8 hereinabove). We find that the Department did not issue any guidelines or rules for determination of value as provided under sub-section (4) of Section 4A of the Central Excise Act. We find that Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008 incorporates Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 which reads as under :-

Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.

[Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008] In exercise of the powers conferred by Section 37 read with sub-section (4) of Section 4A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules, namely :-

RULE 1. (1) These rules may be called the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.

(2) They shall come into force on the date of their publication in the Official Gazette.

RULE 2. In these rules, unless the context otherwise requires,-

(a) ‟Act‟ means the Central Excise Act, 1944 (1 of 1944);

(b) ‟retail sale price‟ means the retail sale price as defined in Section 4A of the Act; and

(c) Words and expressions used in these rules and not defined but defined in the Act or any other rules made under the Act shall have the meaning as assigned therein.

RULE 3. The retail sale price of any excisable goods under sub-section (4) of Section 4A of the Act, shall be determined in accordance with these rules.

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,

then, the retail sale price of such goods shall be ascertained in the following manner, namely :-

(i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods :

(ii) if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture :

Provided that if more than one retails sale price is ascertained under clause (i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods.

Explanation – For the purposes of this rule, when retails sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis.

RULE 5. Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods :

Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.

RULE 6. If the retail sale price of any excisable goods cannot be ascertained under these rules, the retail sale price shall be ascertained in accordance with the principles and the provisions of section 4A of the Act and the rules aforesaid.”

It can be noted that these rules came into force with effect from 1-3­2008. We are of the considered opinion that if these rules came to be effective on 1-3-2008, the ascertaining of value of similar goods has to be done so, with effect from 1-3-2008 and cannot be used to determine the value for the clearances made prior to 1-3-2008. We find strong force in the contention raised by the learned Counsel that the decision of the Tribunal in the case of Aditya Cement (supra) would squarely cover the issue in favour of the appellants. The relevant ratio in Para 9 of the said decision is reproduced :-

“9. It can be seen from the above reproduced rule that it was in context of the definition of “person liable for paying the Service Tax”. This provision in itself may not suffice revenue to direct the appellant to discharge the service tax liability as service receiver, on the face of the fact that notification under Section 68(2) of the Finance Act, 1994, was issued by the Central Government only on 31-12-2004. If the contention of the learned SDR is to be accepted, then there was no necessity for the Government to issue Notification No. 36/2004-S.T. notifying the service receiver from non-resident having no office, to pay Service tax, as receiver. By issuing the said Notification, Central Government intended to tax the service receiver from non-resident, with effect from 1-1-2005, which, in corollary would be that no service tax is payable by this category prior to 1-1-2005. If that by so, then the amount paid by the appellant is not a tax, which the revenue cannot kept with it.”

13. It is seen from the findings of the adjudicating authority in paras 55, 56 and 57 that the adjudicating authority has confirmed the demand based only on the ground of undervaluation and extrapolating the amount for the period December, 2001 and January, 2002 as being 65% of the MRP declared and confirmed the demand. As we have already held that this could not be done by adjudicating authority in the absence of any rules or authority under the section, the demand is not sustainable. We find that in paras 55 and 57, the adjudicating authority has recorded a finding which is as under :-

“55 ………………………  Thus, in this case, the suppression of turnover is admitted and can be either on account of undervaluation or on account of volume.”

“57 ……………….. . As the suppressed turnover is in value terms only, no enquiry need be made for establishing the turnover to the use of raw materials etc. The suppressed turnover, being the excess collection over and above the recorded value or income in their books, is related to the sale value which escaped assessment under the Central Excise Act. Once the suppressed turnover is admitted beyond any doubt and the assessee opts to accept the tax liability under the Income-tax Act, no meaningful purpose would have been served to cause further detailed probing under the Central Excise Act and Rules.”

14. We find that the above said findings recorded by the adjudicating authority are directly in conflict of the law which has been settled by the higher judicial fora as regards the confirmation of demand of the duty on an assessee on the ground of undervaluation in respect of goods covered under Section 4A of Central Excise Act, 1944.

15. In the case before us, the question of undervaluation would not arise, and assuming even if it arises, during the relevant period (in this case prior to 1-3-2008) there was no procedure under Section 4A of the Central Excise Act to demand the duty, as the said procedure came into statute from 1-3-2008 only. As regards the finding by the ld. adjudicating authority that suppression could be on account of volume, we have already recorded that there is no corroborative evidence nor there is any finding as to the exact quantity of goods clandestinely cleared to come to the conclusion that the value of Rs. 3.75 crores is attributable to the specific quantity of goods on amount of clandestine removal. In the absence of any such details, we are of the considered view that the impugned order is unsustainable.

16. Before parting with the case, we would like to record that since we disposed off all the appeals only on the merits of the case, we are not recording any finding on the other submissions made by both sides on various issues.

17. In view of the foregoing findings, we are of the view that the impugned order is not sustainable and is liable to be set aside and we do so. The impugned order is set aside and all the appeals are allowed with consequential relief.

13. Identical views were expressed by the Tribunal in the case of M/s. ABB Ltd. (supra), we would like to record here that the 3 decisions of the Tribunal i.e. M/s. Millennium Appliances India Ltd, M/s. Ravi Foods Pvt. Ltd., M/s. ABB Ltd. have held a view that prior to 1-3-2008, in the absence of any provisions for re-determining the RSP, in the form of prescribed rules, the Revenue authorities cannot re-determine the RSP under any of the provisions available to them. It has to be noted that there is no contrary view which has been taken by the Tribunal.

14. At this juncture, we would like to refer to the submissions made by the ld. Special Counsel for the Revenue that in the case of M/s. Schneider Electrical India Pvt. Ltd. (supra), Hon‘ble Member (Technical) has differed with the views of Hon‘ble Member (Judicial) who has relied upon all these three case laws. In our considered view, the diferring Member has incorrectly applied the law in the case of M/s. Mahim Patram Pvt. Ltd. to take a different view from the views already existing. On perusal of the said decision of Apex Court in the case of M/s. Mahim Patram Pvt. Ltd., we find that the Apex Court was dealing with a dispute wherein in the absence of rules having been prescribed under the Central Sales Tax for determining the manner in which the sale price of transfer of goods under Works Contract was to be calculated, would the levy of Works Contract be sustainable in the State of Uttar Pradesh by computing the value of taxable turnover in accordance with the rules framed under Uttar Pradesh Trade Tax Act, 1948. The Apex Court while dealing with the issue noted that Central Sales Tax Act, 1956 provides that the authority who is empowered to assess, re-assess, collect, and enforce payment of any tax under General Sales Tax law of the appropriate state, shall on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax under the Central Sales Tax Act and for this purpose, they may exercise all or any of the powers they have under the General Sales Tax law of the State; Section 3(3) of the Central Sales Tax provides that State Government may make rules not inconsistent with the provisions of the Act and rules made thereunder. The Uttar Pradesh State Government has framed Central Sales Tax (U.P. Rules) 1957, in exercise of the powers conferred under the CST Act, 1956, and Rule 9 of the said Rules provided that the provisions of Uttar Pradesh Sales Tax Act, 1948 and U.P. Sales Tax Rules, 1948 as amended from time to time or the rules made thereunder would apply to the dealer liable for assessment under Central Sales Tax Act and U.P. Sales Tax Rules, 1948, Rule 44(B) prescribed the manner of determining the turnover of the goods involved in execution of Works Contract. The relevant findings of the Apex Court were rendered on this factual aspect as contained in Para 27 of the judgment. In our considered view, the ratio decidendi from this judgment is that merely because the rules were not framed in Central enactment, it would not mean that no tax is leviable if rules have been framed under said enactment and there is a provision for referential incorporation of the said act in the Central Act. We are of the view that the ratio laid down by Apex Court in the case of M/s. Mahim Patram Pvt. Ltd. does not in any manner support the case of the Revenue as well as the view of the differing member in the case of M/s. Schneider Electrical India Pvt. Ltd.; in the cases in hand the ascertainment/redetermination of RSP has not been enacted or prescribed in any other enactment and as no provisions have been incorporated by reference under Central enactment. In our view, there being no contrary judgment to the views expressed by the 3 decisions of the Co-ordinate Benches of the Tribunal on this issue, even assuming that there was misdeclaration of RSP, period prior to 1-3-2008 the RSP cannot be re-determined by the Revenue in any manner.

15. We also find that in the cases in hand, on factual matrix also, there is a strong case in favour of the assessee i.e. manufacturer of tiles. The statements recorded of the individuals of manufacturer of the tiles, specifically state that they were declaring a RSP of Rs. 100/- on each box which were cleared by them from the factory premises, it is also stated that the said clearances are effected on ex-factory basis and transportation of such boxes are in the hands of the buyers. If it is the case of the Revenue that RSP was later on changed and sold to the ultimate consumer at higher price, it was for the Department to first ascertain who has changed the said MRP. In our view, the person who has altered the RSP on the goods is the person who can be held as a manufacturer on alteration of RSP; as the definition of manufacturer in Section 2(f) of the Act (herein be fore reproduced) specifically talks about the process of declaration or alteration of RSP on the product which are covered under the provisions of Section 4A of the Act would be considered as a manufactured product. As stated hereinabove, it is the case of the Revenue that there was an alteration of the MRP, there is nothing on record which indicates that the appellant-manufacturers herein are the persons who have altered the MRP in godown/places of the dealers. The dealers whose statements were recorded by the Revenue authorities state that they have sold the goods at a higher price than the price at which goods were cleared from factory premises of the appellants. We are unable to understand the investigating authorities‘ mind, as during the course of investigation there is a specific admission of the dealers that they have sold the goods at higher MRP than the declared MRP; no question was put any of the dealers as to who altered the RSP declared on boxes of glazed/vitrified tiles. In our considered view, this clinching evidence has not been recorded by the investigating authorities, for the reasons best known to them. If there would have been any evidence in any form as to who altered the RSP, then the duty liability in our considered view, gets crystallized in the hands of such persons as goods become manufactured goods; is the law which can be deduced from the provisions of Central Excise Act, 1944. In the absence of any evidence suggesting as to who altered the MRP on the boxes of tiles, we are of the view that the Revenue authorities cannot turn around and take a stand that the manufacturers are liable to duty, which would effectively mean that they are the persons who have altered the RSP. Yet another angle to the entire case is absence of evidence as to there being alteration of RSP; inasmuch as when the investigations were conducted by the authorities, we find that the investigating authorities have not seized a single carton of the offending goods in the Pan India operation at different dealers‘ premises, wherein different RSP was declared. It would be beyond imagination that the dealers could not have had any stocks of glazed/vitrified tiles received from the appellants, in their hands when the investigation took place. In the absence of such a crucial evidence, we are unable to hold that the appellant herein can be saddled with a liability of Central Excise duty based upon redetermined RSP, for the period prior to 1-3-2008.

16. We also find the statements of the authorized persons of the manufacturers have stated that they have cleared the glazed/vitrified tiles based upon a RSP declared, which was in their opinion a correct price is not contraverted by leading any evidence that the declared price was not the correct one was known to the manufacturer. We find that the contention of ld. Counsel that the belief of manufacturer has always considered that declared RSP was correct, is supported by the statements of individuals who were either partners/proprietors of appellant manufacturer. We find strong force in the contentions raised by ld. Counsel for the appellant that the manufacturers may be unaware that the RSP on the box was obliterated or altered after the removal from their place of manufacturer, as none of the dealers have stated that the RSPs were changed on direction of manufacturer; or manufacturer was instrumental to order such a charge. In the absence of any contrary evidence, we have to take an adverse inference against the Revenue.

17. On this factual matrix also, we are of the view that Revenue‘s case is unsustainable for the demand of duty from the appellants.

18. As regards the demand of duty for the period post-1-3-2008 in all these cases even though it has been contended that the demand for this period is un­sustainable, both on facts (as there is no evidence to show that RSP declared on the package was false to the knowledge of the manufacturer) as also in law (though the rules have been framed for determination of RSP, the demand has not been computed in the manner prescribed in rule), we are of the view that the Department ought to be given an opportunity to compute the demand in terms of the rules, if they come to a conclusion that the declared RSP was false to the knowledge of manufacturer. It appears from the examples quoted in the written submissions that even if the Department‘s theory of cash consideration flowing back was assumed to be correct, even then the total consideration earned by the manufacturer even after including the other elements of cost, seems to not exceed the declared RSP at Morbi. This aspect, in our considered view, needs greater verification, if necessary, after granting cross-examination especially in the light of the facts that the documents have been recovered from the premises of third party who have not been made noticee. If after going through the evidence and statements, it is felt that there is, in fact, evidence of extra cash consideration, then it will have to be seen whether the declared RSP at Morbi was proved to be false to the knowledge of manufacturer or not. If the declared RSP is found to be false to the knowledge of manufacturer at Morbi, then RSP will have to be determined in the manner prescribed in the rules which have been enacted w.e.f 1-3-2008, instead of being determined in any other manner. To that extent, we remand the matter to the adjudicating authority for reconsideration of determining the RSP post-1-3-2008 as per the directions hereinabove and in accordance with law. The adjudicating authority will follow the principles of natural justice before coming to any conclusion.

19. Regarding the demand of duty in respect of cases where the clandestine removal has been alleged, we find that the said allegations and the findings reached by the adjudicating authority are not challenged and during the course of personal hearing, were not pressed. Hence, we, without examining the maintainability or otherwise of these demands on merit, uphold the same along with interest and equal penalty.

20. Since we have disposed of the appeals or merit for the period prior to 1-3­2008 and post-1-3-2008 remanded the issue, we are not recording any findings on various other submissions made by the both sides.

21. In sum, the demand of duty for the period prior to 1-3-2008 is set aside as also the penalty imposed on the manufacturer assessee and other individuals, and for the period post-1-3-2008, the demands are set aside and matters remanded back to the adjudicating authority to reconsider the issue.

22. All the appeals are disposed of as indicated hereinabove.”

3. The orders impugned in the instant case were similar in the case to the orders impugned in the cases decided in the decision of Acme Ceramics (supra). When the matter came up before this bench, the aforesaid decision of Tribunal in the case of Acme Ceramics was doubted and the matter was referred to the Larger Bench on the following grounds:

“9. In view of above this matter may be placed before the Hon’ble President for constitution of a larger bench to examine the following questions of law

1) In the facts and circumstances of the case and in view of the contrary precedent decisions of tribunal in the cases of ACME (Supra) and in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), is it permissible to ascertain RSP for the purpose of assessment under Section 4A of CEA, 1944, in respect of clearances made prior to issue of notification 13/2008-CE(NT) dated 1-3-2008?

2) If yes, can it be done by using best judgment method, based upon material available and in a manner consistent with principles and provisions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 ?”

Subsequently, while deciding the application filed for rectification of mistake in the order dated 10.01.2019 of division bench, division bench of Ahmedabad Tribunal referred the following additional questions to be decided by Larger Bench.

“3. Subsequently, while deciding an application filed for rectification of mistake in the aforesaid order dated 10.01.2019 of the Division Bench, a Division Bench of the Ahemdabad Bench of the Tribunal referred the following additional issue to be decided by the Larger Bench:

“(3) In the facts and circumstances of the case, if the evidence establishes that the RSP was manipulated fraudulently at the behest of the appellant by any other person, can the liability of duty be fastened on the appellants.”

The aforesaid questions were answered in the following manner by the Larger Bench vide Interim order No. 1-23 of 2024 dated 23.01.2024:

“90. The reference made by the Division Bench to the Larger Bench of the Tribunal is, accordingly, answered in the following manner:

(i) It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which datethe Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force;

(ii) In view of the answer to the first question, there is no necessity of answering the second question; and

(iii) It is not necessary to answer the third question as both learned counsel for the appellant and the learned special counsel appearing for the department have stated that this question may not be answered by the Larger Bench.

91. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal.”

It is apparent that the interim order removes the doubts raised by this bench with respect to the decision in case of Acme Ceramics (surpa). Consequently, the earlier decision of Tribunal in the case of Acme Ceramics becomes a binding precedent decision that needs to be followed in the instant case. The findings of the precedent decisions are also recorded in para 2 above. Consequently, following the decision in case of Acme Ceramics the matters are disposed of in identical terms as prescribed in para 18 of the said decision.

4. In sum, the demand for the period prior to 01.03.2008 are set aside as also the penalty imposed on the manufacturer assessee and other individuals. For the period post 01.03.2008, the demands are set aside and matters remanded back to the adjudicating authority to reconsider the same, in light of above findings.

(Order pronounced in the open court on 23.09.2024)