Western India Ceramics Pvt Ltd Vs Commissioner of C.E. & S.T. (CESTAT Ahmedabad)
Western India Ceramics Pvt. Ltd., during the period from March 2005 to March 2009, manufactured vitrified polished tiles that were assessable to Central Excise duty under Section 4A of the Central Excise Act, 1944 on the basis of the Retail Sale Price (RSP) declared on the goods after the prescribed abatement. In March 2008, DGCEI initiated investigations into the authenticity of the declared RSP. A show cause notice dated 27.03.2010 alleged that the goods had been sold at prices higher than the declared RSP on the basis of statements of employees, the director, dealers, builders and computer printouts of e-mails allegedly showing cash transactions. The notice proposed rejection of the declared RSP, re-determination of the RSP by adopting the MRP contained in a dealer’s price list dated 23.02.2005, and demanded differential Central Excise duty of ₹9,19,34,781 under the proviso to Section 11A of the Central Excise Act, 1944 together with interest under Section 11AB and penalties. A separate show cause notice dated 17.07.2009 proposed confiscation of 202 boxes of tiles valued at ₹1,71,700 seized at the Kolkata depot for alleged non-declaration of RSP.
Read SC Judgment in this case: SC Dismissed Time-Barred Excise Appeal Against CESTAT Order
The appellants replied that the department had failed to establish that the tiles were sold above the declared RSP, that different consignments and grades could bear different RSPs, that there was no evidence of any flow-back of cash or receipt of consideration above the declared RSP, and sought cross-examination of the persons whose statements had been relied upon. By Order-in-Original dated 31.03.2011, the Commissioner confirmed the differential duty demand of ₹9,19,34,781, imposed an equivalent penalty on the company under Section 11AC, imposed a penalty of ₹50,00,000 on the director under Rule 26, ordered confiscation of the seized goods with redemption fine of ₹1,00,000, and imposed penalties of ₹4,000 each on the company and another appellant under Rule 26.
Before the Tribunal, the appellants submitted that, in view of the Larger Bench decision in Ocean Ceramics Ltd v CCE, re-determination of RSP under Section 4A(4) was not permissible for the period prior to 01.03.2008 because the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 had not yet been notified. They also contended that the statements of dealers and builders did not establish sale above the declared RSP, that the computer printouts were inadmissible since the requirements of Section 36B had not been satisfied, and that the proposed determination of RSP was not in accordance with the 2008 Rules. The Revenue submitted that consideration in excess of the RSP could be inferred from the statements and documentary evidence and stated that it had no objection if the matter was remanded for cross-examination of the witnesses.
The Tribunal identified the principal issues as whether the materials relied upon established that the goods were sold at prices higher than the declared RSP and whether the determination of the RSP conformed to the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. It found that the statements of dealers only indicated that certain transactions involved payments partly by cheque and partly by cash but did not state that the total consideration exceeded the declared RSP. It also noted that no statements of buyers had been recorded to establish payment above the declared RSP and that there was no allegation that dealers had altered the printed RSP. The Tribunal held that these statements did not establish sale above the declared RSP.
The Tribunal further held that none of the conditions specified in Section 4A(4) of the Central Excise Act, 1944 had been established. It observed that there was no allegation or evidence that the goods had been removed without declaration of RSP, that the declared RSP did not comply with the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, or that the manufacturer had tampered with or altered the declared RSP after removal. It also found that the statements of builders alleging receipt of lesser quantities than invoiced did not inspire confidence, that the statements of the company’s officials were exculpatory, and that denial of cross-examination was contrary to the legal position referred to by the appellants. The Tribunal further held that the computer printouts allegedly showing cash transactions were inadmissible because compliance with Section 36B had not been established.
On the method of re-determining the RSP, the Tribunal held that Rule 4 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 required determination based either on the declared RSP of identical goods removed within one month or on enquiries in the retail market. It held that reliance on a dealer’s price list dated 23.02.2005 did not conform to the prescribed method and could not be uniformly applied to clearances made from 2005 to 2009. Referring to the Larger Bench decision in Ocean Ceramics Ltd v CCE, the Tribunal also held that, prior to 01.03.2008, no prescribed mechanism existed under Section 4A(4) for ascertainment of the RSP and that the 2008 Rules could not apply retrospectively. Accordingly, it held that the differential duty demand for the period prior to 01.03.2008 was not sustainable.
In view of its findings, the Tribunal set aside the Order-in-Original and allowed the appeals with consequential relief, if any, as per law.
Recent Cases Discussed
- Ocean Ceramics Ltd v CCE (CESTAT Ahmedabad Larger Bench), 2024 (1) TMI 1280-CESTAT-AHMEDABAD-LB
- CC v Junaid Kudia (SC), 2024 (338) ELT 529 (SC)
- Junaid Kudia v CC, (2024) 16 Centax 503
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
Briefly the facts of the case are that Appellant, Western India Ceramics P. Ltd, during the period March 2005 to March 2009 was engaged in the manufacture, inter alia, of “Vitrified Polished Tiles” of different series, its grades and sub-grades (“the goods” herein after); the other two Appellants are Director and employee respectively of the Western India Ceramics P. Ltd (hereinafter referred to as “the Appellant”). The goods being notified under Section 4A of the Central Excise Act, were liable to be assessed to Central Excise duty on Retail Sale Price (RSP) declared on the goods less abatement stipulated in such Notification under Section 4A. The Appellant was accordingly, discharging Central Excise duty on the Retail Price declared on the goods less such abatement.
1.1 In or about March 2008, the officers of DGCEI initiated investigations into the question of authenticity of the RSP declared on the goods manufactured and cleared by the Appellant. The said Investigations culminated into issuance of Show Cause Notice dated 27-3-2010 for the period 1-3-2005 to 31-3-2009, by which it was alleged that the goods manufactured and cleared by the Appellant were sold at prices higher than the Retail Price declared on the goods based on the statements of appellant’s employees, director, some dealers, builders and computer print-outs of e-mails showing cash transactions. The show cause notice dated 27-3-2010 sought to reject the RSP declared on the goods and sought to re-determine the Retail Price by taking the MRP mentioned in a Price List effective from 23-2-2005 found with one of the Dealers, Krishna Ceramic Choice, Bangalore. Based on the Retail Price re-determined as per the said Price List, the Show Cause Notice demanded differential Central Excise duty of Rs. 9,19,34,781/- for the period 1-3-2005 to 31-3-2009 under the Proviso to Section 11A of the Central Excise Act 1944 along with interest under Section 11AB of the said Act and proposed imposition of penalties on the Appellants.
1.2 One more Show Cause Notice dated 17-7-2009 was issued for confiscation of 202 Boxes Tiles of value Rs.1,71,700/- and seized on 22-12009 at the Appellant’s Kolkata Depot on the ground that the RSP was not declared on the goods.
1.3 The Appellants replied to and contested the said Show Cause Notices by Reply dated 18-11-2010 by which it was submitted that it was not established that the Tiles were sold at prices higher than the RSP declared thereon; that it was open to the Appellant to affix different Retail Prices on different consignments and different grades of goods and it is not for the department to fix the RSP; that there was no evidence of any flow-back of cash to the Appellant or of collection of money over and above the RSP declared on the goods and further requested for cross-examination of the deponents whose statements were relied upon in the Show Cause Notice.
1.3 The Commissioner of Central Excise passed Order-in-Original dated 313-2011 by which he confirmed the demand for Central Excise duty of Rs. 9,19,34,781/- and imposed equivalent penalty on the company under Section 11AC. He imposed penalty of Rs. 50,00,000/- on the Director, Kantibhai Patel under Rule 26. He ordered confiscation of the 202 boxes seized at Kolkata Depot, imposed redemption fine of Rs.1,00,000/- and penalty of Rs.4,000/-each on the company and on Appellant Atul Kumar Adak under Rule 26. It is this Order dated 31-3-2011 of Commissioner which is assailed by the appellants on various grounds.
2. Shri J. C. Patel Learned Counsel with Shri Rahul Gajera, Advocate appearing for the Appellants at the outset submitted that in view of the Hon’ble Larger Bench decision in Ocean Ceramics Ltd v CCE-2024 (1) TMI 1280-CESTAT-AHMEDABAD-LB, for the period prior to 1-3-2008, the RSP declared on the goods manufactured and cleared, for the purpose of assessment under Section 4A of the Central Excise Act 1944, cannot be re-determined/ ascertained under Section 4A (4), in absence of Rules for such determination having been notified under Section 4 A (4) prior to 1-3-2008, that it is only with effect from 1-3-2008 that Central Excise (Determination of Retail Sale Price of Exciseable Goods) Rules 2008 were notified by Notification No. 13/2008-CE (NT) dated 1-3-2008 which prescribed the manner in which the RSP is to be ascertained in cases covered by Section 4A (4) of the Central Excise Act, 1944; since the “prescribed manner” for such ascertainment had not been provided by any Rules prior to 1-3-2008, demand of differential duty prior to 1-3-2008 is without jurisdiction. Without prejudice to the aforesaid settled legal position before 1-3-2008, it was vehemently argued that sale of goods at prices higher than the RSP declared on the goods has not been established by evidence and therefore such Retail Price cannot be re- determined for any period, whether before or after 1-3-2008, in this behalf they made detailed submissions namely that statements of dealers and builders relied upon in the show cause notice do not establish sale of goods at prices higher than the RSP declared on the goods and that statements of appellant are exculpatory; that computer print-outs of e-mails showing cash transactions are not admissible in evidence as requirements of Section 36B of the Central Excise Act 1944 not shown to have been satisfied; it was further submitted that the determination of the Retail Price proposed in the Show Cause Notice and confirmed in the Order-in-Original is liable to be set aside as being not in conformity with the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008. They relied upon the following decisions in support of their arguments:-
- CC v Savi Vision P. Ltd – 2016 (337) ELT 331
- J & K Cigarettes Ltd v CCE – 2009 (242) ELT 189
- Basudev Garg v CC – 2013 (294) ELT 353
- Andaman Timber Industries v CC – 2015 (324) ELT 641 (SC)
- Anvar P. V. vs. P. K. Basheer – 2017 (352) ELT 416 (SC)
- Agarvanshi Aluminium Ltd v CC – 2014 (299) ELT 83
- Junaid Kudia v CC – (2024) 16 Centax 503
- CC v Junaid Kudia – 2024 (338) ELT 529 (SC)
- CCE v Bell Granito Ceramics Ltd – 2009 (235) ELT 171
3. Learned AR, Shri Rajesh R Kurup appearing for the Revenue submitted that consideration in excess of RSP having flown can be inferred from statements and documentary evidences and that as regards statements relied upon of deponents have not been cross-examined, he has no objection if the matter is remanded for cross-examination of such witnesses. He further reiterated detailed findings given by the Commissioner in the impugned order, in light of which he prayed that the impugned Order is required to be upheld.
4. We have heard and considered the submissions made by both the sides and have examined the records of the case. The following principal issues arise for consideration in the present Appeals:-
a) Whether, based on materials relied upon in the show cause notice and in the adjudication order, it is established that the goods were sold at prices higher than the Retail Price declared on the goods.
b) Whether, the determination of the Retail Price confirmed in the Order-in-Original is in conformity with the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008.
4.1 It is observed that Show Cause Notice has placed reliance on Statements of some dealers who stated that the Tiles purchased by them from the Appellant were sold by them against cheque as well as cash. It is stated in such statements that for buyers who insisted on Bills for the full value, the full value was mentioned in the Bills and payment was received by cheque and that for buyers who paid partly by cheque and partly by cash, the price mentioned in the Bills was less than the full value and equal to the amount received by Cheque. For the said reason, it is stated that, for the same kinds of Tiles, there were Bills for different prices depending on whether the full value was received in Cheque or partly by Cheque and partly by cash. What appears from these statements is that while some Tiles were sold for the full value against cheque, in other cases, part of such value was recovered in cash. It is, however, not stated that such full value was higher than the RSP declared on the goods. In our considered view, based on such statements, it cannot be concluded that Tiles were sold at prices higher than the Retail Price declared on the goods.
4.2 It is further observed that department has not recorded any statement of the buyers who purchased the Tiles from the said dealers who have stated about part of the price having been recovered by the dealers in cash. There is no statement of the buyers from such dealers to the effect that the buyers paid any amount over and above the RSP declared on the goods. There is no allegation that the RSP declared on the goods was altered and increased by the Dealers. It is therefore inconceivable that any buyer would pay a price in excess of the RSP declared on the goods. As held in CC v Savi Vision P. Ltd – 2016 (337) ELT 331, in absence of any inquiry with the Buyers from the dealers whether they paid a price higher than the RSP declared on the goods, it cannot be concluded that the goods were sold at price higher than that declared on the goods.
4.3 It is seen that section 4A (4) of the Central Excise Act 1944 is attracted only i) Where the goods are removed from the place of manufacture without declaring the RSP of such goods on the packages, or ii) Where the RSP declared on the packages is not the RSP as required to be declared under the provisions of Standards of Weights and Measures (Packaged Commodities) Rules 1977, or iii) The manufacturer tampers with, obliterates or alters the RSP declared on the packages of the goods after their removal from place of manufacture. We find that none of the aforesaid ingredients of Section 4A (4) is satisfied in the present case. Further, in respect of Show Cause Notice dated 27-3-2010 we find there is no allegation nor any evidence that the goods were removed from the Appellant’s factory without declaring the RSP on the packages of the goods; there is also no allegation nor any evidence that the Appellant tampered with, obliterated or altered the RSP declared on the packages of the goods after their removal from place of manufacture; there is also no evidence to establish that the RSP declared on the packages by the Appellant is not the RSP as required to be declared under the provisions of Standards of Weights and Measures (Packaged Commodities) Rules 1977. The Show Cause Notice does not in any manner bring out that the RSP which was declared by the Appellant on the goods was not the RSP as required by Standards of Weights and Measures (Packaged Commodities) Rules 1977; it is not indicated as to how the retail price declared by the Appellant on the goods did not meet the requirements of RSP as per Standards of Weights and Measures (Packaged Commodities) Rules 1977. There is thus mere allegation that the dealers sold the goods at price higher than the RSP declared on the goods which in our view does not render the RSP declared on the goods to be not as per the requirements of Standards of Weights and Measures (Packaged Commodities) Rules 1977; at most the consequence would be that the dealer selling the goods at price higher than the RSP declared on the goods will be liable for action in accordance with the Standards of Weights and Measures Act and the Rules thereunder.
4.4 It is further observed that the show cause notice has placed reliance on Statement of Director of SSS Tiles Square India P. Ltd, one of the Dealers, in which he has stated that in respect of one brand (Touch Wood Brand) they had sold the Tiles at price higher than RSP; he stated, this was however, not done for other Brands; he has stated that payment to the Appellant was made of the price mentioned in the Appellant’s Invoice by cheque and no cash payment was made to the Appellant. Again, in our view, based on this Statement it cannot be concluded that the RSP declared by the Appellant on the goods was not the RSP as required by Standards of Weights and Measures (Packaged Commodities) Rules, 1977. If the said dealer has sold one brand at price higher than the RSP declared on the goods, at most he would be liable for action in accordance with the Standards of Weights and Measures Act and the Rules thereunder. However, that would not make the Retail price declared on the goods to be not in accordance with the requirement of Standards of Weights and Measures (Packaged Commodities) Rules 1977.
4.5 It is further observed that the Show Cause Notice has relied on Statements of some Builders who had purchased the Tiles, in which they have stated that they made the payment of the price mentioned in the Appellant’s Invoices by cheques but received lesser quantity of tiles than mentioned in the Invoices. In our view, the said statements do not inspire any confidence as it is impossible that the said Builders would pay for a higher quantity than the quantity received by them; it is not their say in the Statements that they ever complained to the Appellant that quantity supplied to them was short or that they adopted any legal proceedings against the Appellant for alleged short supply of the Tiles. It is further noticed that the statements of the Appellant’s General Manager, Jagdish Babu Shetty Appellant’s head of Sorting Department, Navin Shetty and Appellant’s Director, Kantibhai Patel are exculpatory and there is no confession of any sale over and above the Retail price declared on the goods or of any cash transactions. We find that the Appellant’s Director, Kantibhai Patel has in his statement denied and disagreed with the Statements of the Dealers which speak of cash transactions and statements of the Builders which speak of supply of less quantity than the Billed quantity. In that view no reliance can be placed on the statements of the dealers and builders who have otherwise also not been examined under Section 9D of the Central Excise Act 1944 and whose cross-examination has not been granted to the Appellant contrary to the settled legal position in this behalf by the decisions cited supra.
4.6 It is seen that the Commissioner denied cross-examination of dealers by holding that the dealers whose cross-examination had been sought had one way or the other carried out business with the Appellant and were hand in glove in the evasion of duty and that therefore no purpose will be served to allow the cross examination of such persons who themselves were involved in the evasion of duty. The said view is directly in the teeth of the judgment of Hon’ble Supreme Court in Andaman Timber Industries v CC – 2015 (324) ELT 641 (SC) in which it is held that it is not for the Commissioner to speculate whether cross-examination would have served useful purpose or not. Secondly, the reason advanced by the Commissioner that the Dealers were involved in the duty evasion for denying their cross-examination is totally misconceived. If as held by the Commissioner the dealers themselves were involved in alleged duty evasion, it is not understood as to why they were not made parties to the Show Cause notice and no proposal for penalty on them was made. This fact itself casts serious doubt on the veracity of their statements and establishes that the statements were procured from them under inducement and hence no reliance can be placed on the said statements. We are therefore of the view that remitting the matter for cross-examination will not serve any purpose.
4.7 It is seen that reliance is also placed in the Show Cause notice on Computer print outs of e-mails showing cash transactions. In this behalf, at the outset we find that it is not shown that the said alleged cash transactions represent receipt of price over and above the RSP declared on the goods. Further, in absence of it being shown that requirements of Section 36B of the Central Excise Act 1944 were satisfied in respect of the said Computer printouts, the same are not admissible in evidence as held in the judgments cited supra.
4.8 It is further observed that even if it is assumed that the RSP was liable to be determined/ ascertained under Section 4A (4), even so, the determination proposed in the Show Cause Notice and confirmed in the Order-in-Original is not in conformity with the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008. This is for the reason that Show cause Notice dated 27-3-2010 sought to reject the RSP declared on the goods and sought to re-determine the Retail Price by taking the MRP mentioned in a Price List effective from 23-2-2005 found with one of the Dealers, Krishna Ceramic Choice, Bangalore. However, this is not the manner prescribed for ascertainment of the Retail price under the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008. We find that under Rule 4 of the said Rules of 2008, the RSP has to be determined in the following manner:
a. 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,
b. 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.
4.9 It is seen that Rule 4 nowhere provides for adopting a MRP indicated in a Price List but requires ascertainment of the RSP which is either declared on identical goods removed within a period of one month or the RSP in the retail market at which the goods are actually sold at or about the time of removal of such goods from the place of manufacture. The said Price List relied upon in the notice, itself under Terms and Conditions, at Sr. No.7 mentions that Prices therein are subject to revision without prior notice and ruling prices will be charged at the time of dispatch. The same therefore does not represent the actual retail price at which the goods are sold. Moreover, the requirement is to ascertain the actual RSP at or about the time of removal of the goods to be valued. Therefore, a Price list of Feb 2005 cannot in any event be uniformly applied through out the period from 2005 to 2009. It is settled law as laid down in CCE v Bell Granito Ceramics Ltd – 2009 (235) ELT 171, that there is no requirement under Section 4A that the MRP on each package of goods has to be identical. Accordingly, a manufacturer can affix different MRPs on different packages of the same kind of goods. If the MRP on a given package has to be rejected under Section 4A (4) and redetermined under Rule 4 of the said Rules of 2008, then with regard to every package, it would be necessary to ascertain the actual RSP in the retail market at or about the time of removal of the package in question. An MRP indicated in a Price list of Feb 2005, which itself mentions that Prices therein are subject to revision without prior notice and ruling prices will be charged at the time of dispatch cannot be applied across the board for clearances made from 2005 to 2009.
4.10 It is further noticed that the Larger Bench of this tribunal in the case of Ocean Ceramics Ltd v CCE-2024 (1) TMI 1280-CESTAT-AHMEDABAD-LB, has held that in absence of the manner of ascertainment of RSP having being prescribed by Rules under Section 4A (4) for the period prior to 1-3-2008, it is not open to the adjudicating authority to ascertain the RSP for the period prior to 1-3-2008 and that the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008 notified with effect from 1-3-2008 cannot apply retrospectively for the period prior to 1-3-2008, in that view, we find that the demand for the period prior to 1-3-2008 based on the ascertainment done in the impugned Order-in-Original is in any way not tenable.
5. In view of foregoing discussions and findings, impugned Order-In-Original cannot be sustained and is set aside. Appeals are allowed with consequential relief, if any, as per law.
(Pronounced in the open court on 04.12.2024)
