Western India Ceramics Pvt Ltd Vs Commissioner of C.E. & S.T. (CESTAT Ahmedabad)
The appeals were filed by Western India Ceramics Pvt. Ltd., its Director, and an employee against an Order-in-Original confirming central excise duty, penalties and confiscation. The dispute related to the period March 2005 to March 2009, during which the company manufactured vitrified polished tiles assessed under Section 4A of the Central Excise Act, 1944 on the basis of the declared Retail Sale Price (RSP) after allowing the prescribed abatement.
The Directorate General of Central Excise Intelligence (DGCEI) initiated an investigation in March 2008 into the correctness of the declared RSP. A show cause notice dated 27 March 2010 alleged that the goods were sold at prices higher than the declared RSP based on statements of employees, the Director, dealers, builders and computer printouts of e-mails allegedly showing cash transactions. The notice proposed to reject the declared RSP and re-determine it by adopting the MRP mentioned in a price list effective from 23 February 2005 recovered from a dealer, Krishna Ceramic Choice, Bangalore. Differential duty of Rs. 9,19,34,781 was demanded under the proviso to Section 11A along with interest under Section 11AB, and penalties were proposed. A separate show cause notice dated 17 July 2009 proposed confiscation of 202 boxes of tiles seized at the Kolkata depot on the ground that no RSP was declared on them.
The appellants contested the notices, contending that sale above the declared RSP had not been established, that different consignments could carry different RSPs, that there was no evidence of any cash flow-back or receipt of consideration over the declared RSP, and that cross-examination of the persons whose statements were relied upon had been denied. They also relied on the Larger Bench decision in Ocean Ceramics Ltd. v. CCE, contending that for the period prior to 1 March 2008, RSP could not be redetermined because the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 were not then in force. They further argued that even for the post-1 March 2008 period, the RSP had not been determined in accordance with the prescribed Rules.
The Revenue submitted that excess consideration could be inferred from the statements and documentary evidence. It stated that if necessary, the matter could be remanded for cross-examination of the witnesses whose statements had been relied upon and supported the findings recorded in the impugned order.
The Tribunal examined whether the evidence established that the goods were sold above the declared RSP and whether the RSP had been determined in accordance with the 2008 Rules. It found that the statements of dealers merely indicated that some transactions involved payment partly by cheque and partly in cash, but none of the statements established that the total sale price exceeded the RSP declared on the goods. The Tribunal also noted that the Department had not recorded statements from the ultimate buyers stating that they had paid more than the declared RSP, nor was there any allegation that dealers had altered the RSP printed on the packages.
The Tribunal observed that Section 4A(4) applies only where goods are cleared without declaring the RSP, where the declared RSP is not the RSP required under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, or where the manufacturer tampers with, obliterates or alters the declared RSP after removal from the factory. It found that the show cause notice did not establish any of these circumstances. According to the Tribunal, even if dealers sold the goods above the declared RSP, that would at most attract action against the dealers under the Standards of Weights and Measures law and would not by itself establish that the manufacturer’s declared RSP was incorrect.
The Tribunal also found the statements of builders unreliable, observing that they alleged receipt of lesser quantities than invoiced without showing any complaint or legal action against the appellant. It noted that the statements of the appellant’s Director and employees were exculpatory and denied the allegations regarding cash transactions and short supply. The Tribunal held that reliance on the statements of dealers and builders was also unsustainable because they had neither been examined under Section 9D of the Central Excise Act nor made available for cross-examination. Referring to Andaman Timber Industries v. CC, it held that denial of cross-examination on the Commissioner’s reasoning was contrary to settled law and further observed that remanding the matter solely for cross-examination would serve no purpose in the circumstances of the case.
The Tribunal further held that the computer printouts of e-mails relied upon by the Department were not admissible because compliance with Section 36B of the Central Excise Act had not been established. It also found that there was nothing to show that the alleged cash transactions represented consideration received over and above the declared RSP.
Even assuming that Section 4A(4) was applicable, the Tribunal held that the Department had not determined the RSP in accordance with the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. Instead of following Rule 4, which requires adoption of the RSP of identical goods or determination through retail market enquiries, the Department relied on a dealer’s price list dated 23 February 2005. The Tribunal held that such a price list, which itself stated that prices were subject to revision without notice, could not represent the actual retail sale price or be uniformly applied to clearances over the period from 2005 to 2009. It also noted that different MRPs could lawfully be affixed to different packages of the same goods.
The Tribunal relied upon the Larger Bench decision in Ocean Ceramics Ltd. v. CCE, which held that prior to 1 March 2008, RSP could not be ascertained under Section 4A(4) because the prescribed Rules had not yet been notified and that the 2008 Rules could not operate retrospectively. Accordingly, the demand for the period prior to 1 March 2008 was also held to be untenable on that ground.
Holding that the impugned Order-in-Original could not be sustained, the Tribunal set it aside and allowed the appeals with consequential relief, if any, in accordance with law.
Cases Discussed
- CC v Junaid Kudia (SC), 2024 (338) ELT 529 (SC)
- Junaid Kudia v CC, (2024) 16 Centax 503
- Ocean Ceramics Ltd v CCE, 2024 (1) TMI 1280-CESTAT-AHMEDABAD-LB
- CC v Savi Vision P. Ltd, 2016 (337) ELT 331
- Andaman Timber Industries v CC (SC), 2015 (324) ELT 641 (SC)
- Agarvanshi Aluminium Ltd v CC, 2014 (299) ELT 83
- Basudev Garg v CC, 2013 (294) ELT 353
- J & K Cigarettes Ltd v CCE, 2009 (242) ELT 189
- CCE v Bell Granito Ceramics Ltd, 2009 (235) ELT 171
- Anvar P. V. vs. P. K. Basheer, 2017 (352) ELT 416 (SC)
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:
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.
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)
