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2024 (5) TMI 478 - CESTAT CHENNAIMethodologies for re-determination of CVD payable on imports on MRP basis - Imports of notebook / laptop computers - free distribution to students - suppressing the actual sale price by mis-declaring the MRP to evade Customs duty (CVD) - limitation - Valuation - Confiscation of goods - interest - demand - penalty and redemption fine - Whether the rejection of MRP declared on the laptops imported by appellant and redetermination of the MRP is legal and sustainable - HELD THAT:- The facts reveal that the appellant had entered into contract with ELCOT to supply laptop with carry bag. Admittedly, appellant has not imported the carry bags. While supplying the goods to ELCOT, the appellant has altered the MRP and affixed stickers showing higher MRP on the composite supply of laptop and bag. This is the genesis of the dispute. According to appellant, as they were clearing the imported laptop with locally purchased carry bag and inclusive of its’ VAT, the MRP had to be altered and had affixed the higher MRP on the goods while supplying to ELCOT. The appellant has purchased backpack locally. In such circumstances the appellant, no doubt, is entitled to add this value while supplying to ELCOT. It is not a case where only the imported laptop computer is supplied to ELCOT. According to appellant, they procured the backpack which has market price of Rs.2500/- at a negotiated price of Rs.225/-. The appellant has affixed the new increased MRP on the basis of purchase price agreed with ELCOT. This purchase price includes the price of laptop computer, backpack, the booklet, instruction guide etc. It can be seen that even though a methodology to ascertain the RSP is laid down, the same will apply only in situations of (a) and (b) of subsection (4) of Section 4A. On examining the facts, the appellant has adopted a new RSP for the combined goods of laptop computer + carry bag + booklet + Instruction guide. The department has redetermined the RSP of the imported laptop computer alleging misdeclaration of MRP. As there is no methodology or machinery for redetermining the MRP of goods imported for the purpose of payment of CVD, we hold that such re-determination of MRP is against the provisions of law. Moreover, in the present case, though the adjudicating authority has stated that Rule 6 of 2008 is applied to redetermine RSP, it can be seen that the method of arriving at the redetermined MRP is not within the principles or provisions of Section 4A of the Central Excise Act & Rules. The methodology adopted by adjudicating authority is to deduct the negotiated price of the backpack (Rs.225/-) from the Purchase order price. The Purchase order Price or bid price is inclusive of items which are not imported. Further, the department has no case that such backpack can be obtained at Rs.225/- from market. All these factors would lead to the conclusion that the redetermined MRP cannot be sustained. Consequently, the demand of differential duty also cannot be sustained and require to be set aside. Ordered accordingly. The Ld. Counsel has put forward arguments on the grounds of limitation also. The show cause notice is dated 08.08.2017. the imports are made during the period 09.05.2012 to 09.06.2014. The facts reveal that the officers have visited the warehouse on 2.7.2013 and 16331 numbers of laptops were seized. The Department was thus aware of the entire situation in 2013 itself. The statements were also recorded in 2013. Thereafter, show cause notice has been issued after 4 years alleging suppression of facts with intent to evade payment of Customs duty invoking the extended period. The issue is with respect to redetermination of MRP of the composite supply of laptop and laptop bags. The issue as to whether there is undervaluation of MRP when the goods are in a composite supply form is debatable and is interpretational in nature. Taking all these aspects into consideration, we are of the considered opinion that there are no grounds for invoking the extended period. The show cause notice is time-barred and the demand cannot sustain on the ground of limitation also. The appellant has argued that confiscation of goods, interest demand, penalty and redemption fine imposed cannot be sustained in relation to CVD leviable u/s 3 (1) of Customs Tariff Act, 1975. The Hon’ble Bombay High Court in the case of Mahindra & Mahindra Ltd. v. Union of India 2022 (10) TMI 212 - BOMBAY HIGH COURT had considered the said issue and held that interest and penalty in relation to CVD cannot be demanded in the absence of specific provisions for levy of interest, penalty in the Customs Tariff Act, 1975. The said decision was upheld by Hon’ble Apex Court in 2023 (8) TMI 135 - SC ORDER. Following the same, we hold that the confiscation of goods, interest on CVD, redemption fine and penalties cannot sustain on this ground also. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
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