9911796707
TMI Blog2008 (9) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... main ingredient used in the manufacture of Cookies and the same had been charged with Excise duty from 1-3-2005 by virtue of the amendment made in the Finance Act, 2005. (b) On the basis of the report gathered that the first respondent had been clearing Dough to their franchises and outlets without payment of duty, certain investigations were carried on and it came to light that the first respondent was clearing Dough for preparation of Cookies to their outlets and franchises without payment of duty and that they have cleared CENVAT availed packing materials to their franchises/outlets without expunging the credit taken on the same. (c) When it was also noticed that the first respondent has cleared excisable goods in bulk to institutional customers by wrongly assessing the same on Maximum Retail Price (MRP), a show-cause notice was issued to it on 31-7-2006, demanding a total duty of Rs. 33,82,246/- and education cess amount of Rs. 67,645/- along with interest. That apart, the penal provision under the Central Excise Act, 1944 (in short, "the Act") was also invoked against the first respondent. (d) It is the case of the writ petitioner that on the visit by the officials of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for settlement filed by the first respondent stating that the decision of the Tribunal rendered in M/s. Ishaan Research Laboratories Pvt. Ltd., [2004 (172) E.L.T. 484 (Tri.) ] relied on by it is not relevant, since in that case it was held that the provisions of the Packaged Commodities Rules, 1977 are not applicable, as no materials have been adduced by the Revenue to show that the marking on the package indicates in clear terms that it has been specially packed for any industry as a raw-material or for the purpose of servicing any industry, while in the instant case, the goods were supplied for servicing in the industries. (h) It was also brought to the notice of the second respondent Commission that the first respondent has specifically stated that the institutional customers are not selling the Cookies, but are supplying the same to their customers for consumption and therefore, the decision of the Tribunal relied upon by the first respondent is not applicable, since the decision relates to the goods affixed with MRP while in the present case there was no affixture of MRP, but the package contains a word "specially packed for Jet Airways and not for sale", "date of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion letter of the Central Board of Excise and Customs dated 28-2-2002, wherein in respect of goods which are not statutorily required to print/declare the retail sale price on the package under the provisions of Standards of Weights and Measures Act, 1976 or the Rules, valuation should be done under Section 4 of the Act and that similar circular was issued on 31-7-1998, which requires to indicate MRP under Standards of Weights and Measures (Packaged Commodities) Rules, 1977; that the decision in M/s. Ishaan Research Laboratories (P) Ltd., [2004 (172) E.L.T. 484 (Tri.- Delhi)] is not applicable and that the granting of immunity of penalty and prosecution is without jurisdiction and the second respondent ought to have taken into consideration various decisions of the Supreme Court. 5. The first respondent, who has filed affidavit in support of the petition to vacate stay granted by this Court has stated that the writ petition is not maintainable since the Settlement Commission has exercised its discretion under Section 32-K of the Act. It is also stated that the writ petition becomes infructuous by relying upon the judgement of the Supreme Court in Jayanthi Food Processing Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent manufactured and cleared a total quantity of 2,20,813 Kgs. of Dough valued at Rs. 1,49,04,162/- during the period from March, 2005 to December, 2005 to its various franchises/outlets and the same was confirmed in its letters dated 20-1-2006 and 24-1-2006 and the first respondent has voluntarily paid an amount of Rs. 21,89,237/- along with an interest to the tune of Rs. 1,50,485/- and also paid an amount of Rs. 2,43,122/- towards CENVAT Credit and altogether, paid a sum of Rs. 23,84,666/- towards total excise duty and Rs. 47,693/- towards cess. 5(e). It is also the case of the first respondent that the Department noticed that it had cleared its final product viz., Cookies to hotel industry like Taj Group of Hotels, GRT Grand Hotel and airlines like Jet Airways etc. in bulk, based on specific contract with each one of the parties. The sale was effected on the basis of the purchase orders from the above said purchasers. It is admitted that the excise duty had been paid not on the contract price, but on the MRP based assessment. For the period from 1-2-2004 to 31-3-2005, the excise duty comes to Rs. 4,88,200/- and the duty already paid works out to Rs. 3,59,621/- and therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 6(b). It is also his further submission that under the provisions of the Standards of Weights and Measures Act, 1976, which do not mandate disclosure of MRP, the valuing of goods under Section 4-A of the Act does not arise. In the absence of any requirement under the Standards of Weights and Measures Act, 1976 to declare MRP and admittedly, when the first respondent has not declared MRP on the packing, the second respondent Commission ought not to have applied Section 4-A of the Act. 6(c). It is also submitted by him that Rule 2-A, which has been inserted to Standards of Weights and Measures (Packaged Commodities) Rules, 1977, excludes the applicability of the rules to the institutional customers, including Airways, Railways, Hotels, etc. which has been given effect from 13-1-2007 and the said Rule makes it clear that the intention of the legislature is to exclude institutional customers from the purview of the Rules. 6(d). It is his further contention that even though the second respondent/Settlement Commission has called for a report as required under Section 32-F(1) of the Act, no investigation has been carried out, especially when the Department has raised a serious i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the learned senior counsel, the decision of the second respondent-Settlement Commission arriving at the duty under Section 4-A of the Act, is perfectly in order. It is also his submission that the latest judgment of the Supreme Court in Jayanthi Food Processing (P) Ltd., is dated 22-8-2007, and the order of the Settlement Commission is dated 6-12-2006 and upto the date of the Supreme Court judgement, there has been divergent opinion among the members of the Tribunal. 7(b). He would also rely upon some of the orders of the Tribunals, viz., (i) Bharati Systel Ltd. v. Commissioner [2002 (145) E.L.T. 626]; (ii) Catrol India Ltd. v. Commissioner [2003 (159) E.L.T. 575]; (iii) Commissioner v. Trishul Research Lab (P) Ltd. [2002 (144) E.L.T. 204 (T)]; and (iv) Commissioner v. Kraftech Products Inc. [2004 (174) E.L.T. 396 (T)], wherein the Tribunals have held that when the products were not sold in retail but in bulk or to institutional buyers, Section 4 would apply. On the other hand, in (i) ITEL Industries Pvt. Ltd. v. Commissioner [2004 (163) E.L.T. 219 (T)]; (ii) Jayanthi Food Processing (P) Ltd. v. CCE, Rajasthan (2002 (141) E.L.T. 162 = 2007 (8) SCC 34)]; (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A of the Central Excise Act, 1944. 9. As far as the first issue is concerned, it is the case of the first respondent that it was under the bona fide belief that Dough made by it was not liable to duty since it was not in marketable condition and it was due to the mistake committed by the first respondent in not noticing the change made in the Central Excise Tariff Act, 1985 by virtue of amendment of the year 2005, and immediately after the first respondent was informed that Dough has become liable for duty, the first respondent paid the entire amount which is not in dispute. Therefore, the only point which remains to be decided is about the assessment of price of Cookies supplied as stated above. 10. In this regard, it is the case of the first respondent that the supply of Cookies was made by them to the hotels like, Taj Group of Hotels, etc. who as institutional customers are only supplying to their customers for consumption. The first respondent also relies upon the communication from its institutional customers like M/s. Taj Coromandel, M/s. Jet Airways, who have confirmed the words on the package, 'date of manufacture', 'best before 60 days', 'product name', 'batch number' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the provisions of the Act. Therefore, by issuance of the said show-cause notice, the proceedings under the Central Excise Act have commenced and in normal circumstances, it is for the first respondent to offer its explanation and thereafter, for the authorities to adjudicate considering the entire circumstances and arrive at a conclusion regarding the recovery of duty. 14. It is true that under the Central Excise Act, when the proceedings have been initiated, it is open to an assessee to resort to the procedures under Chapter V of the Act which deals with settlement of cases, which is being done by the Customs and Central Excise Settlement Commission. Under section 31 of the Central Excise Act, 1944, clause (c) defines the term, 'case' which is as follows : " 'case' means any proceeding under this Act or any other Act for the levy, assessment and collection of excise duty or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a Central Excise Officer or Central Government on the date on which an application under sub-section (1) of section 32-E is made." 15. Section 32-E of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the assessee shall not be entitled to make an application under sub-section (1), before the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed. (4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. "32F. Procedure on receipt of an application under section 32E. - (1) On receipt of an application under sub-section (1) of section 32-E, the Settlement Commission shall call for a report from the Commissioner of Central Excise having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section, unless an opportunity has been given to the applicant of being heard: Provided further that the Commissioner of Central Excise shall furnish such report within a period of one month of the receipt of the communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (7) After examination of the records and the report of the Commissioner of Central Excise received under sub-section (1), and the report, if any, of the Commissioner (Investigation) of the Settlement Commission under sub-section (6), and after giving an opportunity to the applicant and to the Commissioner of Central Excise having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) under sub-section (1) or subsection (6). (8) Subject to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder. (2) Where an application made under section 32-E has been allowed to be proceeded with under section 32-F, the Settlement Commission shall, until an order is passed under sub-section (7) of section 32-F, have, subject to the provisions of sub-section (6) of that section, exclusive jurisdiction to exercise the powers and perform the functions of any Central Excise Officer, under this Act in relation to the case. (3) In the absence of any express direction by the Settlement Commission to the contrary, nothing in this Chapter shall affect the operation of the provisions of this Act in so far as they relate to any matters other than those before the Settlement Commission. (4) The Settlement Commission shall, subject to the provisions of this Chapter, have power to regulate its own procedure and the procedure of Benches thereof in all matters arising out of the exercise of its powers, or of the discharge of its functions, including the places at which the Benches shall hold their sittings." 18. Section 32-O of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application filed by the first respondent dated 20-9-2006, the para-wise comments of the petitioner Department having been received on 30-10-2006. A reference to the impugned order of the second respondent, Settlement Commission makes it clear that the final order has been passed at the admission stage since the order itself is captioned as 'admission-cum-final order'. While admitting the case of the first respondent in respect of manufacture of Dough that there has been a clear misconception regarding the legal position and that subsequently the amount has been paid, the impugned order of the Commission proceeds that the levy of duty on the price of Cookies supplied to the institutional customers could be done under section 4-A of the Act instead of assessing on the contractual value under section 4 of the Act. It is relevant to point out that the first respondent itself has admitted as it is found in the impugned order by the second respondent, Settlement Commission that there was no indication of MRP, however, the second respondent, Settlement Commission has arrived at a categoric finding that there is no doubt that cookies were made for retail distribution. 22. Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of excise duty on retail sale price, section 4-A gives leniency to the assessee who is compelled under the provisions of the Standards of Weights and Measures Act, 1976 and the Rules made thereunder to declare on the packets the retail sale price (M.R.P.) and in such circumstances, notwithstanding the provisions of section 4 of the Act wherein the transaction value has to be taken for excise, the declared price is taken as value under section 4-A of the Act. Sections 4 and 4-A of the Act are as follows : "4. Valuation of excisable goods for purposes of charging of duty of excise.- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation. - For the removal of doubts, it is her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. "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 decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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.]" On a bare reading of sections 4 and 4-A of the Act, it is clear that section 4-A gives certain privileges and benefits to assesses who are compelled under the Standards of Weights and Measures Act, 1976 to declare on the package the retail sale price by assessing duty on the said declared price rather than the contractual price. 26. Applying the above said provisions of the Act to the factual matrix which has been enumerated even by the second respondent, Settlement Commission, in the absence of declaration of retail sale price on the packages by the first respondent in respect of Cookies manufactured by it and in the absence of any obligation on its part to make such declaration of retail sale price as per the Standards of Weights and Measures Act, 1976 (Act 60/76), there is absolutely no reason for the second respondent Settlement Commission to show leniency by making assessment under Section 4-A of the Act. 27. In any event, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the first respondent to declare the maximum retail price as per the Standards of Weights and Measures Act, 1976 and the Rules made thereunder, which is not in dispute and it is also not in dispute that in fact the first respondent has not declared such Maximum Retail Price in the packages and therefore, the third and fifth factors which are the mandatory requirements for applicability of Section 4-A of the Act are lacking on the face of the factual situation in this case and inspite of it, it is not known as to how the second respondent Settlement Commission has granted the benefit of Section 4-A to the first respondent. 30. The paragraphs 73, 74 and 75 of the judgment of the Supreme Court cited above on which reliance was placed by the learned senior counsel for the first respondent have no application to the facts of the present case. Those paragraphs relate to the mineral water bottles. On facts, it is clear as it is seen in paragraph 73 that the manufacturer used to pack twelve 200 ml. bottles in a single package and used to mention the Maximum Retail Price on the said package. It was, after finding that on the label, after disclosure of Maximum Retail Price, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 75. The factual scenario is that though the MRP was declared on the package of 12 bottles, the bottles did not have any MRP, instead it was written: (a) not for resale; (b) specially packed for Jet Airways. No retail price was written on 200 ml bottle. There is further no dispute that the assessee had entered into a contract with Jet Airways dated 13-2-2002 and the contracted price of sale for the goods was Rs. 2.61. It was the condition in the contract that each bottle to be supplied shall have a printed label "specially packed for Jet Airways". On the basis of these facts Shri Subba Rao urged that this case, if it was identical with Jayanti Food case then it was bound to be held that the MRP based assumption could not be the correct assessment and it should be under Section 4 of the Act. The contention is incorrect and as infact the "package" cannot be viewed as a "wholesale package". It does not come within the definition of Rule 2(x)(i) as the "package" was not intended for sale, distribution or delivery to an intermediary. On the other hand, it is sold directly to Jet Airways and Jet Airways supplied the said bottles to their passengers and thus there is no further ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
