TMI Blog2012 (11) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... [Judgment per : Sonia Gokani, J. (CAV)]. Present petitions are directed against the very same order of Settlement Commission dated 18-1-2011. Although both the petitioners have preferred these petitions for different reasons, the challenge is to the impugned order of the Settlement Commission and therefore the same are being decided by way of this common judgment. 2. Both these petitions arise in the following factual background :- M/s. Suzlon Ceramics, the petitioner of Special Civil Application No. 9381 of 2011 is engaged in the manufacture of Suzlon brand ceramic tiles and is holding Central Excise Registration for manufacture and clearance of such excisable goods. Central Excise Duty is leviable as per the provisions of Section 4A of the Central Excise Act ( the Act for short) on Ceramic Tiles, based on the maximum retail price affixed on the package in terms of the provisions of the Standards of Weights and Measures Act, 1976. A notification was issued being Notification No. 13/2002-C.E. (N.T.), dated 1-3-2002 providing for abatement of 45% from such MRP for the purpose of determining the assessable value of ceramic tiles. Vide another Notification No. 6/2002-C.E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (1) of Section 11A of the Act as also for interest and penalty under Sections 11AB and 11AC of the Act respectively. For the partner of the applicant company, notice demanding penalty under Rule 26 of the Central Excise Rules, 2002 also was issued on the very same day i.e. 29-6-2009. Prior to this SCN, on dated 3-7-2008 demand of Central Excise duty of Rs. 32,891/- was made for clandestine removal of premium grade tiles totaling 4171 boxes. An application was filed before the Settlement Commission on 15-4-2010 by the petitioner M/s. Suzlon Ceramics where the petitioner accepted the total duty of Rs. 9,34,452/-, as against the total demand of Rs. 19,75,928/-. The Department was of the opinion that the applicant was not declaring colours and designs of the tiles manufactured and sold, nor were they mentioned in the invoices. It objected to the method adopted by the petitioner for arriving at additional duty as also non-declaration of MRP of tiles sold for the period in question on their Central Excise invoices, the Settlement Commission after affording opportunities to both the sides settled the case under Section 32F(7) of the Act laying down the terms and conditions as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete go-by to the provisions of law. The excise duty is required to be paid on the Retail Sale Price (RSP) declared on such goods less 45% abatement from such retail price. As per notification, the petitioner firm, according to the petitioner, had sold the goods at the actual declared retail sale price on the goods and paid duty of excise on excisable value after applying abatement at the rate of 45% on such declared MRP of each removal. The Revenue could not point out that retail sale price fetched more than the declared retail sale price and that the same was within the knowledge of the petitioner, and investigation having failed to bring on record any such details, the prices declared shall need to be recorded. It is also the case of the petitioner that while approaching Settlement Commission it had re-worked retail sale price for each removal i.e invoice wise by adding realized amount by way of cheque, average cash amount, cost of transportation, retailer s profit and excise duty on the revised MRP plus VAT/CST. The petitioner contended that in most of the cases even after addition of cash amount in the amount received through cheques plus tax, it would not exceed retail s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement Commission has come out with a completely different method. He has sought to rely upon judgment of the Apex Court in the case of Union of India v. Ind-Swift Laboratories Ltd. reported in 2011 (265) E.L.T. 3 (S.C.) and in the case of Paul Industries (India) v. Union of India reported in 2004 (171) E.L.T. 299 (S.C.). 12. Per contra, it is vehemently contended by learned Counsel Mr. Darshan Parikh that the reduction of 10% per year as has been done by the Settlement Commission would lead to absurdity of the figure as there would be a substantial reduction of 50% at the end of 5 years and if that year wise reduction is further extended, effect would be of getting a negative sum eventually. He also further urged that it would not only have cascading effect as there are 200 other manufacturers who are waiting on the fence, but the same would lead to a chaotic situation for the Revenue. He urged this Court to consider the fact that though DGCEI needs to investigate in the allegation of large scale evasion of the tax and duties, the officials were not permitted to do so by the manufacturers, their employees etc. This very attitude, on the part of the manufacturers, which incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consensus between two conflicting parties. This mechanism allows tax payers to come forward clean by disclosing truly its income but, this mechanism cannot work de hors the objectives and intent of statute. 16. Before adverting to the contentions raised by both the sides, it needs to be mentioned, at the outset, emphatic challenge is made to the impugned order of the Settlement Commission as both the sides are unhappy and the method adopted by the Settlement Commission intrigues both of them. Insistence of both the sides is not to sustain the said order with a further request that it must be held that the Commission has travelled beyond its jurisdiction. In such a situation, firstly, the authority, sought to be relied upon, if is looked at, before the Apex Court in the case of Paul Industries (India) v. Union of India (supra), challenge was to the decision of dismissal of the writ petition by the High Court challenging the correctness of the order passed by the Settlement Commission. The Apex Court held that the High Court was obliged to go into the question as to whether the original order passed by the Settlement Commission was in accordance with law or not. It was argued befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be contrary to the provisions of the Act applicable to the case of the petitioner. However, the Court shall have to also interfere with the findings of the facts recorded by the Settlement Commission, in as much, as the provisions which are made applicable to the fact are found erroneous. As the question appears to be essentially more a question of law than the question of fact, for answering the disputed question raised before this Court by both the sides, it would be pertinent to reproduce, at this stage, the provisions of Central Excise Act. Section 4A of the Central Excise Act reads 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 char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Section, retail sale price is the price at which excisable goods in the packed form is sold to the ultimate customer and that should be inclusive of all taxes, freight, transport charges, commission, etc. Thus, it is important to have retail sale price on the packed goods which is sold to the customer and for all practical purpose that should be inclusive of all the taxes and charges and such a price is the only consideration for the purpose of sale to the customer and would have bearing on duty to be collected. It is also vital to note here that in the event of clandestine removal, where the sale price of such goods on the package is not declared or the same is tempered with or obliterated, Retail Sale Price needs to be ascertained for which rules have been made, known as the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 notified by Central Board of Excise Customs vide Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008, have come into being. These rules have substituted earlier Notification No. 54/96 of 1996 dated 31-10-1996 and Rule 4 of these rules read as thus :- Rule 4. Where a manufacturer removes the excisable goods specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MRP. Resultantly, it had the effect of determining the lower assessable value after availing the abatement of 45% on such MRP. Since it was not possible for the DGCEI to conduct the coordinated search operations in the wake of sever resistance as mentioned hereinabove, the documents were called for. The course adopted by the officers of the department was to rely on the searches conducted at the premises of the dealers of the manufacturers and record their statements and thereby it issued the show cause notice levying the differential duty of Rs. 19,43,037/- including the demand of additional interest and penalty. Present petitioner M/s. Suzlon was keen to settle the case. It approached the Settlement Commission but they maintained that there was enhanced extra consideration of Rs. 35/- per box as against the single average of the highest and the lowest extra consideration. However, they do not subscribe to the correctness of the basis on which the demand for differential duty had been raised. According to the petitioner it had admitted the enhanced liability to the tune of Rs. 13,46,967/- by raising extra consideration of Rs. 35/- per box. They worked out the detailed considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 4A(4) of the Central Excise Act read with Valuation Rules under Notification No. 13 of 2008. Noting all these aspects, the Bench ruled thus :- 21. The Bench agrees with the applicant that the criteria of the weighted average of subsequent clearances for the period of one year does not fall within the ambit of Rule 4 of the said Rules. However, the Rules also provide for a residual provision under Rule for valuation in accordance with the principles and general provisions of the Section 4A(4) of the Act. The main concern of the applicant in adopting the weighted average price of subsequent period is that revised price should be higher in the normal course compared to the existing price. The Bench finds that this argument is quite reasonable and that whenever there is price revision, due allowance is given towards inflation and other cost escalation factors such as higher price of inputs. Taking these aspects into consideration, the Bench finds that it is reasonable to accept a notional upward price revision of 10% for the subsequent period in this case to arrive at the MRP for the relevant period. Accordingly, the Bench considers that the most practical approach to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the basis of the data and documents, only on the ground that the petitioner was very cooperative and had come forth for the settlement proceedings, worked out a formula which is foreign to the existing law. 26. Admittedly for the period for which the MRP was being worked out was from 19-4-2007 to 15-2-2008. At the relevant point of time, the Central Excise Rules, 2008 were not in existence. But at the same time, instead of going as per the provisions of the law the notional price revision of 10% for subsequent period, for arriving at MRP for the relevant period, and in the name of practical approach for the subsequent period, has made reduction in the weighted average MRP by the factor of 10% is wholly unacceptable and, therefore, as rightly submitted by the learned advocate for the Revenue, the possibility cannot be ruled out that eventually this reduction could bring weighted average MRP to nil and it would result into ridiculous preposition. As the policy adopted by the Settlement Commission is neither legal nor in any manner conducive to the object of the Act and as the same is challenged by both the sides and as fallacy of reasoning had been well made out, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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