THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, CALICUT versus M/S. CERA BOARDS AND DOORS, KANNUR KERALA & ORS.
[2020] 11 S.C.R. 471, Supreme Court of India, 2020
Outcome: Disposed off
Segment: Facts
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THE COMMISSIONER OF CENTRAL EXCISE,
CUSTOMS AND SERVICE TAX, CALICUT
v.
M/S. CERA BOARDS AND DOORS,
KANNUR KERALA & ORS.
(Civil Appeal Nos. 7240-7248 of 2009)
AUGUST 19, 2020
[S. A. BOBDE, CJI, A. S. BOPANNA AND
V. RAMASUBRAMANIAN, JJ.]
Central Excise Act, 1944 – s.4 amended in 2000 – Charging
of excise duty – Method of valuation of excisable goods – In present
cases arising out of similar facts, assesses allegedly undervalued
the goods manufactured and cleared by them – Evaded the excise
duty actually payable – Period of assessment pre & post 2000
Amendment – Adjudicating authorities inter alia held that there was
undervaluation and evasion of excise duty – Customs, Excise and
Service Tax Appellate Tribunal (CESTAT) though upheld said finding
but remanded the matters back for re-quantification of duty – Held:
Finding w.r.t undervaluation and evasion of excise duty recorded
by CESTAT in all the cases has not been challenged by the assesses
and hence has attained finality – Further, before amendment, clause
(a) of sub-section (1) of s.4 laid emphasis on normal price for an
ordinary sale in the course of wholesale trade, after amendment it
speaks about transaction value – Thus, after amendment, if a sale
is covered by s.4(1)(a), the value of excisable goods shall be the
transaction value defined in s.4(3)(d) – Clause (b) of sub-section
(1), both before and after the amendment, leaves it to the delegated
legislation to prescribe the method of valuation, for
cases not covered
by clause (a) – After the amendment, the Central Government issued
a new set of rules- 2000 Valuation Rules in supersession of 1975
Valuation Rules – Valuation as per the Rules is permissible only in
cases covered by s.4(1)(b) and not by s.4(1)(a) – Impugned orders
of CESTAT confirmed – Principles enumerated for adjudicating
authorities to keep in mind while re-adjudicating the matters –
Finance Act, 2000 – Central Excise Valuation (Determination of
Price of Excisable Goods) Rules, 2000 – Central Excise (Valuation)
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Rules, 1975 – Central Excise Rules, 1944 – Central Excise Rules,
2002.
Disposing of the appeals, the Court
HELD: 1.1 Common Issues arising in these appeals
It may be seen from the facts involved in these batches of
cases that there is a common thread that runs along the fabric of
these cases. This common thread is that the assessees in these
cases allegedly undervalued the goods, sold them for a much
higher price than what was reflected in the invoices and thereby
they evaded the excise duty actually payable. Though the
assessees uniformly denied the said allegation, the CESTAT has
recorded a categorical finding in all the cases that there was
undervaluation and evasion of excise duty. The said finding has
not been challenged by the assessees and hence it has attained
finality. Therefore, what arises for adjudication is only the manner
of determining the value of the goods removed by the assessees
for sale to or through dealers. In other words, the entire dispute
now revolves around the question of valuation of excisable goods,
for the purposes of charging of duty. But for finding an answer to
the said question, it is necessary to take note of the period of
assessment. In some of these cases, the period of assessment
was both prior to and after 01.07.2000 and in other cases, the
period was after 01.07.2000. According to the respondents, the
method of determination of value before 01.07.2000 was different
from the
method of valuation after 01.07.2000, since Section 4 of
the Central Excise Act, 1944 was amended with effect from
01.07.2000 under Act 10 of 2000. The amended Section 4 also
underwent some changes in the years 2003 and 2012. The Court
is not concerned with the changes brought forth in 2012.
[Paras 77, 78][500-C-G]
1.2 In simple terms, 2 different methods of valuation were
prescribed in Section 4 as it stood prior to 01.07.2000:
(i) one covered by clause (a) of sub-section (1) of Section
4, where the emphasis was on normal price, the
determination of which co-related to ordinary sale in
the course of wholesale trade (satisfying certain
conditions), and
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(ii) another covered by clause (b) of sub-section (1) of
Section 4, which related to cases where there were no
sales, and cases where normal price could not be
ascertained for any other reason. [Para 80][507-C-D]
1.3 The prescriptions contained in clause (a) of sub-section
(1) of Section 4, before amendment in 2000, are summarized as
follows:
I.
As a first rule, the normal price, namely the price at
which such goods are ordinarily sold in the course of
wholesale trade shall be taken as the value, if the
buyer is not a related person and the price is the sole
consideration for the same.
II.
But in cases where different prices are charged to
different classes of buyers, each such price should be
taken to be the normal price in relation to each such
class of buyers.
III.
Similarly, if different prices are charged at different
places of removal, the normal price shall be the price
charged in relation to each such place of removal.
IV.
Where the goods are generally not sold in the course
of wholesale trade, except to or through a related
person, the normal price shall be the price at which
the goods are ordinarily sold by the related person,
in the course of wholesale trade to other dealers.
Thus it is clear that under Section 4(1)(a), as it stood before
01.07.2000, the method of valuation prescribed therein was
directly linked to the normal price for an ordinary sale in the
course of wholesale trade. But in cases where normal price was
not ascertainable, the
same would fall under Section 4(1)(b) and
the valuation in such cases had to be done in terms of the Valuation
Rules of the year 1975. Clause (b) identifies one situation, namely
where goods are not sold, in which, the normal price may not be
ascertainable. In addition, clause (b) also recognises the fact that
there may be cases where normal price is not ascertainable for
any other reason. These cases may perhaps include sales
otherwise than in the course of wholesale trade. [Paras 81,
82][507-E-H; 508-A-C]
COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX
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1.4 Though the words “normal price” were used in Section
4(1)(a), the proviso to clause (a) recognised the fact that the normal
price need not be the same universally, but could vary from one
class of buyers to another or from one place of removal to another.
By the amendment under Act 10 of 2000, with effect from
01.07.2000, the words “normal price” and the words “in the
course of wholesale trade” were removed. Instead, the words
“transaction value” were inserted in Section 4(1)(a).
[Paras 83, 84][508-D-E]
1.5 Though the Constitution Bench in Grasim Industries
noted the shift, at least in the language, of Section 4(1), from
“normal price” to “transaction value”, the Constitution Bench
did not take note of one major area of difference, namely that the
focus of Section 4(1)(a) prior to 01.07.2000 was on finding out
the normal price in respect of sales made ordinarily in the course
of wholesale trade. The method of valuation, wherever there was
no sale, was to be on the basis of the Rules, in view of Section
4(1)(b). Even in cases where there was a sale—
(i) in the course of wholesale trade but the conditions
stipulated in clause (a) were not satisfied or
(ii) the normal price could not be ascertained for any other
reason, the method of valuation was left under clause (b) of sub-
section (1) of Section 4 to the rule making authority to stipulate.
The implication flowing out of the words “for any other reason”
found in
clause (b) before amendment is of significance in this
regard. After the amendment under Act 10 of 2000, the normal
pricing method was gone, as the focus shifted from sale in the
course of wholesale trade. [Para 86][509-B-D]
CCE v. Grasim Industries Limited (2018) 7 SCC 233 :
[2018] 6 SCR 1099 – referred to.
1.6 While clause (a) of sub-section (1) of Section 4, as it
stood before amendment, laid emphasis on normal price, clause
(a) of sub-section (1) of Section 4, as it stands after amendment,
speaks about transaction value. Clause (b) of sub-section (1),
both before and after the amendment, leaves it to the delegated
legislation to prescribe the method of valuation, for cases not
covered by clause (a). For the valuation under Section 4(1) to
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follow the “transaction value”, (after amendment) the three
conditions stipulated in clause (a), namely (i) that the goods are
sold for delivery at the time and place of removal, (ii) that the
assessee and buyer are not related and (iii) that the price is the
sole consideration for the sale, should be satisfied. If the three
conditions, enumerated in clause (a) are not satisfied, then the
case would fall under clause (b) of sub-section (1) of Section 4,
which starts with the words “in any other case”. In other words,
in cases not covered by clause (a), the value can be determined
in such manner as may be prescribed. [Paras 87-89][509-E-H]
1.7 After the amendment under Act 10 of 2000, the Central
Government issued a new set of rules called the Central Excise
Valuation (Determination of Price of Excisable Goods) Rules,
2000. These rules were issued in exercise of the power conferred
by Section 37, in supersession of the 1975 Valuation Rules.
Rule 3 of the aforesaid 2000 Rules makes it clear that the value
of excisable goods, for the purposes of clause (b) of sub-section
(1) of Section 4, should be determined in accordance with the
said Rules. Therefore, it is clear that the valuation as per the
Rules is permissible only in cases covered by Section 4(1)(b)
and not by Section 4(1)(a). For the purpose of the issues on hand,
it may not be necessary to dwell deep into the aforesaid rules.
[Paras 90, 91][510-A-C]
1.8 Suffice it to say, that if a sale is covered
by clause (a) of
sub-section (1) of Section 4 (after amendment), the value of
excisable goods shall be the ‘transaction value’. This expression
‘transaction value’ is defined in clause (d) of sub-section (3) of
Section 4. But if a case is not covered by clause (a) of sub-section
(1) of Section 4, then the value of the excisable goods should be
determined in accordance with the 2000 Rules. Therefore, in
essence, an adjudicating authority is obliged to do the following,
in respect of transactions that took place after 01.07.2000:
(i)
first, he must see whether there is a sale and
(ii) next, he must see if such sale satisfies the three
conditions stipulated in clause (a) of sub-section (1) of
Section 4.
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In cases where there is a sale and the three conditions stipulated
in clause (a) of sub-section (1) of Section 4 are satisfied, the
adjudicating authority should determine the value based upon
the transaction value. But (i) in cases where there is no sale and
(ii) in cases where there is a sale but the three conditions
stipulated in clause (a) are not satisfied, then the adjudicating
authority should fall back upon the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000.
[Paras 92-94][510-D-G]
1.9 What the Adjudicating Authority and the Tribunal had
and had not done in these cases
Broadly, in the batches of cases on hand (with one or two
exceptions), the Adjudicating Authorities came to the following
conclusions:
(i)
that there was undervaluation and evasion of duty;
(ii)
that in respect of sales effected both before and after
01.07.2000, the invoice value, together with the cash
paid over and above the invoice value, would represent
the normal price or the transaction value, as the case
may be, and
(iii)
that in cases where there was evidence to show that
a dealer had paid more than the invoice value, the
amount found to have been paid by such a dealer,
though relatable only to a few out of the several
transactions that he had with the assessee, should be
taken to be the normal price or the transaction value,
as the case may be, applicable to all the transactions
that the particular
dealer had with the assessee.
Similarly, what the CESTAT did in all these cases is:
(i)
to uphold the finding of undervaluation and evasion
of duty;
(ii)
to hold that invoice price need not be taken as the
normal price in respect of cases prior to 01.07.2000
and that wherever a particular amount is actually found
to have been paid by a dealer, the same could be taken
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to be the transaction value, for cases after
01.07.02000; and
(iii)
to hold that the determination of the normal price or
the transaction value, as the case may be, should be
confined only to the evidence available on record, but
not to all the transactions across the board.
[Paras 95, 96][511-A-F]
1.10 But the Adjudicating Authorities as well as CESTAT
are also guilty of failure to do something in these batches of cases.
They are:
(i)
Failure to find out, in cases covered by Section 4(1)
as it stood prior to 01.07.2000, whether there were
sales in the course of wholesale trade, satisfying the
3 conditions prescribed therein, falling under clause
(a) of sub-section (1) or whether the sales in question
fell under clause (b) of sub-section (1) of Section 4;
(ii)
Failure to find out, in cases covered by Section 4(1)
as it stands amended by Act 10 of 2000 with effect
from 01.07.2000, whether the sales in question fell
under clause (a) or clause (b) of sub-section (1) of
Section 4;
(iii)
Failure to find out, in the event of the sales in question
falling under clause (b) of sub-section (1) of Section 4
(before or after the amendment), whether the
valuation had to be done only in accordance with the
Rules (1975 Rules or the 2000 Rules, as the case
may be), and
(iv)
Failure to find out, in cases covered by Section 4(1)(b),
the specific rule that is applicable among the 1975 or
2000 Rules, as there are different rules covering
different contingencies, both in the
1975 Rules and
in the 2000 Rules.
Since the Adjudicating Authorities as well as the CESTAT
failed to make a determination as indicated above, the orders of
remand passed by the Tribunal, though for completely different
reasons, were justified. [Paras 97, 98][511-G; 512-A-D]
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1.11 Conclusion
These appeals are disposed of, confirming the impugned
orders of CESTAT setting aside the Orders-in-Original passed
by the Adjudicating Authorities and remanding the matters back
for re-adjudication. However, while carrying out the exercise of
re-adjudication, the Adjudicating Authorities should keep in mind
the principles enumerated hereunder:
A. Cases where the period of assessment is prior to
01.07.2000
I.
First ascertain the price at which such goods are
ordinarily sold by the assessee to a buyer who is not
related to him, in the course of wholesale trade, at
the time and place of removal and also find out whether
the price is the sole consideration for the sale. If the
Adjudicating Authority is able to find this out, he may
take such price as the normal price and treat the case
as covered by Section 4(1)(a), applying, wherever
permissible, the prescriptions contained in the
proviso to clause (a) of sub-section (1) of Section 4.
II.
If the normal price is not ascertainable, either for the
reason that the goods are not sold or for any other
reason, then he may take it that the case would fall
under Section 4(1)(b) and take recourse in such cases,
to the Central Excise (Valuation) Rules, 1975.
III.
The phrase “for any other reason” appearing in
Section 4(1)(b) would include cases where the price
charged in the course of wholesale trade is not
discernible or where the same, though discernible,
cannot
be linked to delivery at the time and place of
removal or where the price is not the sole
consideration for the sale, even though the price
charged in the course of wholesale trade for delivery
at the time and place of removal are available.
IV.
If the case falls under Section 4(1)(b) and the
Adjudicating Authority takes recourse to the method
of valuation prescribed in the 1975 Rules, he shall
find out which among the relevant rules would apply
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to the cases on hand before proceeding with the
valuation.
B. Cases where the period of assessment is after
01.07.2000
I.
First ascertain the “transaction value”, with particular
reference to the definition of the said expression
contained in Section 4(3)(d).
II.
Apply the transaction value so ascertained, to cases
where three conditions, namely (i) the goods are sold
for delivery at the time and place of removal, (ii) the
assessee and buyer are not related and (iii) the price
is the sole consideration, are satisfied. This is because
such cases will fall under Section 4(1)(a).
III.
In cases where one or more of the aforesaid three
conditions are not satisfied, and also in cases where
there is no sale, the Adjudicating Authority should
treat the cases as falling under Section 4(1)(b) and
hence take recourse to the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules,
2000.
IV.
If a case falls under Section 4(1)(b) and the
Adjudicating Authority takes recourse to the method
of valuation prescribed in the 2000 Rules, he shall
find out which among the relevant rules would apply
to the case on hand before proceeding with the
valuation.
Principles applicable in common (both pre and post
amendment)
C. The Adjudicating Authority may treat any amount
received either in cash or otherwise, over and above the invoice
value, as the value of excisable goods even in cases falling under
Section 4(1)(a) (after the amendment), as the definition of
“transaction value” under Section 4(3)(d) means the price actually
paid or payable.
D. The Adjudicating Authority shall keep in mind the fact
that while the expression “normal price” was not defined in
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Section 4(1) before amendment, the expression “transaction
value” is defined very exhaustively in Section 4(3)(d) and this
definition is both inclusive as well as exhaustive.
E. Wherever there is a finding that a particular dealer/
customer has paid a consideration over and above what is reflected
in the invoice, the additional payment made by him together with
the invoice value shall be taken to be the transaction value, for
all the transactions that the particular dealer/customer had with
the assessee. In simple terms, if a dealer/customer has made 10
purchases during the period in question, for a particular value
stated in the invoice, the transaction value determined on the
basis of material relatable to a few out of those transactions, can
be applied to all the transactions of that customer/dealer across
the board for that period. However, the same value cannot be
applied to the other dealers/ customers. This principle shall be
followed in respect of cases arising after the amendment.
F. Since the matters are more than a decade old, the
Adjudicating Authorities may conduct hearings, afford adequate
opportunities to the parties and pass orders in original as early
as possible. [Para 99][512-E-H; 513-A-H; 514-A-G]
Collector of Customs, Madras v. D. Bhoormall (1983)
13 ELT 1546 (SC) – referred to.
Case Law Reference
[2018] 6 SCR 1099
referred to
Para 85
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
7240-7248 of
2009.
From the Judgment and Order dated 24.03.2009 of the Customs
Excise & Service Tax Appellate Tribunal, South Zonal Bench at
Bangalore, in Appeal No. E/947-954/2006 and E/339/07.
With
C.A. Nos. 8615-8620 Of 2009, 2236-2253, 3231-3233, 3227-3230,
6564-6567, 9988-9991 of 2011.
Balbir Singh, ASG, Ms. Nisha Bagchi, Abhishek Attrey, B. Krishna
Prasad, Mrs. Anil Katiyar, V. K. Monga, V. Lakshmikumaran,
Ms. Charanya Lakshmikumaran, Aaditya Bhattacharya, Ms. Apeksha
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Mehta, Kunal Kapoor, Ms. Mounica Kasturi, Gautam Narayan,
Ms. Asmita Singh, Adithya Nair, M. P. Devanath, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
V. RAMASUBRAMANIAN, J.
Introduction
1. All the appeals on hand are by the Commissioners of Central
Excise, Customs & Service Tax of different Commissionerates, filed
under Section 35L(1)(b) of the Central Excise Act, 1944 (hereinafter
referred to as “the Act”), questioning the correctness of the orders passed
by Customs, Excise and Service Tax Appellate Tribunal, South Zonal
Bench at Bangalore (CESTAT) in seven different batches of cases, but
arising out of similar facts and raising identical questions.
2. For the purpose of convenience, the facts out of which the first
batch of cases in Civil Appeal Nos. 7240-7248 of 2009 (which we may
call the lead case) arise, are recorded in detail. The facts in the other
batches of cases are brought on record in brief and to the extent that
they have some distinguishing features. As a matter of fact, the batch of
cases relating to the assessee by name, M/s. CERA Boards and Doors
(the respondents in Civil Appeal Nos. 7240-7248 of 2009), was decided
first by CESTAT. Thereafter, CESTAT decided the other 6 batches of
cases on the basis of the ratio laid down in CERA Boards. This is why
Civil Appeal Nos. 7240-7248 of 2009 are taken as the lead case.
Facts in Civil Appeal Nos. 7240-7248 of 2009
3. M/s. CERA Boards and Doors, Kannur, which is
the assessee
concerned in this batch of cases, admittedly manufactures plywood/block
boards. Searches were conducted by the Directorate General of Central
Excise Intelligence (DGCEI) at their factory premises at Kannur, Kerala
and their depot at Bangalore, on 17.10.2002 and on subsequent days.
Searches were also conducted at the residences of the partners of the
firm, the residences of some of their employees and the premises of
some of their dealers.
4. CERA Boards and Doors is a partnership firm comprising of
one Mr. K. S. Harris and Smt. K. P. Rashida as partners. Their Bangalore
depot was managed by its manager, Sh. T. S. Bhaskar.
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5. The investigation that followed the searches revealed that the
assessee had undervalued the goods manufactured by them and cleared
the goods from their factory, resulting in the evasion of Central Excise
duty to the tune of Rs. 4,29,01,384 during the period from 01.12.1998 to
05.12.2002.
6. After the search, CERA Boards made payment of a sum of
Rs. 12,50,000 towards shortfall in duty for the clearances effected during
the relevant period. Thereafter, show cause notices dated 07.04.2003
and 22.12.2003 were issued. The show cause notice dated 07.04.2003
was for the proposed confiscation of the goods seized from CERA Boards,
M/s. Ply Home, M/s. Gee Ply, M/s. Decowood Interiors, M/s. Arihant
Marketing and M/s. Krishna Agencies, respectively valued at
Rs. 12,80,926, Rs. 27,961, Rs. 34,332, Rs. 2,88,585, Rs. 32,829 and
Rs. 1,00,000. This was under Rule 25 of the Central Excise Rules, 2002.
7. The show cause notice dated 22.12.2003 was for (i) payment
of differential duty to the tune of Rs. 4,29,01,384 under Section 11A(1)
of the Central Excise Act, 1944, (ii) interest under Section 11AB of the
Act, (iii) appropriation of the amount of Rs. 12,50,000 voluntarily paid by
them immediately after the search, towards duty liability, (iv) penalty in
terms of Section 11AC of the Act and also under Rule 173Q of the
erstwhile Central Excise Rules, 1944/ Rule 25 of the Central Excise
Rules, 2002, and (v) imposition of penalty on
the Managing Partner and
Manager of the firm under Rule 209A of the erstwhile Central Excise
Rules, 1944/ Rule 26 of the Central Excise Rules, 2002.
8. The material forming the basis of the aforesaid show cause
notices were: (i) the loose sheets recovered from a Sales Executive by
name Mr. Dayanandan, (ii) computer print outs containing “overdue bills”
statements, (iii) the price lists containing the actual rate per square feet
of plywood/block boards of different thicknesses, (iv) certain slips
containing the details of the sales made during the relevant period, (v)
copies of statements of expenses, (vi) copies of periodical cash statements
and the statement of cash sent through one Mr. Xavier, (vii) collection
books, (viii) a red colour notebook containing party-wise details of invoiced
amounts and the amounts payable in cash, (ix) a notebook containing
details of transactions with various dealers, (x) a green colour notebook
and two receipt books, (xi) the diary of the Sales Executive, Mr.
Dayanandan, and certain other items.
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9. Apart from the above documents seized during the searches,
the show cause notices also relied upon the statements recorded from
(i) Mr. Dayanandan (Sales Executive), (ii) Mr. Cyril D’Souza (Sales
Executive), (iii) Mr. M. P. Narayanan, (iv) Mr. K. S. Harris (Managing
Partner), (v) Mr. K. S. Mohammad Ali (brother of K. S. Harris), (vi)
Mr. Gajanan K. Kadolkar (one of the purchasers), (vii) Mr. K. S. Abdul
Basheer (a purchaser), (viii) Mr. B. Narayan Rao (a purchaser), (ix)
Mr. Riyas Mayalakkare (purchaser), (x) Mr. Jagdish S. Patel (purchaser),
(xi) Mr. G. M. Aggarwal (purchaser), (xii) Mr. Sunny John (purchaser),
(xiii) Mr. Kailash Kumar (purchaser), (xiv) Mr. Arvind L. Patel
(purchaser), (xv) Mr. T. V. G. Ganesan (purchaser) and (xvi) Mr. Abdul
Khayoom (purchaser).
10. In response to the two show cause notices referred to above,
the assessee sent two replies, one dated 09.08.2005 and another dated
24.08.2005. Through these replies, the assessee sought permission to
cross-examine all those whose statements were recorded by the DGCEI
and took a stand that there was no undervaluation.
11. The assessee contended in their replies that they were effecting
supplies not only to the dealers and consumers in Bangalore but also to
dealers in Tamil Nadu and Kerala and that based upon a few documents
seized in relation to the transactions in Bangalore depot, an allegation of
undervaluation by 70% on all transactions, cannot be made.
12. It was also contended that
though the Department sought to
rely upon private documents allegedly maintained by two of their staff
members at the Bangalore depot, by name Suresh and Deepak Dhiman,
they were not examined. According to the assessee, they were transacting
with 153 dealers during the period 2001-2002 and 3 dealers during the
period 2002-2003, and that the Department was not entitled to reach a
conclusion on the basis of the statements recorded from just 2 of those
dealers in Karnataka and only one out of 56 dealers in Kerala.
13. It was also contended by the assessee that in so far as the
period prior to 01.07.2000 is concerned, what is relevant is the normal
price, namely the price at which the goods are sold at the factory there.
This was in terms of Section 4(1)(a) of the Act as it stood prior to
01.07.2000. Hence they contended that even if they had realised a higher
price from certain buyers, the same would be irrelevant, as regards the
period before 01.07.2000.
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14. In so far as the period post 01.07.2000 is concerned, it was
contended by the assessee in their replies that the transaction value
should be arrived at on the basis of the price indicated in each invoice.
15. After the receipt of the replies from the assessee, the
Commissioner of Central Excise and Customs, Calicut, held personal
hearings, allowed the cross-examination of witnesses, perused the case
law relied upon by the assessee and then passed an Order-in-Original
No. 14/2006 dated 09.05.2006. By this Order-in-Original, the
Commissioner (i) confirmed the demand of duty in a sum of Rs. 79,21,663
from the assessee under the proviso to Section 11A(1) of the Act, (ii)
levied interest at the appropriate rate for the belated payment of the
duty under Section 11AB of the Act, (iii) imposed a penalty of Rs.
79,21,663 under Section 11AC read with Rule 25, (iv) directed the
confiscation of goods seized from the assessee, valued at Rs. 12,80,926
with an option to redeem the same upon payment of fine of Rs. 25,000,
(v) directed the confiscation of goods seized from five different dealers,
however, with an option to redeem the same upon payment of fine amounts
ranging from Rs. 2,500 to Rs. 15,000, (vi) imposed a penalty of Rs.
5,000 each, upon the assessee and five of the dealers and (vii) imposed
a penalty of Rs. 5,000 each on the Managing Partner of the assessee
and its Manager at the Bangalore depot.
16. It is relevant
to note that the proposal as contained in the
show cause notice was for the imposition of differential Central Excise
duty to the tune of Rs. 4,29,01,384 for the period between 01.12.1998
and 05.12.2002. But, the adjudicating authority confirmed the demand
only to the extent of Rs. 79,21,663. The findings recorded by the
adjudicating authority, and the reasons given therefor are as follows:-
I.
That as per the statements recorded from the dealers, the
assessee was usually showing a lesser amount in the
invoices than the actual sale consideration and was in the
habit of collecting the differential amount by way of cash;
II.
That though some of the dealers retracted from their original
statements, the retractions happened only during cross-
examination that happened after several years and hence,
the original statements could be taken into account;
III.
That the documentary evidence such as the loose slips,
computer printouts, notebooks, diaries, receipt books, etc.
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seized by the DGCEI together with the statements recorded
from the depot Manager and Sales Executives clearly
showed under-invoicing;
IV.
That though the Department had demanded differential duty
to the tune of Rs. 4,29,01,384 on the actual sales turnover
for the period in question, the department collected evidence
only in respect of 11 customers and not from all customers
whose names were mentioned in Annexure D to the show
cause notice;
V.
That therefore, the calculation of differential duty had to be
confined only to the sales turnover relatable to the aforesaid
11 customers and the turnover relatable to 3 more customers
whose confession statements had been recorded;
VI.
That in view of the law laid down by this Court in Collector
of Customs, Madras vs. D. Bhoormall,1 the Department
could not plead its inability to examine all the dealers to
come to the conclusion of undervaluation in all transactions;
VII.
That in respect of those 14 dealers, a clear case was made
out by the Department about the gross undervaluation of
the sales price, and
VIII. That therefore, the differential duty co-relatable to the sales
turnover in respect of those 14 dealers could be demanded.
17. Aggrieved by the Order-in-Original No. 14/2006 dated
09.05.2006, one appeal was filed by the assessee, one appeal was filed
by its Managing Partner, one appeal was filed by the Manager of the
Bangalore depot of the assessee, one appeal each was filed by five
dealers from whom seizure
of material was effected and one appeal
was filed by the Commissioner himself. Thus, there were 9 appeals, 8 of
which were at the instance of assessee, its Managing Partner, its Manager,
and the five dealers, and the last of which was by the Commissioner of
Central Excise.
18. While the 8 appeals filed at the instance of the assessee and
its coterie were directed against the demand for differential duty, interest,
penalty and confiscation, with an option of redemption, the appeal filed
by the Commissioner was on the ground that as against the proposal for
1 (1983) 13 ELT 1546 (SC)
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a differential duty of Rs. 4,29,01,384 made in the show cause notice, the
adjudicating authority confirmed the demand only to the extent of
Rs. 79,21,663.
19. By Final Order Nos. 245-253/2009 dated 24.03.2009, the
CESTAT (i) rejected all the five appeals filed by the five dealers
challenging the orders of confiscation of the seized goods with the option
for redemption and (ii) allowed the three appeals filed respectively by
the assessee, its Managing Partner and its Manager, challenging the
demand for differential duty, interest, and penalty and remanded the
matter for re-quantification of duty in light of the findings given. The
appeal filed by the Revenue also followed the fate of the three appeals
filed by the assessee, its Managing Partner and its Manager.
20. The effect of the Final Orders passed by CESTAT is (i) that
the appeals of the dealers against confiscation with the option of
redemption stood rejected and (ii) that the substantive appeals arising
out of the imposition of differential duty, interest, penalty, etc. stood
allowed and remanded back to the adjudicating authority for a fresh
consideration.
21. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That there was overwhelming evidence to show under-
invoicing;
II.
That in light of the statements made by depot officials as
well as dealers, the finding of the Adjudicating Authority
that 30% of the actual value
alone was mentioned in the
invoice cannot be interfered with;
III.
That as per Section 4(1)(a), as it stood before 01.07.2000,
duty was payable on the normal price, namely the price at
which such goods were ordinarily sold in the course of
wholesale trade; and hence the Commissioner was obliged
to find out what the normal price in the course of wholesale
trade was for the clearances made prior to 01.07.2000;
IV.
That  in respect of the sales made prior to 01.07.2000, the
adjudicating authority should adopt the normal pricing
method;
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V.
That for the clearances made after 01.07.2000, the
transaction value had to be determined in respect of each
transaction and the differential duty confined only to the
evidence available on record;
VI.
That the stand of the Revenue that 70% should be added to
the invoice value uniformly in respect of all clearances, could
not be accepted and,
VII.
That therefore, the matter required re-adjudication.
22. Therefore, the Revenue has come up with this batch of nine
appeals, Civil Appeal Nos. 7240-7248 of 2009.
Facts in Civil Appeal Nos. 8615-8620 of 2009
23. The facts of this batch of appeals are similar to those in Civil
Appeal Nos. 7240-7248 of 2009. M/s. Prestige Boards Pvt. Ltd., Kannur
which is the assessee concerned in this batch of cases, also manufactures
plywood/block boards. Similar searches conducted at their premises
revealed that the assessee had grossly undervalued the goods cleared
by them from their factory, resulting in evasion of Central Excise duty to
the tune of Rs. 2,72,03,232 during the period between 01.12.1998 and
17.10.2002.
24. Show cause notices (i) dated 08.04.2003, for confiscation of
the material and cash, imposition of penalty, etc., and (ii) dated 22.12.2003,
demanding differential duty of Rs. 2,72,03,232 under Section 11A(1) of
the Act, interest, penalty, etc. were issued.
25. After the receipt of the replies from the assessee to the two
show cause notices, the Commissioner of Central Excise and Customs,
Calicut, held an
enquiry and passed an Order-in-Original No. 10/2006
dated 27.03.2006, by which, he (i) confirmed the demand of duty to the
extent of Rs. 1,50,23,911 from the assessee under the proviso to Section
11A(1) of the Act, (ii) levied interest at the appropriate rate for the
belated payment of duty under Section 11AB of the Act, (iii) imposed a
penalty of Rs. 1,50,23,911 under Section 11AC read with Rule 25,
(iv) directed the confiscation of goods seized from the assessee, valued
at Rs. 14,24,286 with an option to redeem the same upon payment of
fine of Rs. 1,50,000, (v) directed the confiscation of goods seized from
M/s. Prestige Traders, valued at Rs. 5,49,176, with an option to redeem
the same upon payment of fine of Rs. 50,000, (vi) directed the confiscation
COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX
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of goods seized from M/s. Ply Home, valued at Rs. 29,270, with an
option to redeem the same upon payment of fine of Rs. 3000, (vii) directed
the confiscation of goods seized from M/s. Gee Ply, valued at Rs. 38,268,
with an option to redeem the same upon payment of fine of Rs. 3500,
(viii) ordered outright release of Rs. 2,50,000 seized from Sh. P. K.
Shakeer, (ix) imposed a penalty of Rs. 5,000 each on M/s. Prestige
Traders, M/s. Ply Home and M/s. Gee Ply, and (x) imposed a penalty of
Rs. 50,000 each on Sh. K. S. Mohammad Ali (Managing Director) and
Sh. Kunjuraman (Manager, Bangalore depot).
26. The Commissioner held that there was evidence to prove
undervaluation, but the demand had to be confined only to the transactions
that the assessee had with 20 customers from whom alone evidence
had been collected. Like the Order-in-Original passed in the case of
CERA Boards, the Commissioner ruled in this case also that (i) with
respect to the period prior to 01.07.2000, the normal price should include
the price indicated in the invoice plus the amount collected by way of
cash, and (ii) for the period post 01.07.2000, the transaction value was
nothing but the invoice value plus the amount collected in cash.
27. Aggrieved by the Order-in-Original No. 10/2006 dated
27.03.2006, the assessee, its Managing Director (Sh. K. S. Mohammad
Ali), its Sales Manager (Sh. Kunjuraman), M/s. Prestige Traders and
the two dealers from whom
seizure of material was effected, filed six
appeals before the CESTAT.
28. By Final Order Nos. 414-419/2009 dated 21.04.2009, the
CESTAT (i) allowed the three appeals filed by the assessee, its Managing
Director and Sales Manager challenging the demand for differential duty,
interest and penalty, and remanded the matter for re-quantification of
duty in light of the findings given, and (ii) rejected the appeals filed by
M/s. Prestige Traders and the two dealers challenging the orders of
confiscation.
29. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That there was overwhelming evidence to show under-
invoicing;
II.
That in respect of the sales made prior to 01.07.2000, the
Adjudicating Authority should have adopted the normal
pricing method;
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III.
That for the clearances made after 01.07.2000, the
transaction value has to be determined in respect of each
transaction and the differential duty confined only to the
evidences available on record;
IV.
That the stand of the Revenue that 70% should be added to
the invoice value uniformly in respect of all clearances,
cannot be accepted.
30. Aggrieved by the said order, the Revenue has come up with
this batch of six appeals, Civil Appeal Nos. 8615-8620 of 2009.
Facts in Civil Appeal Nos. 2236-2253 of 2011
31. Searches were conducted by the officers of the Directorate
General of Anti-Evasion (Central Excise) on 23.09.1997, simultaneously
at the premises of eleven plywood manufacturing units located at Kumbla,
Kasargod District, on the basis of intelligence reports that they were
indulging in undervaluation and evading payment of central excise duty.
32. After recovering incriminating evidence and recording the
statements of proprietors/partners, employees and dealers of the units in
question, two show cause notices, one dated 23.03.1998 and another
dated 02.08.1999 were issued. The first show cause notice was against
M/s. Universal Wood Crafts, Kumbla, M/s. Wood Crafts, Kumbla,
M/s. Uniwoods, Kumbla, M/s. National Boards, Kumbla, M/s. Darvesh
Plywoods, Kumbla, Sri K. Mohammed Arabi, Kumbla, Sri Khaleel
Rahiman, Kayarkulam and Sri Mansoorul Huck, Kayarkulam, proposing
the confiscation of the seized plywood and the seized Indian currency,
demand drafts
and cheques.
33. The second show cause notice  quantified the duty short paid
by the seven plywood units, namely M/s. National Boards, M/s. Darvesh
Plywoods, M/s. Uniwoods, M/s., Wood Crafts, M/s. Universal Wood
Craft Co., M/s. Mailatty Wood Industries and M/s. National Wood
Products, at Rs. 7,59,24,737 and the duty short paid by the chemical unit
by name M/s. Bharath Chemicals, at Rs. 9,12,375, for the period from
1994-1995 to 1999-2000 (up to June 1999). The notice also proposed the
levy of interest and penalty, apart from confiscation.
34. Subsequently, twelve periodical show cause notices were
issued to the plywood manufacturing/dealing units for different periods
of time.
COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX
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35. After the receipt of the replies from the assessees and their
proprietors/partners to the two show cause notices, the Commissioner
of Central Excise, Calicut, held an enquiry and passed an Order-in-
Original No. 10/2005 dated 30.06.2005, wherein he confirmed the duty
demanded from the units in question, named in column 1 of the table
below, to the extent indicated in column 2 thereof. The Adjudicating
Authority also imposed penalties on each of them, to the extent indicated
in column 3 of the table:
Name 
Duty Demanded 
Penalty  
M/s. National Boards 
Rs 28,95,584/- 
Rs 28,95,584/- 
M/s. Darvesh Plywoods 
Rs. 86,01,648/-  
Rs. 86,01,648/- 
M/s. Uniwoods 
Rs. 72,15,522/- 
Rs. 72,15,522/- 
M/s. Wood Crafts 
Rs. 73,59,665/- 
Rs. 73,59,665/- 
M/s. Universal Wood Crafts 
Co. 
Rs. 26,73,758/-
Rs. 26,73,758/-
M/s. Mailatty Wood Industries 
Rs. 23,24,056/- 
Rs. 23,24,056/- 
M/s. National Wood Products 
Rs. 61,14,236/- 
Rs. 61,14,236/- 
M/s. Bharath Chemicals 
Rs. 5,52,839/- 
Rs. 5,52,839/- 
36. In addition to the above, the Adjudicating Authority confirmed
the demand of interest under Section 11AB, ordered the confiscation of
material with an option to redeem the same on payment of fine and
imposed penalties. However, (1) the currency of Rs. 20,66,940 and the
demand drafts and cheques seized from Sh. Mohammed Arabi was
directed to be released and (2) the proceedings envisaged in the twelve
show cause notices on account
of clubbing the value of clearances of all
the units, were dropped.
37. The Adjudicating Authority ruled that there was sufficient
evidence to prove undervaluation. However, he took the view that since
the units were registered separately with the Departments of Industries,
Sales Tax and the Income Tax, their clearances could not be clubbed to
deny them the benefit of Small Scale Industries exemption under
Notification No. 1/93.
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38. As against the aforesaid Order-in-Original dated 30.06.2005,
17 appeals were filed by the eight units and their partners and proprietors.
These 17 appeals in Central Excise Appeals Nos. E/1145-1161/2005
were disposed of by CESTAT, by a common order dated 01.04.2010.
39. In and by the said order, the CESTAT came to the following
conclusions:
I.
That the finding of the Adjudicating Authority about
undervaluation and clandestine clearance of goods resulting
in evasion of duty, was unassailable;
II.
That the units in question operated secret price lists for
sale of their finished products and paid duty on a much
lower value and also resorted to innovative methods of
accounting;
III.
That the previous decisions of the Tribunal in the case of
CERA Boards, Noble Ply and Prestige Boards, with regard
to the fixation of normal price in respect of the clearances
made prior to 01.07.2000, should be followed and the matter
remanded back;
IV.
That as regards Bharat Chemicals, the demand of
differential duty of Rs. 9,12,375 together with other penal
liabilities, was liable to be confirmed and their appeal liable
to be dismissed;
V.
That as regards the clandestine clearances made by
M/s. Wood Crafts, M/s. Uniwoods, M/s. Darvesh Plywood,
M/s. National Boards, M/s. National Wood Products,
M/s. Mailatty Wood Industries and M/s. Universal Wood
Crafts Co., the matter had to be remanded back to the
Commissioner, for the purpose of adjudicating whether the
turnover reckoned
by the Adjudicating Authority included
proceeds of sale of non-excisable goods;
VI.
That as a consequence of the remand, the penalties imposed
on the seven units (whose names are indicated in the
preceding point) should also be re-adjudicated after the re-
quantification of the liability;
VII.
That the appeals filed against the confiscation of plywood
valued at Rs. 2,86,389.20 seized from Khaleel Rehman
COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX
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Glass Centre, the appeals filed against the confiscation of
plywood sheets valued at Rs.15,056.20 seized from
Mansarool Huck, with an option to redeem upon payment
of fine, and the appeals filed against the individual penalties
imposed upon Khaleel Rehman and Mansarool Huck were
also liable to be rejected, and
VIII. That all the other appeals are to be allowed, and the matter
remanded for re-adjudication on the terms indicated above.
40. Aggrieved by the said order, the Revenue has come up with
this batch of appeals, Civil Appeal Nos. 2236-2253 of 2011.
Facts in Civil Appeal Nos. 3227-3230 of 2011
41. Similar to the preceding cases, M/s. Mysore Chipboards Ltd.,
which is the assessee concerned in this batch of cases, also manufactures
plywood/block boards/particle boards. Searches conducted by the DGCEI
at their premises revealed that the assessee had undervalued the goods
manufactured by them and cleared them from their factory, resulting in
the evasion of Central Excise duty to the tune of Rs. 7,51,53,570 during
the period from 01.07.2000 to 28.08.2003.
42. A show cause notice dated 21.07.2005 was issued, demanding
differential duty of Rs. 7,51,53,570 under Section 11A(1) of the Central
Excise Act, 1944, interest, penalty, etc.
43. After the receipt of the reply from the assessee, the
Commissioner of Central Excise, Mysore held an enquiry and passed an
Order-in-Original No. 06/CCE/2006 dated 05.10.2006. By this
Order-
in-Original, the Commissioner (i) confirmed the demand of duty in a sum
of Rs. 81,01,637 from the assessee under the proviso to Section 11A(1)
of the Act, (ii) directed appropriation of Rs. 16,00,000 voluntarily paid by
the assessee, (iii) levied interest at the appropriate rate for the belated
payment of the duty under Section 11AB of the Act, (iv) imposed a
penalty of Rs. 81,01,637 under Section 11AC read with Rule 25 and (v)
imposed a penalty of Rs. 10,00,000 on Sh. Shyam Daga, the Resident
Director of the assessee.
44. The adjudicating authority held that undervaluation was
established only (i) to the extent of Rs. 3,79,452 in respect of the invoices
raised by the factory at Mysore, (ii) to the extent of Rs. 29,677 relating
to the six slips from the Lucknow office and (iii) to the extent of
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Rs. 5,02,26,106 with respect to sales through assessee’s consignment
agent, M/s. Kela Brothers. The Adjudicating Authority further ruled that
the evidence in respect of undervaluation in sales through M/s. Umiya
Enterprises, M/s. Balaji Glass & Plywoods, M/s. Rohini Plywood &
Laminates, and the Ludhiana and Delhi office of the assessee was
insufficient.
45. Aggrieved by the Order-in-Original No. 06/CCE/2006 dated
05.10.2006, three appeals were filed, one by the assessee, another by its
Resident Director and the third by the Commissioner of Central Excise,
Mysore, before the CESTAT.
46. The assessee challenged the maintainability of the appeal filed
by the Commissioner of Central Excise, Mysore, on the ground that as
per the decision of the Committee of Chief Commissioners, it was only
the Mangalore Commissioner and not the Mysore Commissioner who
was entitled to file an appeal.
47. In response to the said objection, the Commissioner of Central
Excise, Mysore then filed a Miscellaneous Application in its appeal before
the CESTAT, placing on record, a corrigendum to the order of the
Committee of Commissioners authorising the Mysore Commissioner to
file the appeal.
48. By a Final Order passed in the three regular appeals and one
miscellaneous application, namely Final Order Nos. 985-987/2010 dated
07.07.2010 and Miscellaneous Order No. 300/2010 dated 07.07.2010,
the CESTAT (i) allowed the appeals filed by the assessee and its Resident
Director challenging
the demand for differential duty, interest and penalty
and remanded the matter to the Adjudicating Authority for re-quantification
of duty; (ii) allowed the appeal filed by the Revenue and remanded the
matter for fresh adjudication (except on the clearances relating to Umiya
enterprises and sales from the Delhi branch) and (iii) allowed the
Miscellaneous Application relating to the maintainability of the appeal
filed by the Mysore Commissioner.
49. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That the demand of Rs. 60,712 for the differential value of
Rs. 3,79,452 in respect of the clearances reflected in the
Inter-Office memo was rightly confirmed by the
Adjudicating Authority, by rejecting the retractions of the
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statements of Sh. K. Sridhar and Sh. Umeedmal Jain who
had admitted to undervaluation and collecting differential
amounts in cash;
II.
That the demand of duty of Rs. 4748 on the differential
value of Rs. 29,677 with respect to clearances from the
Lucknow branch was liable to be sustained;
III.
That the demand of Rs. 80,36,177 on the differential value
of Rs. 5,02,26,106 for the clearances made to M/s. Kela
Brothers was to be confirmed on the principle of
preponderance of probability regarding undervaluation by
the assessee;
IV.
That since the demand was towards differential duty, the
same should have been correlated to particular invoices
covering such clearances, which the Adjudicating Authority
had not done;
V.
That the Adjudicating Authority rightly dropped the demand
relating to M/s. Umiya Enterprises;
VI.
That the Adjudicating Authority was correct in not applying
the charge and level of undervaluation in respect of all the
clearances, and
VII.
That differential duty could be demanded only where
undervaluation was established and in the light of transaction
value introduced w.e.f. 01.07.2000, such evidence had to
be available in respect of each removal.
50. Aggrieved by the said order, the Revenue has come up with
this batch of 4 appeals, Civil Appeal Nos. 3227-3230 of 2011.
Facts in Civil Appeal Nos. 3231-3233/2011
51. M/s. Plama Boards Pvt. Ltd., Mangalore, which is the assessee
concerned in this batch of
cases, manufactures plywood/ block boards.
Searches conducted by the DGCEI at their premises revealed, according
to the Revenue, that (i) the assessee had fraudulently undervalued the
goods manufactured and cleared, (ii) that the actual value of clearances
had crossed the Small Scale Industries exemption limit of Rs. 1,00,00,000
and (iii) that the assessee had thus, evaded Central Excise duty to the
tune of Rs. 2,13,70,618 during the period from 01.10.2000 to 28.04.2004.
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52. A show cause notice dated 22.11.2005 was issued demanding
differential duty of Rs. 2,13,70,618 under Section 11A(1) of the Central
Excise Act, 1944, interest, penalty, etc.
53. After the receipt of the replies from the assessee, the
Commissioner of Central Excise, Mangalore, held an enquiry and passed
an Order-in-Original No. 10/2006 dated 29.05.2006, in and by which, he
(i) confirmed the demand of duty in a sum of Rs. 1,37,81,152 from the
assessee under the proviso to Section 11A(1) of the Act, (ii) directed
appropriation of Rs. 5,00,000 voluntarily paid by the assessee, (iii) levied
interest at the appropriate rate for the belated payment of the duty under
Section 11AB of the Act, (iv) imposed a penalty of Rs. 1,37,81,152 under
Section 11AC read with Rule 25, (v) imposed a penalty of Rs. 1,00,000
under Rule 173Q/ Rule 25 (vi) imposed a penalty of Rs. 10,00,000 under
Rule 2019/ Rule 26, and (v) imposed a penalty of Rs. 10,00,000 on Sh.
P. M. A. Razak, the Managing Director of the assessee.
54. The Commissioner recorded a finding that the evidence on
record proved that the assessee had undervalued the goods sold through
Shree Shyam Plywoods by about 75% and those sold through other
dealers by about 70%.
55. Aggrieved by the Order-in-Original No. 10/2006 dated
29.05.2006, the assessee, its Managing Director and the Commissioner
of Central Excise, Mangalore filed three appeals before the CESTAT.
56. By Final Order Nos. 1145-1147/2010 dated 26.08.2010,
the
CESTAT allowed all the three appeals and remanded the matter for
re-quantification of duty in the light of the findings given.
57. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That the statements given by third parties in the course of
investigation stood in contrast to the statements given by
the employees of the assessee and that once retracted, the
statements of third parties would lose their evidentiary value;
II.
That the pocket planner recovered from Sh. Ashraf was
not an official record of the assessee but a private diary;
III.
That the prices written on the letterhead of M/s. Shree
Shyam Plywoods were not corroborated by the dealers and
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even the statement of the proprietor could not be taken as
corroboration, as the said statement was retracted;
IV.
That the price lists recovered from M/s. Plydeal could not
be relied upon as M/s. Plydeal did not purchase plywood
from the assessee;
V.
That the Adjudicating Authority’s decision to confirm
undervaluation to the extent of 75% to M/s. Shree Shyam
Plywoods and 70% to the other dealers was not appropriate
and that undervaluation could not be presumed in respect
of all the clearances made by the assessee during the
material period, by just examining clearances of only a few
dealers;
VI.
That no concrete evidence of undervaluation and evasion
with reference to any particular clearance had been found
by the Adjudicating Authority;
VII.
That as seen from the statement of the Managing Director,
there was no doubt about undervaluation and payment of
lesser duty than what was due, and
VIII. That since the dispute was for clearances after 01.07.2000,
the value had to be determined based on each transaction.
58. Aggrieved by the said order, the Revenue has come up with
this batch of 3 appeals, Civil Appeal Nos. 3231-3233 of 2011.
Facts in Civil Appeal Nos. 6564-6567/2011
59. M/s. Thumbay Holdings Pvt. Ltd., Mangalore, which is the
assessee concerned in this batch of cases, admittedly manufactures
plywood/block boards and is also engaged in construction and sale of
immovable properties. Searches similar to the ones
in the previous batches
of appeals were conducted by the DGCEI at their premises, which
revealed that the assessee had undervalued the goods manufactured by
them and cleared them from their factory, resulting in the evasion of
Central Excise duty to the tune of Rs. 8,37,019 during the period from
01.04.2003 to 31.03.2004.
60. Thereafter, a show cause notice dated 11.10.2006 was issued,
demanding differential duty of Rs. 8,37,019, interest, penalty, etc.
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61. Unlike in the other batches of cases, the Joint Commissioner
of Central Excise, Mangalore, was the Adjudicating Authority in this
batch, in view of the monetary value of the demand. After receipt of the
assessee’s reply to the show cause notice, he held an enquiry and passed
an Order-in-Original No. 20/2007 dated 29.06.2007. By this Order-in-
Original, the Joint Commissioner (i) confirmed the demand of duty in a
sum of Rs. 7,21,568 from the assessee under the proviso to Section
11A(1) of the Act, (ii) levied interest at the appropriate rate for the
belated payment of the duty under Section 11AB of the Act, (iii) imposed
a penalty of Rs. 7,21,568 under Section 11AC, (iv) imposed a penalty of
Rs. 50,000 under Rule 25 and (v) imposed a penalty of Rs. 50,000 each
on Sh. B. Abdul Salam, Sh. J. M. Ashraf and Sh. Manoj Kumar Amin
under Rule 26.
62. The Adjudicating Authority held that there was undervaluation
on assessee’s part and that therefore, Section 4(1)(a) was not applicable
to the assessee’s transactions and that the assessable value had to be
ascertained in terms of Rule 11 of the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000.
63. Aggrieved by the Order-in-Original No. 20/2007 dated
29.06.2007, the assessee, Sh. B. Abdul Salam, Sh. J. M. Ashraf and
Sh. Manoj Kumar Amin filed four separate appeals before the
Commissioner of Central Excise (Appeals).
64. The Commissioner of Central Excise (Appeals) dismissed
the
appeals.
65. Aggrieved by the Orders-in-Appeal dated 18.09.2008, the
assessee, Sh. B. Abdul Salam (Managing Director), Sh. J. M. Ashraf
(Chief Executive Officer) and Sh. Manoj Kumar Amin (Marketing
Executive), filed four appeals before the CESTAT.
66. By Final Order Nos. 1505-1508 dated 07.12.2010, the CESTAT
allowed all the four appeals and remanded the matter for re-quantification
of duty liability and penal liability in light of the findings given.
67. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That retraction by the witnesses of their statements at a
belated stage was not acceptable;
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II.
That the entries in the slips had been corroborated by
statements of the witnesses and hence evasion of Central
Excise duty to an extent of 67% stood proved;
III.
That since only 3 out of 25 dealers had recorded their
statements and only one of those clearly incriminated the
assessee, which had also been later retracted, the total
evidence available may not be adequate to quantify evasion
by the assessee for a whole year;
IV.
That an analysis of the provisions of the Bankers’ Book
Evidence Act, 1891 showed that the Adjudicating Authority
was not barred from requisitioning the bank statement;
V.
That the Adjudicating Authority rightly held that the show
cause notice was not barred by limitation;
VI.
That however, the finding of evasion of duty could not be
applied to all the clearances by the assessee, and that if the
standard of preponderance of probability was applied in that
respect, it would contain an element of arbitrariness, and
VII.
That the Adjudicating Authority’s quantification of duty due
based on a formula worked out on the basis of the slips and
a few invoices, was not permissible, and that transaction
value had to be calculated with respect to each removal, in
terms Section 4 of the Act.
68. Aggrieved by the said order, the Revenue has come up with
this batch of 4 appeals, Civil Appeal Nos. 6564-6567 of 2011.
Facts in Civil Appeal Nos. 9988-9991 of 2011
69. The facts of this last batch of appeals
are also similar to the
preceding cases. M/s. Hajee Timber Complex, Mangalore, which is the
assessee concerned in this batch of cases, manufactures plywood/block
boards. Searches conducted by the DGCEI at their premises revealed
that the assessee had undervalued the goods manufactured and cleared
by them, resulting in the evasion of Central Excise duty to the tune of
Rs. 50,42,761 during the period between 01.07.2001 to 31.03.2004.
70. A show cause notice dated 10.10.2006 was issued demanding
differential duty of Rs. 50,42,761 under Section 11A(1) of the Central
Excise Act, 1944, interest, penalty, etc.
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71. After the receipt of the reply from the assessee, the
Commissioner of Central Excise, Mangalore, held an enquiry and passed
an Order-in-Original No. 08/2007 dated 29.03.2007, wherein he (i)
confirmed the demand of duty in a sum of Rs. 40,46,923 from the assessee
under the proviso to Section 11A(1) of the Act, (ii) directed appropriation
of Rs. 2,00,000 voluntarily paid by the assessee, (iii) levied interest at the
appropriate rate for the belated payment of the duty under Section 11AB
of the Act, (iv) imposed a penalty of Rs. 40,46,923 on the assessee
under Section 11AC, (v) imposed a penalty of Rs. 2,00,000 on the assessee
under Rule 25 of the 2002 Rules and (vi) imposed a penalty of Rs.
2,00,000 each on Sh. B. Abdul Salam, Sh. J. M. Ashraf and Sh. Manoj
Kumar Amin under Rule 26 of the 2002 Rules.
72. The Adjudicating Authority held that the documentary evidence
and witness statements clearly showed that the assessee had grossly
undervalued their products.
73. Aggrieved by the Order-in-Original No. 08/2007 dated
29.03.2007, the assessee, Sh. B. Abdul Salam, Sh. J. M. Ashraf and
Sh. Manoj Kumar Amin filed four appeals before the CESTAT.
74. By Final Order Nos. 1509-1512/2010 dated 08.12.2010, the
CESTAT allowed all the four appeals and remanded the matter for re-
quantification of duty liability and penal liability in the light of the findings
given.
75. The findings recorded and the reasons therefor, as given by
CESTAT, are as follows:-
I.
That the
slips and price lists recovered from one of the
dealers, the price list recovered from the BA group of
companies and the statements obtained from the dealers
and employees of the BA group, revealed the modus operandi
followed by the assessee in undervaluation of excisable
goods;
II.
That the initial statements of the witnesses were voluntary
and hence, valid evidence;
III.
That the test of preponderance of probability could not be
applied to judicially quantify the duty short paid during the
entire period of the dispute relying upon one slip showing
actual price in respect of few transactions;
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IV.
That the proviso to Section 11A(1) was applicable to the
present case and the show cause notice was not barred by
limitation, and
V.
That each impugned clearance was assessable to duty on
the particular price (transaction value) charged for each
removal.
76. Aggrieved by the said order, the Revenue has come up with
this batch of 4 appeals, Civil Appeal Nos. 9988-9991 of 2011.
Common Issues arising in these appeals
77. It may be seen from the facts involved in these batches of
cases that there is a common thread that runs along the fabric of these
cases. This common thread is that the assessees in these cases allegedly
undervalued the goods, sold them for a much higher price than what
was reflected in the invoices and thereby they evaded the excise duty
actually payable. Though the assessees uniformly denied the said
allegation, the CESTAT has recorded a categorical finding in all the cases
that there was undervaluation and evasion of excise duty. The said finding
has not been challenged by the assessees and hence it has attained
finality. Therefore, what arises for adjudication is only the manner of
determining the value of the goods removed by the assessees for sale to
or through dealers.
78. In other words, the entire dispute now revolves around the
question of valuation of excisable goods, for the purposes of charging of
duty. But for finding an answer to the said question, it is necessary for us
to take note
of the period of assessment. In some of these cases, the
period of assessment was both prior to and after 01.07.2000 and in other
cases, the period was after 01.07.2000. According to the respondents,
the method of determination of value before 01.07.2000 was different
from the method of valuation after 01.07.2000, since Section 4 of the
Central Excise Act, 1944 was amended with effect from 01.07.2000
under Act 10 of 2000. The amended Section 4 also underwent some
changes in the years 2003 and 2012. We are not concerned with the
changes brought forth in 2012.
79. Therefore, let us first take note of how the statutory prescription
stood before 01.07.2000 and after the said date. The relevant portion of
Section 4 as it stood before 01.07.2000 and as it stands after 01.07.2000
is presented in a tabular column as follows:
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Section 4 as it stood before
01.07.2000
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
value, such value, shall, subject to
the other provisions of this section
be deemed to be—
(a) the normal price thereof,
that is to say, the price at which
such goods are ordinarily sold
by the assessee to a buyer in
the course of wholesale trade
for delivery at the time and
place of removal, where the
buyer is not a related person
and the price is the sole
consideration for the sale:
Provided that—
(i) where in accordance with
the normal practice of the
wholesale trade in such
goods, such goods are sold
by the assessee at different
prices to different classes
of buyers (not being related
Section 4 as it stands after
01.07.2000, including the
amendment in 2003 but not
including the amendment in
2012
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 hereby declared
that the price-cum-duty of the
excisable goods sold by the
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assessee shall be the price
actually paid to him for the goods
sold and the money value of the
additional consideration, if any,
flowing directly or indirectly from
the buyer to the assessee in
connection with the sale of such
goods, and such price-cum-duty,
excluding sales tax and other
taxes, if any, actually paid, shall
be deemed to include the duty
payable on such goods.
(2) The provisions of this section
shall not apply in respect of any
excisable goods for which a tariff
value has been fixed under sub-
section (2) of Section 3.
(3) For the purpose of this
section—
(a) “assessee” means [...];
(b) persons shall be deemed to be
“related” if— [...]
(c) “place of removal” means—
(i) a factory or any other
place or premises of
production or manufacture
of the excisable goods;
persons) each such price
shall, subject to the existence
of the other circumstances
specified in clause (a), be
deemed to be the normal
price of such goods in relation
to each such class of buyers;
(ia) where the price at which
such goods are ordinarily sold
by the assessee is different
for different places of
removal, each such price
shall, subject to the existence
of other circumstances
specified in clause (a), be
deemed to be the normal
price of such goods in relation
to each such place of
removal;
(ii) where such goods are sold
by the assessee in the course
of wholesale trade for
delivery at the time and place
of removal at a price fixed
under any law for the time
being in force, or at a price,
being the maximum, fixed
under any such law, then,
notwithstanding anything
contained in clause (iii) of
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(ii) a warehouse or any
other place or premises
wherein the excisable
goods 
have 
been
permitted to be deposited
without payment of duty,
(iii) a depot, premises of
a consignment agent or
any other place or
premises from where the
excisable goods are to be
sold after their clearance
from the factory;
from where such goods
are removed;
(cc) “time of removal”, in
respect of the excisable goods
removed from the place of
removal referred to in sub-
clause (iii) of clause (c), shall
be deemed to be the time at
which such goods are cleared
from the factory;
(d) “transaction value” means
the price actually paid or
payable for the goods, when
sold, and includes in addition
to the amount charged as
price, any amount that the
buyer is liable to pay to, or on
behalf of, the assessee, by
reason of, or in connection
with the sale, whether payable
this proviso, the price or the
maximum price, as the
case may be, so fixed, shall,
in relation to the goods so
sold, be deemed to be the
normal price thereof;
(iii) where the assessee so
arranges that the goods are
generally not sold by him
in the course of wholesale
trade except to or through
a related person, the
normal price of the goods
sold by the assessee to or
through such related
person shall be deemed to
be the price at which they
are ordinarily sold by the
related person in the
course of wholesale trade
at the time of removal, to
dealers (not being related
persons) or where such
goods are not sold to such
dealers,
to dealers (being
related persons) who sell
such goods in retail;
(b) where the normal price
of such goods is not
ascertainable for the
reason that such goods
are not sold or for any
other reason, the nearest
ascertainable equivalent
thereof determined in
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such manner as may be
prescribed.
(2) Where, in relation to any
excisable goods the price thereof
for delivery at the place of
removal is not known and the
value thereof is determined with
reference to the price for
delivery at a place other than the
place of removal, the cost of
transportation from the place of
removal to the place of delivery
shall be excluded from such
price.
(3) [...]
(4) For the purposes of this
section—
(a) “assessee” means [...];
(b) “place of removal”
means—
(i) a factory or any other
place or premises of
production 
or
manufacture of the
excisable goods;
(ii) a warehouse or any
other place or premises
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 
organisation
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.
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wherein the excisable
goods 
have 
been
permitted 
to 
be
deposited 
without
payment of duty;
(iii) A depot, premises of
a consignment agent or
any other place or
premises from the
excisable goods are to
be sold after their
clearances from the
factory and,
from where such goods
are removed;
(ba) “time of removal”, in
respect of goods removed
from the place of removal
referred to in sub-clause (iii)
of clause (b), shall be
deemed to be the time at
which such goods are
cleared from the factory;
(c) “related person” means
[...]
(d) “value”, in relation to any
excisable goods—
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(i) where the goods are
delivered at the time of
removal in a packed
condition, includes the
cost of such packing
except the cost of the
packing which is of a
durable nature and is
returnable by the buyer
to the assessee.
Explanation.—[...]
(ii) does not include the
amount of the duty of
excise, sales tax and
other taxes, if any,
payable on such goods
and, subject to such
rules as may be made,
the trade discount (such
discount not being
refundable on any
account whatsoever)
allowed in accordance
with the normal practice
of the wholesale trade
at the time of removal in
respect of such goods
sold or contracted for
sale.
Explanation.—[...]
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(e) “wholesale trade”
means sales to dealers,
industrial consumers,
Government, local
authorities and other
buyers, who or which
purchase their
requirements/otherwise
than in retail.
80. In simple terms, 2 different methods of valuation were
prescribed in Section 4 as it stood prior to 01.07.2000:
(i) one covered by clause (a) of sub-section (1) of Section 4,
where the emphasis was on normal price, the determination
of which co-related to ordinary sale in the course of wholesale
trade (satisfying certain conditions), and
(ii) another covered by clause (b) of sub-section (1) of Section 4,
which related to cases where there were no sales, and cases
where normal price could not be ascertained for any other
reason.
81. The prescriptions contained in clause (a) of sub-section (1) of
Section 4, before amendment in 2000, are summarized as follows:
I.
As a first rule, the normal price, namely the price at which
such goods are ordinarily sold in the course of wholesale
trade shall be taken as the value, if the buyer is not a related
person and the price is the sole consideration for the same.
II.
But in cases where different prices are charged to different
classes of buyers, each such price should be taken to be
the normal price in relation to each such class of buyers.
III.
Similarly, if different prices are charged at different places
of removal, the normal price shall be the price charged in
relation to each such place of removal.
IV.
Where the goods are
generally not sold in the course
of wholesale trade, except to or through a related person,
the normal price shall be the price at which the goods are
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ordinarily sold by the related person, in the course of
wholesale trade to other dealers.
82. Thus it is clear that under Section 4(1)(a), as it stood before
01.07.2000, the method of valuation prescribed therein was directly
linked to the normal price for an ordinary sale in the course of
wholesale trade. But in cases where normal price was not ascertainable,
the same would fall under Section 4(1)(b) and the valuation in such
cases had to be done in terms of the Valuation Rules of the year 1975.
Clause (b) identifies one situation, namely where goods are not sold, in
which, the normal price may not be ascertainable. In addition, clause (b)
also recognises the fact that there may be cases where normal price is
not ascertainable for any other reason. These cases may perhaps
include sales otherwise than in the course of wholesale trade.
83. Though the words “normal price” were used in Section 4(1)(a),
the proviso to clause (a) recognised the fact that the normal price need
not be the same universally, but could vary from one class of buyers to
another or from one place of removal to another.
84. By the amendment under Act 10 of 2000, with effect from
01.07.2000, the words “normal price” and the words “in the course of
wholesale trade” were removed. Instead, the words “transaction value”
were inserted in Section 4(1)(a).
85. As rightly pointed out by the learned Additional Solicitor
General, the third question referred
to the Constitution bench in CCE vs.
Grasim Industries Limited2 was whether or not the concept of
“transaction value” makes any material departure from the deemed
normal price concept of the erstwhile Section 4(1)(a) of the Act. In the
penultimate paragraph of its decision, the Constitution bench answered
this question in the following manner:
“Further, we hold that “transaction value” as defined in
Section 4(3)(d) brought into force by the Amendment Act,
2000, statutorily engrafts the additions to the “normal price”
under the old Section 4 as held to be permissible in Bombay
Tyre International Ltd. (supra) besides giving effect to the
changed description of the levy of excise introduced in Section
3 of the Act by the Amendment of 2000. In fact, we are of the
view that there is no discernible difference in the statutory
2 (2018) 7 SCC 233
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concept of “transaction value” and the judicially evolved
meaning of “normal price”.”
86. Though the Constitution Bench in Grasim Industries noted
the shift, at least in the language, of Section 4(1), from “normal price” to
“transaction value”, the Constitution Bench did not take note of one
major area of difference, namely that the focus of Section 4(1)(a)
prior to 01.07.2000 was on finding out the normal price in respect
of sales made ordinarily in the course of wholesale trade. The
method of valuation, wherever there was no sale, was to be on the basis
of the Rules, in view of Section 4(1)(b). Even in cases where there was
a sale—
(i) in the course of wholesale trade but the conditions stipulated in
clause (a) were not satisfied or
(ii) the normal price could not be ascertained for any other reason,
 the method of valuation was left under clause (b) of sub-section
(1) of Section 4 to the rule making authority to stipulate. The implication
flowing out of the words “for any other reason” found in clause (b)
before amendment is of significance in this regard. After the amendment
under Act 10 of 2000, the normal pricing method was gone, as the focus
shifted from sale in the course of wholesale trade.
87. While clause (a) of sub-section (1) of Section 4, as it stood
before amendment, laid emphasis on normal price, clause (a) of sub-
section (1) of Section 4, as it stands after amendment, speaks about
transaction value. Clause (b) of sub-section (1), both
before and after
the amendment, leaves it to the delegated legislation to prescribe the
method of valuation, for cases not covered by clause (a).
88. For the valuation under Section 4(1) to follow the “transaction
value”, (after amendment) the three conditions stipulated in clause (a),
namely (i) that the goods are sold for delivery at the time and place of
removal, (ii) that the assessee and buyer are not related and (iii) that the
price is the sole consideration for the sale, should be satisfied.
89. If the three conditions, enumerated in clause (a), (indicated
above) are not satisfied, then the case would fall under clause (b) of
sub-section (1) of Section 4, which starts with the words “in any other
case”. In other words, in cases not covered by clause (a), the value can
be determined in such manner as may be prescribed.
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90. After the amendment under Act 10 of 2000, the Central
Government issued a new set of rules called the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000. These rules
were issued in exercise of the power conferred by Section 37, in
supersession of the 1975 Valuation Rules.
91. Rule 3 of the aforesaid 2000 Rules makes it clear that the
value of excisable goods, for the purposes of clause (b) of sub-section
(1) of Section 4, should be determined in accordance with the said Rules.
Therefore, it is clear that the valuation as per the Rules is permissible
only in cases covered by Section 4(1)(b) and not by Section 4(1)(a). For
the purpose of the issues on hand, it may not be necessary for us to
dwell deep into the aforesaid rules.
92. Suffice it to say, that if a sale is covered by clause (a) of sub-
section (1) of Section 4 (after amendment), the value of excisable goods
shall be the ‘transaction value’. This expression ‘transaction value’ is
defined in clause (d) of sub-section (3) of Section 4. But if a case is not
covered by clause (a) of sub-section (1) of Section 4, then the value of
the excisable goods should be determined in accordance with the 2000
Rules.
93. Therefore, in essence, an adjudicating authority is obliged to
do the following, in respect of transactions that took place after
01.07.2000:
(i) first, he must see whether there is a sale and
(ii) next, he must see if such
sale satisfies the three conditions
stipulated in clause (a) of sub-section (1) of Section 4.
94. In cases where there is a sale and the three conditions stipulated
in clause (a) of sub-section (1) of Section 4 are satisfied, the adjudicating
authority should determine the value based upon the transaction value.
But (i) in cases where there is no sale and (ii) in cases where there is a
sale but the three conditions stipulated in clause (a) are not satisfied,
then the adjudicating authority should fall back upon the Central Excise
Valuation (Determination of Price of Excisable Goods) Rules, 2000.
What the Adjudicating Authority and the Tribunal had and
had not done in these cases
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95. First, let us see what they did, before looking at what they did
not. Broadly, in the batches of cases on hand (with one or two exceptions),
the Adjudicating Authorities came to the following conclusions:
(i)
that there was undervaluation and evasion of duty;
(ii)
that in respect of sales effected both before and after
01.07.2000, the invoice value, together with the cash paid
over and above the invoice value, would represent the normal
price or the transaction value, as the case may be, and
(iii)
that in cases where there was evidence to show that a
dealer had paid more than the invoice value, the amount
found to have been paid by such a dealer, though relatable
only to a few out of the several transactions that he had
with the assessee, should be taken to be the normal price
or the transaction value, as the case may be, applicable to
all the transactions that the particular dealer had with the
assessee.
96. Similarly, what the CESTAT did in all these cases is:
(i)
to uphold the finding of undervaluation and evasion of duty;
(ii)
to hold that invoice price need not be taken as the normal
price in respect of cases prior to 01.07.2000 and that
wherever a particular amount is actually found to have been
paid by a dealer, the same could be taken to be the
transaction value, for cases after 01.07.02000; and
(iii)
to hold that the determination of the normal price or the
transaction value, as the case may be, should be confined
only to the evidence
available on record, but not to all the
transactions across the board.
97. But the Adjudicating Authorities as well as CESTAT are also
guilty of failure to do something in these batches of cases. They are:
(i)
Failure to find out, in cases covered by Section 4(1) as it
stood prior to 01.07.2000, whether there were sales in the
course of wholesale trade, satisfying the 3 conditions
prescribed therein, falling under clause (a) of sub-section
(1) or whether the sales in question fell under clause (b) of
sub-section (1) of Section 4;
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(ii)
Failure to find out, in cases covered by Section 4(1) as it
stands amended by Act 10 of 2000 with effect from
01.07.2000, whether the sales in question fell under clause
(a) or clause (b) of sub-section (1) of Section 4;
(iii)
Failure to find out, in the event of the sales in question falling
under clause (b) of sub-section (1) of Section 4 (before or
after the amendment), whether the valuation had to be done
only in accordance with the Rules (1975 Rules or the 2000
Rules, as the case may be), and
(iv)
Failure to find out, in cases covered by Section 4(1)(b), the
specific rule that is applicable among the 1975 or 2000 Rules,
as there are different rules covering different contingencies,
both in the 1975 Rules and in the 2000 Rules.
98. Since the Adjudicating Authorities as well as the CESTAT
failed to make a determination as indicated above, we are of the view
that the orders of remand passed by the Tribunal, though for completely
different reasons, were justified. Hence the appeals are liable to be
disposed of, confirming the orders of remand passed by CESTAT, with a
clarification on the legal issues so that the Adjudicating Authorities know
how to proceed.
Conclusion
99. In fine, these appeals are disposed of, confirming the impugned
orders of CESTAT setting aside the Orders-in-Original passed by the
Adjudicating Authorities and remanding the matters back for re-
adjudication. However, while carrying out the
exercise of re-adjudication,
the Adjudicating Authorities should keep in mind the principles enumerated
hereunder:
A. Cases where the period of assessment is prior to 01.07.2000
I.
First ascertain the price at which such goods are ordinarily
sold by the assessee to a buyer who is not related to him, in
the course of wholesale trade, at the time and place of
removal and also find out whether the price is the sole
consideration for the sale. If the Adjudicating Authority is
able to find this out, he may take such price as the normal
price and treat the case as covered by Section 4(1)(a),
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applying, wherever permissible, the prescriptions contained
in the proviso to clause (a) of sub-section (1) of Section 4.
II.
If the normal price is not ascertainable, either for the reason
that the goods are not sold or for any other reason, then he
may take it that the case would fall under Section 4(1)(b)
and take recourse in such cases, to the Central Excise
(Valuation) Rules, 1975.
III.
The phrase “for any other reason” appearing in Section
4(1)(b) would include cases where the price charged in the
course of wholesale trade is not discernible or where the
same, though discernible, cannot be linked to delivery at
the time and place of removal or where the price is not the
sole consideration for the sale, even though the price
charged in the course of wholesale trade for delivery at the
time and place of removal are available.
IV.
If the case falls under Section 4(1)(b) and the Adjudicating
Authority takes recourse to the method of valuation
prescribed in the 1975 Rules, he shall find out which among
the relevant rules would apply to the cases on hand before
proceeding with the valuation.
B. Cases where the period of assessment is after 01.07.2000
I.
First ascertain the “transaction value”, with particular
reference to the definition of the said expression contained
in Section 4(3)(d).
II.
Apply the transaction value so ascertained, to cases where
three conditions, namely (i) the goods are sold for delivery
at the time and place of removal, (ii) the
assessee and buyer
are not related and (iii) the price is the sole consideration,
are satisfied. This is because such cases will fall under
Section 4(1)(a).
III.
In cases where one or more of the aforesaid three conditions
are not satisfied, and also in cases where there is no sale,
the Adjudicating Authority should treat the cases as falling
under Section 4(1)(b) and hence take recourse to the Central
Excise Valuation (Determination of Price of Excisable
Goods) Rules, 2000.
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IV.
If a case falls under Section 4(1)(b) and the Adjudicating
Authority takes recourse to the method of valuation
prescribed in the 2000 Rules, he shall find out which among
the relevant rules would apply to the case on hand before
proceeding with the valuation.
Principles applicable in common (both pre and post amendment)
C. The Adjudicating Authority may treat any amount received
either in cash or otherwise, over and above the invoice value, as the
value of excisable goods even in cases falling under Section 4(1)(a)
(after the amendment), as the definition of “transaction value” under
Section 4(3)(d) means the price actually paid or payable.
D. The Adjudicating Authority shall keep in mind the fact that
while the expression “normal price” was not defined in Section 4(1)
before amendment, the expression “transaction value” is defined very
exhaustively in Section 4(3)(d) and this definition is both inclusive as
well as exhaustive.
E. Wherever there is a finding that a particular dealer/ customer
has paid a consideration over and above what is reflected in the invoice,
the additional payment made by him together with the invoice value shall
be taken to be the transaction value, for all the transactions that the
particular dealer/customer had with the assessee. In simple terms, if a
dealer/customer has made 10 purchases during the period in question,
for a particular value stated in the invoice, the transaction value
determined on the basis of material relatable to a few out of those
transactions, can be applied to all the transactions of that customer/
dealer across the board for that period. However, the same value cannot
be applied to the other dealers/ customers. This principle shall be followed
in respect of cases arising after the amendment.
F. Since the matters are more than a decade old, the Adjudicating
Authorities may conduct hearings, afford adequate opportunities to the
parties and pass orders in original as early as possible.
The appeals are disposed of accordingly. There will be no order
as to costs.
Divya Pandey
Appeals disposed of.