M/S
Sony India Ltd. Vs. Commissioner of Central Excise, Delhi [2004] Insc 365 (5 May 2004)
Cji
& G.P. Mathur. Rajendra Babu, Cji. :
A show
cause notice was issued to the appellant by the Commissioner of Central Excise
demanding duty of Rs. 2,07,64,870.16 for the period from 1.7.1998 to 31.1.1999.
The appellant complied with the demand under protest without prejudice to their
contentions and filed a reply to the show cause notice contesting the various
points raised therein. The Commissioner ultimately gave a finding that the
goods in question had been removed from the place of manufacture without
printing the retail sale price as it was mandatory for them to print the price
once the goods are cleared in packed condition as per requirement of Standards
of Weights and Measures Act, 1976. It was admitted that it was only stock
transfer to the depots of the appellant from the factory gate and retail price
was printed at their depots. The appellant contended that stock transfer is not
sale of goods in their case and actual sale of goods took place from their
depots and before putting the goods in question for sale in the market they had
been printing retail sale price on their goods and when the goods were sold
these were having printed retail sale price. They also contended that the
printed retail sale price was the sole consideration as they had launched an
exchange scheme; that the goods were sold in the market with the printed sale
price in packed condition; that central excise duty was not leviable at ad valorem
basis @ 18% on all different models of television sets manufactured by them.
These contentions were rejected by the Commissioner.
On
appeal to the Customs, Excise and gold (Control) Appellate Tribunal
(hereinafter referred to as the Tribunal) against the order of the
Commissioner, it was held that colour T.V. is an item in relation to the sale
of which the provisions of the Standards of Weights and Measures Act and Rules
made therein to declare the retail sale price on their packages would be
attracted and that under Section 4-A(2) of the Central Excise Act, 1944 excise
duty is liable to be paid at the applicable rate with reference to the retail
sale price after effecting the abatement from the retail sale price as
specified in the said provision and, therefore, the ad valorem.
As
regards offer of gifts made by the appellant, it was stated that
notwithstanding free gifts offered by the appellant to the buyers on the sale
of TV sets, the sale price charged from the buyers will not cease to be the
sole consideration for such sale and, therefore, the Tribunal affirmed the
findings of the Commissioner that it was mandatory for the appellant to print
the maximum retail price on the package at time of clearance from the factory
as per the requirement of Standards of Weights and Measures Act, 1976 and it
was the sole consideration for sale. The Tribunal also noticed that the
appellant is only stock transferring their goods from the factory to their
depots and retail price was printed at their depots; that the stock transfer is
not sale of goods, actual sale of goods took place from their depots and when
the goods were sold these were having printed retail sale price on the
packages; that this printed retail sale price was the sole consideration for
the sale of the goods and the central excise duty was leviable @ 18% ad valorem
on under Section 4-A(a) of the Act.
As
regards the contention put forth by the appellant that the appellant were of
bona fide belief that their case was not covered by the expression "the retail
sale price being the sole consideration for such sale" and the price had
not been printed at the time of clearing the goods and they had indicated so in
their letter to the concerned authorities, the Tribunal took note of the fact
that the appellant should have printed the maximum retail price on the packages
before clearing the goods from their factory; that in order to bye-pass the
rigors of the legal provisions relating to the maximum retail price based
payment of duty, they postponed the printing of maximum retail price before
clearance from the factory premises to the depots;
that
this was done with the sole intention to avoid payment of duty at the
appropriate rate applicable to their goods; that, therefore, there was hardly
any circumstance for the appellant to raise the plea of bona fide belief. The
Tribunal was of the view that the extended period for the demand of duty and
the penal provisions under Section 11-AB and 11-AC have been rightly invoked by
the Commissioner. The Tribunal was not impressed with the decisions cited
before it, viz., Cement Marketing Co. of India Ltd. vs. Assistant Commissioner
of Sales Tax and Ors., 1980 ELT 295, Pushpam Pharmaceuticals Company vs.
Collector of Central Excise, Bombay, 1995 (78) ELT Kasturi Lal Har Lal, 1987
(67) ELT 154, Hindustan Steel Ltd. vs. The State of Orissa, 1970 (25) STC 211, and State of Madhya Pradesh vs. Bharat Heavy Electricals, 1998
(99) ELT 33 (SC).
The
arguments advanced before the Commissioner and the Tribunal are reiterated
before us on the merits of the matter.
The
sole question that arises for consideration in the present case is whether the
appellant was required to pay excise duty at ad valorem basis or at specific
rates as provided in the relevant notification. Prior to 2.6.1998 only one duty
was leviable on the colour television sets and, that is, at the rate of 18% ad valorem
and the duty was required to be paid on the basis of maximum retail price
printed after allowing an abatement of 30% on the retail sale price. But by
notification issued on 2.6.1998 it was indicated that where the manufacturer
did not print the retail price on the package of the colour television
receivers or where such a retail sale price was not the retail sale price as
contemplated in the explanation to the notification, that is, in a case where
the retail sale price either did not include the elements required to be
included by the explanation or where the retail sale price was not the sole
consideration for the sale, then in all such cases specific rate of duty
ranging from Rs. 1500/- per set to Rs. 5400/- per set was leviable depending
upon the they have launched a gift scheme in which they were giving VIP suit
cases and cordless head phone as gifts free of cost and claimed that they were
entitled to pay specific rate of duty. The basic plea was that they had not
printed any sale price of colour television sets at the time of clearance from
their factory gate and the price offer was not the sole consideration in the
said transaction inasmuch as certain gifts were involved. It has been found as
a matter of fact by the Tribunal and by the Commissioner that the appellant had
cleared the goods from factory without indicating the price thereof but affixed
the price in their depots. Therefore, it is clear that the whole object of
removing the goods from their factory premises to their depots was with the
purpose of getting over the payment of higher duty.
The
Standards of Weights and Measures (Packaged Commodities) Rules, 1977
specifically provides that every package shall bear thereon or on a label
securely affixed thereto a definite, plain and conspicuous declaration among
other things the sale price of the package. Therefore, though the goods were
marketed from the depots of the appellant it is clear that the same was done
after affixing the price and that become the sale price of the goods in
question.
Notwithstanding
the free gifts offered by the appellant to the buyers on the sale of television
sets, as noticed by the Tribunal, the sale price charged from the buyers will
not cease to be the sole consideration for such sale.
The
offer of gifts was only incidental benefits and not the part of the
consideration to be paid in regard to television sets as such. From totality of
the circumstances and the nature of transaction conducted by the appellant, the
view taken by the Tribunal that the stock transfer from their factory to their
depots would not amount to sale of goods and actual sale of goods took place
from their depots and when the goods were sold they were having printed retail
price on the packages and also that the sale price charged from the buyers was
the sale transaction notwithstanding there were free gifts that had been
offered thus stands to reason and does not call for our interference.
Now
the other aspect that has to be considered is whether penalty imposed under
Section 11-AC and interest under Section 11-AB was justified in the
circumstances that arise in the case. The Commissioner had imposed penalty to
an extent of Rs. 2,07,64,870.16 equivalent to the duty that was payable by the
appellant. Under Section 11-AC of the Central Excise Act, the manner in which
the whole transaction went on makes it very clear that the appellant became
liable to pay duty under the circumstances which warrant application of the
provisions of Section 11-A(i) and, therefore, we think if the authorities chose
to impose penalty equivalent to duty payable by the appellant, we do not think,
there is any justification for us to interfere with the same. The decisions
adverted to by the learned counsel have different complexions and bearing.
These cited cases arose in the circumstances where certain actions had been
taken in bona fide belief or the parties were under bona fide doubt as to under
what tariff item they had to pay tax in question or where the assessee was
under bona fide belief that his company was not required to be registered as
dealer under the Sales Tax Act. In the present case, earlier the appellant was
paying duty at the rate of 18% ad valorem on the maximum retail price. It is
only after 2.6.1998 change was sought by the appellant by not printing the
price on the packed goods by removing the same to their depots from their
factory in order to claim that the packed goods had not been priced at the time
of their removal from the factory and gifts were offered by the appellant to
indicate that the consideration in the sale transaction was not solely the
price. These factors, we think, were rightly taken note of by the authorities
and the penalty imposed need not be considered in the present proceedings.
In the
result, the appeal is dismissed.
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