Ashok K. Arya

1. The appellant viz., M/s. Mathewsons Exports & Imports (P) Ltd. are in appeal against the Order-in-Original dated 30.5.2006 passed by Commissioner of Customs, Cochin whereunder demand for differential duty of Rs.34,86,064/- was confirmed against the appellants on account of enhancement made in the value of the goods imported.

2. The appellant has been represented by the learned advocate, Shri P. Gopinatha Menon and Revenue has been represented by the learned AR, Shri J. Harish.

3. The learned advocate based on his appeal memorandum inter alia submits as under:

(i) The demand of differential CVD on the appellant is based on a finding that the goods after import clearance are being sold at a price higher than the MRP declared. It is submitted that there is no legal obligation cast upon the importer to monitor the post import sale of goods, so as to ensure that the goods are not sold at prices higher than the declared MRP.

(ii) The available evidence only points to tampering with the MRP declaration by the wholesale dealers, subsequent to the clearance of the goods from customs.

(iii) The Departments case is that the MRP has been increased at the hands of the wholesale dealers and sold at a higher price thereby causing short payment of CVD. If that be so, the wholesale dealer will become a deemed manufacturer going by Section 2(f)(iii) of Central Excise Act and it is those dealers who affixed the revised MRP, who will become liable to pay Central Excise duty at the enhanced MRP.

(iv) The change in MRP carried out by the wholesale dealers would tantamount to manufacture and such changing of MRP on the toilet soaps have taken place subsequent to the clearance of goods and sale by the importers.

(v) The department has no case that there has been any flow back of funds from the wholesale dealers to the appellant due to the alleged change in the MRP.

(vi) The lapse on the part of the foreign suppliers in not fixing MRP was brought to the notice of the customs vide appellants letter dated 09.02.2004. It was appellant who informed the customs regarding the non-fixture of MRP stickers on 1605 cartons. The whole investigation and the consequent differential CVD demand is the result of the information given by the appellant. In such case, the appellant cannot be fixed with any culpability as to wilful suppression, fraud, etc.

(vii) The Department does not have a case that the appellant sold the imported goods to the marketing agency at a price higher than the MRP declared before the customs authorities. In such a situation, there was no justification whatsoever for demanding differential duty from the appellant.

(viii) The learned advocate in support relies on the following decisions:

a. Collector of Central Excise vs. Chemphar Drugs & Liniments: 1989 (40) E.L.T. 276 (S.C.)

b. Pushpam Pharmaceuticals Company vs. Collector of Central Excise: 1995 (78) E.L.T. 401 (S.C.)

c. Uniworth Textiles Ltd. vs. CCE, Raipur: 2013 (288) E.L.T. 161 (S.C.)

d. MRF Ltd. vs. CCE, Madras: 1997 (92) E.L.T. 309 (S.C.)

e. I.T.C. Ltd. vs. CCE, New Delhi : 2004 (171) E.L.T. 433 (S.C.)

4. On behalf of Revenue, learned AR, Shri J. Harish has reiterated the findings given by the lower Revenue authorities. He further inter alia submits as under:

i. Whole operation of the appellant in this case is that there has been facilitation and involvement of the appellant in avoiding payment of right duty/taxes to the Revenue. The contents of show-cause notice and the Order-in-Original indicate that the importer has been aware of all the operations and the activities of distributors whereunder the goods were sold with increased price, which was double or more than double the MRP declared to the department by the importer-appellant.

ii. The learned AR submits that there is no need of proving a flow back to the importer from the distributors.

iii. The learned AR also refers to the findings given by the Commissioner in the impugned order at Para 50 indicating active role of the importer in evading payment of right duties (CVD).

iv. The learned AR in support relies on the following decisions of the CESTAT, Delhi.

a. Planet sports Pvt. Ltd. vs. CC, New Delhi: 2005 (180) E.L.T. 206 (Tri.-Del.)

b. Media Industries Ltd. vs. CC, Mumbai: 2006 (199) E.L.T. 345 (Tri.-Del.)

5. We have carefully considered facts of the case on record, the submissions made by both the sides and the case laws cited.

6. The appellant has been importing toilet soaps where they had declared the RSP per piece as Rs.5/- to the Cochin Customs. The show-cause notice dated 11.7.2005 issued to the appellant in its para 1 inter alia states the position of law in case of charging of CVD as follows:

As per explanation I to Section 4A of the Central Excise Act, 1944 retail sale price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale. The Countervailing Duty (CVD) have been assessed on basis of Maximum Retail Price/Retail Sale Price (MRP/RSP) declared before the Customs after abatement as permitted under Section 4A of the Central Excise Act, 1994 and under Notification No.5/2001-C.E. (NT) dated 01.03.2001 superseded by Notification No.13/2002-C.E. (N.T) dated 1.3.2002 as amended from time to time. In the case of toilet soaps the abatement is 35%. The declaration of Maximum Retail Price (MRP)/Retail Sales Price (RSP) by the importer at the time of the import casts an obligation on the part of the importer that the goods would be sold in the market to the ultimate consumer at not more than the Maximum Retail Price (MRP)/Retail Sales Price (RSP) declared by them. The CVD and SAD were calculated on these imports based on this declaration of RSP by the importer in terms of Government of India, Ministry of Commerce & Industry, Department of Commerce Notification No.44 (RE-2000)/1997-2002 dated 24.11.2000 and Public Notice No.3 & 4 of 2001 issued by Commissioner of Customs, Custom House, Cochin. Investigations have revealed that the MRP has been mis-declared by the importer, by M/s. Mathewsons Exports & Imports Pvt. Ltd. in their Bills of Entry at the time of presentation.

6.1 Further the show-cause notice dated 11.7.2005 in its para 2 to 5 states as follows:

02. The Government of India vide Ministry of Commerce & Industry, Department of Commerce Notification No.44 (RE-2000)1997-2002 dated 24.11.2000 added paragraph 5 to Chapter 1A: General Notes regarding Import Policyof the ITC (HS) Classification of Export and Import items, 2002-2007 (Public Notice 3/2001 and 4/2001 issued by Commissioner of Customs, Cochin) which stipulates that all pre-packaged commodities imported into India shall in particular carry the following declarations:

a. Name and address of the importer

b. Generic or common name of the commodity packed.

c. Net quantity in terms of standard units of weights and measures. If the net quantity on the imported package is given in any other unit, its equivalent in terms of standard units shall be declared by the importer.

d. Month and year of packing in which the commodity is manufactured or packed or imported.

e. Maximum Retail Sale Price (MRP) at which the commodity in packaged form may be sold to the ultimate consumer. This price shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertising, delivery, packing, forwarding and the like, as the case may be.

03. It also stipulated that the compliance of these conditions should be ensured before the import consignment of such commodities is cleared by customs for home consumption. DGFT Policy Circular No.34 (RE-2000)/1997-2002 dated 13.12.2000 has been clarified that these provisions will be applicable on import of all pre-packing products, as these are applicable on similar domestically manufactured products.

04. As per the DGFT Notification No.44 (RE) dated 24.11.2000, an importer of consumer products has to ensure the strict compliance of the conditions laid down by the DGFT on all import of pre-packaged products. It is based on this MRP that the CVD component of import is calculated.

05. It has been clearly laid down in the proviso to Section 3(2) of the Customs Tariff Act, 1975 that, in case of an article imported into India in relation to which it is required, under the provisions of the Standards of Weights and Measure Act, 1976 or the Rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such article, the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale price as the Central Government may, by Notification in the official Gazette allow in respect of such like article under sub-section (2) of Section 4A of the Central Excise Act, 1944.

6.2 From the facts and the evidences available on record, we find that the appellant viz., Mathewsons Exports and Imports (P) Ltd. in association with the distributor(s) replaces the stickers/labels where as per the requirement of the relevant laws Maximum Retail Price (MRP)/Retail Sale Price (RSP) has to be declared. MRP/RSP is the price, which is the maximum price fixed under law and which/or below which only the price can be charged from the ultimate consumer for the delivery of the said goods as per the existing law. The Countervailing Duty (CVD) is charged at MRP/RSP declared before the customs after giving necessary abatement as permitted under law. The facts indicate that in all the cases of imports made by the appellant, the MRP declared to the customs has been lower than the MRP fixed on the labels for the purpose of price being/to be charged from the ultimate buyers. The MRP declared to the customs for imports made during different periods has certainly been lower than the MRP fixed/charged from ultimate buyers by putting different labels. The appellant generally declared the MRP as Rs.5/- for his imports whereas the actual MRP meant for final consumer has been in the range of Rs.10/- and above. Either there were no MRP labels affixed or these labels were replaced later with higher MRP labels by the appellant in association with his distributors. These details have been mentioned in the show-cause notice issued to the appellant and Mr. Baby Mathew, Managing Director of the appellant-company viz., M/s. Mathewsons Imports & Exports (P) Ltd.

6.3 The appellant submits that non-putting of MRP stickers has been an inadvertent omission on the part of the foreign suppliers and it is the appellant, who sought the permission from the customs to fix the stickers on their goods in case of 1605 cartons prior to clearance from customs.

6.3.1 The act of the appellant pointing out to the customs about non-fixing of MRP stickers cannot diminish the responsibility of the importer appellant, when the said goods were later found to be with the MRP stickers having a higher retail price, which was certainly way above the price declared to the customs.

6.3.2 We find that there has been a clear facilitation and association with the activities of post-import sale of the goods at higher prices by affixing higher price (MRP) labels on the goods on the part of the appellant-importer. The findings of the Commissioner in the impugned order at Para 50 reproduced below makes it very clear that importer has been in active knowledge and they rather facilitated the sale of the goods to be made at the higher price (MRP) than the price (MRP/RSP) they had declared to the customs. Based on the facts on record and the submissions of both the sides, we are in agreement with the findings of the Commissioner given in Paras 50 and 54. In this regard the Commissioners findings clearly indicate that the appellant cannot absolve themselves from the responsibility that the goods carried different MRP labels of the price then what they had declared to the customs. The Commissioners observations in the impugned order given in its paragraphs 50 and 54 are given below:

50. Statements of the importer as well as the distributors were recorded by the investigating officers. The importer stated that the soaps imported by them carried MRP stickers of Rs.5/- and they had sold the soaps at Rs.4.25. The importer further admitted that he was aware that the soaps imported by him were being sold to the ultimate consumer in the year 2003 at Rs.8/- and in some outlets atRs.10/-. He also stated that he was aware that his immediate distributor, M/s. Mathewsons Agencies, were selling the soaps at a price of Rs.6.70 per piece. The importer had deposited an amount of Rs.3,88,620/- as differential duty taking responsibility for the sale made at a higher price by one of his distributors. The fact that the soaps had been sold at a higher MRP as stated by the importer in his statement, has been further corroborated by the sales invoices and letters submitted by M/s. Supply Co. in this regard. The distributors in the supply chain from the importer to the ultimate consumer, namely M/s. Aishwarya Trade Links and M/s. Plus One Agencies have also admitted that the MRP of the soaps at their end was Rs.10/- during the period 2003. M/s. Mathewsons Agencies, the sole distributors for the importer in Cochin who had received the consignments from the importer directly have also admitted that the soaps were sold by them at a price ranging from Rs.6.50 to Rs.7/-, but had categorically stated that they did not notice any stickers of MRP Rs.5/- on the soaps supplied to them and were not at all aware of the MRP of the imported soaps.

51.52.53. ..

54. In his statement Shri Biju Mathew, partner of M/s. Mathewsons Agencies, stated that they were the only dealers for the GIV and Harmony Brands of soaps imported by M/s. Mathewsons Exports & Imports and that their major distributors were M/s. Plus One Agencies at Ernakulam, M/s. Kalattil Agencies, Trivandrum and M/s. Priya Automobiles, Calicut. He further stated that he was not aware of the MRP of Rs.5/- declared by the importer before Customs and had not noticed the MRP of Rs.5/- on the soaps. He also stated that his selling price was Rs.6.70 and that he was not aware of the exact MRP of each brand of soaps but knew that they were being sold at a higher price. Shri Jayakumar, Manager of M/s. Mathewsons Agencies also corroborated what Shri Biji Mathew had stated.

6.4 The appellant argues that the wholesale distributor / dealer, who sold the goods at higher price causing short-payment of CVD is to be taken as deemed manufacture and differential duty should be charged from wholesaler/distributor. This argument of the appellant cannot cut much ice, when they themselves have through out been involved and in the full active knowledge of the fact that the goods were being sold at the higher price (MRP) than what they had declared to the customs.

6.4.1 We again agree with the findings of the Commissioner in para 57, where he observes as under:

57. I find from the records that the investigation had ascertained that the GIV and Harmony Brands of soaps imported by M/s. Mathewsons Exports & Imports were being sold at a higher MRP than that declared. The investigations had, through the chain of supply, established the fact that the soaps found in the retail outlets were in fact imported by the importer. There is no doubt in this regard. The soaps were found with MRP stickers of Rs.10/- on them. The distributors have admitted that in the supply chain from the importer to the ultimate consumer that the MRP of the soaps was Rs.10/- and stickers were supplied by M/s. Mathewsons Agencies. This has been corroborated by the recovery stickers during the investigation. Further, everyone has agreed to the fact that they have been selling the imported soaps at a price higher than the MRP of Rs.5/- declared by the importer. Shri Beby Mathew, Managing Director of the importing firm has admitted to the fact that he was aware of the fact that the selling price of M/s. Mathewsons Agencies was Rs.6.70, in spite of which he did nothing and continued to declare the same MRP before Customs. Though there has been a retraction by Shri P.K. Madhu of M/s. Plus One Agencies, I find no merit in it as the facts mentioned have been conclusively corroborated by other evidences. M/s. Mathewsons have denied having supplied the stickers carrying MRP. The evidences in the form of statement the other distributors and the stickers themselves clearly show that the denial is only made with a view to extricate themselves out of the situation and escape penal consequences. In the light of the above discussions, I conclude that the soaps imported by M/s. Mathewsons Exports & Imports had indeed been sold in the market at a higher MRP than that declared before Customs at the time of import. I also conclude that the MRP as detailed in the table annexed to the show cause notice for the respective periods is the actual MRP at which sale was made during the periods mentioned therein.

6.5 Considering above discussions, we are of the considered view that the appellant is liable for payment of differential duty confirmed by the impugned order. We also take support for our conclusions made above from the CESTAT, Delhis decisions in the cases of Planet Sports Pvt. Ltd. (supra) and Media Industries Ltd. (supra). In this regard, we refer to the observations made by the CESTAT, Delhi in case of Planet Sports Pvt. Ltd. (surpa) in its para five, which are given below:

5. We have considered the submissions of both sides. Section 3(1) of the Customs Tariff Act provides for the levy of Additional Customs Duty on goods imported equal to the excise duty for the time being leviable on a like article if manufactured in India. Sub-section (1) further provides that if excise duty on a like article is leviable at any percentage of its value, the additional duty shall be calculated at that percentage of the value of the imported article. Sub-section (2) of Section 3 of the Customs Tariff Act contains provisions for the determination of assessable value. Proviso to sub-section (2) provides that in case of an article imported into India, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act or the Rules made thereunder to declare on the package thereof the retail sale price and the article has been specified by Notification under Section 4A(1) of the Central Excise Act, the value of imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement as the Central Government may allow. The facts which are not in dispute are that the impugned goods are the goods in relation to which the retail sale price is to be declared on the packages under the law for the time being in force and these goods have been specified by the Central Government under Section 4A(1) of the Central Excise Act. It is also not disputed by the Appellants that the MRP declared by them at the time of importation was not the same at which the goods were sold by them subsequently. This fact has been admitted by Shri Dipak Agarwal, Financial Controller of the Appellants, in his statements. Accordingly, the appellants are liable to discharge their duty liability on the basis of actual MRP at which the impugned goods are sold and not on the basis of MRP declared by them in haste without actually determining the same after taking into consideration the various factors such as landed cost and profit, etc. The ratio of the decision in the case of MRF Ltd., supra, is not applicable as the facts are entirely different. In MRF case, the assessee had cleared the excisable goods on the basis of declared prices which were sold subsequently at a lesser price on the direction of the Government. The refund claim filed by them was rejected by the Department which had been upheld by the Supreme Court holding that once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatsoever reason cannot be a matter of concern to the Central Excise department in so far as the liability to payment of excise duty was concerned. In the present matter before us, it was incumbent upon the importer to declare the MRP at which the imported goods were to be sold and not any other price. The judgment in the case of ITC Ltd. is also not applicable as the facts are different. In ITC case the Appellants had cleared cigarettes manufactured by them after paying excise duty on the basis of the Maximum Retail Price printed by them on each cigarette packet. In the present matter the Appellants have changed the MRP. We, therefore, hold that there was a misdeclaration of MRP at the time of import and as such we uphold the demand of duty, liability of the impugned goods for confiscation and liability of the Appellants for penal action. We uphold the demand of differential duty..

6.5.1 Further, we refer to the observations made by the CESTAT, Delhi in its decision in case of Media Industries Ltd. (supra). The CESTAT in the said decision in para six observes as under:

6.In terms of the provisions of Sub rule 4 or Rule 4A of the Central Excise Rules, 1944, such goods shall be liable to confiscation, if any, manufacturer removes from the place of manufacture any excisable goods specified in sub rule (4) without declaring the Retail Sale Price of such goods on the package or declares a retail sale price, which does not constitute the sole consideration for such sale or tampers or obliterates or alters any such declaration made on the package after removal. It is not disputed in the present case that the declared MRP on the goods at Rs. 600/- per piece was found to be enhanced to Rs. 825/- per piece. The appellants have tried to justify the enhancement on the ground that they had sold the goods at Rs. 600/- per piece to M/s. Media Video Ltd., who have enhanced the same. However, as is seen from the impugned order of the Commissioner that both the companies were situated at the same premises and belong to the same family. In any case, the MRP denotes to maximum retail price at which the goods are sold to be ultimate buyer in retail sale. Tampering with the same even by the subsequent wholesale buyer will amount to contravention, inasmuch as it is the final sale price, which is required to be declared in respect of the goods at the time of clearance from the Customs and duty is required to be paid on the same. In the instant case, both the units were sister concern and MRP was enhanced by the importer with the mala fide intention to evade duty.

7. Based on above discussions and the case laws cited, we have no option other than sustaining the demand of differential duty confirmed by the impugned order dated 30.5.2006.

7.1 However, considering the facts and the circumstances of the case, we reduce the penalty imposed on the appellant by the impugned order to Rs.6,97,212/-(which is 20% of the original penalty imposed) under Section 114A of the Customs Act, 1962.

8. The impugned order is modified to above extent and the appeal is partly allowed accordingly.