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CASE NO.: Appeal (civil)  4964 of 2000

PETITIONER: M/s Sony India Ltd.

RESPONDENT: Commissioner of Central Excise, Delhi

DATE OF JUDGMENT: 05/05/2004

BENCH: CJI & G.P. MATHUR.

JUDGMENT: JUDGMENT

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  Tribunal held that the CTVs are subject to duty @ 18%  ad valorem.  

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       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  the CTVs as provided in the relevant notification issued  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  401 (SC),  State of Uttar Pradesh  & Ors.  Vs.   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

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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  size of screen of CTVs.    The appellant contended that  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

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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.