THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, CALICUT versus M/S. CERA BOARDS AND DOORS, KANNUR KERALA & ORS. on 19 August 2020

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 ANDV. RAMASUBRAMANIAN, JJ.]

Central Excise Act, 1944 – s.4 amended in 2000 – Chargingof excise duty – Method of valuation of excisable goods – In presentcases arising out of similar facts, assesses allegedly undervaluedthe goods manufactured and cleared by them – Evaded the exciseduty actually payable – Period of assessment pre & post 2000Amendment – Adjudicating authorities inter alia held that there wasundervaluation and evasion of excise duty – Customs, Excise andService Tax Appellate Tribunal (CESTAT) though upheld said findingbut remanded the matters back for re-quantification of duty – Held:Finding w.r.t undervaluation and evasion of excise duty recordedby CESTAT in all the cases has not been challenged by the assessesand hence has attained finality – Further, before amendment, clause(a) of sub-section (1) of s.4 laid emphasis on normal price for anordinary sale in the course of wholesale trade, after amendment itspeaks about transaction value – Thus, after amendment, if a saleis covered by s.4(1)(a), the value of excisable goods shall be thetransaction value defined in s.4(3)(d) – Clause (b) of sub-section(1), both before and after the amendment, leaves it to the delegatedlegislation to prescribe the method of valuation, for cases not coveredby clause (a) – After the amendment, the Central Government issueda new set of rules- 2000 Valuation Rules in supersession of 1975Valuation Rules – Valuation as per the Rules is permissible only incases covered by s.4(1)(b) and not by s.4(1)(a) – Impugned ordersof CESTAT confirmed – Principles enumerated for adjudicatingauthorities to keep in mind while re-adjudicating the matters –Finance Act, 2000 – Central Excise Valuation (Determination ofPrice of Excisable Goods) Rules, 2000 – Central Excise (Valuation)

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472SUPREME COURT REPORTS

[2020] 11 S.C.R.

ARules, 1975 – Central Excise Rules, 1944 – Central Excise Rules,2002.

Disposing of the appeals, the Court

HELD: 1.1 Common Issues arising in these appeals BIt may be seen from the facts involved in these batches ofcases that there is a common thread that runs along the fabric ofthese cases. This common thread is that the assessees in thesecases allegedly undervalued the goods, sold them for a muchhigher price than what was reflected in the invoices and therebythey evaded the excise duty actually payable. Though theCassessees uniformly denied the said allegation, the CESTAT hasrecorded a categorical finding in all the cases that there wasundervaluation and evasion of excise duty. The said finding hasnot been challenged by the assessees and hence it has attainedfinality. Therefore, what arises for adjudication is only the mannerDof determining the value of the goods removed by the assesseesfor sale to or through dealers. In other words, the entire disputenow revolves around the question of valuation of excisable goods,for the purposes of charging of duty. But for finding an answer tothe said question, it is necessary to take note of the period ofassessment. In some of these cases, the period of assessmentEwas both prior to and after 01.07.2000 and in other cases, theperiod was after 01.07.2000. According to the respondents, themethod of determination of value before 01.07.2000 was differentfrom the method of valuation after 01.07.2000, since Section 4 ofthe Central Excise Act, 1944 was amended with effect from01.07.2000 under Act 10 of 2000. The amended Section 4 alsoFunderwent some changes in the years 2003 and 2012. The Courtis 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 wereGprescribed in Section 4 as it stood prior to 01.07.2000:

(i) one covered by clause (a) of sub-section (1) of Section4, where the emphasis was on normal price, thedetermination of which co-related to ordinary sale inthe course of wholesale trade (satisfying certainconditions), andH

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(ii) another covered by clause (b) of sub-section (1) ofSection 4, which related to cases where there were nosales, and cases where normal price could not beascertained 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 asfollows:

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I.As a first rule, the normal price, namely the price atwhich such goods are ordinarily sold in the course ofwholesale trade shall be taken as the value, if thebuyer is not a related person and the price is the soleCconsideration for the same.II.But in cases where different prices are charged todifferent classes of buyers, each such price should betaken to be the normal price in relation to each suchclass of buyers.D

III.Similarly, if different prices are charged at differentplaces of removal, the normal price shall be the pricecharged in relation to each such place of removal.

IV.Where the goods are generally not sold in the courseof wholesale trade, except to or through a relatedperson, the normal price shall be the price at whichthe goods are ordinarily sold by the related person,in the course of wholesale trade to other dealers.

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Thus it is clear that under Section 4(1)(a), as it stood before01.07.2000, the method of valuation prescribed therein wasdirectly linked to the normal price for an ordinary sale in thecourse of wholesale trade. But in cases where normal price wasnot ascertainable, the same would fall under Section 4(1)(b) andthe valuation in such cases had to be done in terms of the ValuationRules of the year 1975. Clause (b) identifies one situation, namelywhere goods are not sold, in which, the normal price may not beascertainable. In addition, clause (b) also recognises the fact thatthere may be cases where normal price is not ascertainable forany other reason. These cases may perhaps include salesotherwise than in the course of wholesale trade. [Paras 81,82][507-E-H; 508-A-C]

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A1.4 Though the words “normal price” were used in Section4(1)(a), the proviso to clause (a) recognised the fact that the normalprice need not be the same universally, but could vary from oneclass of buyers to another or from one place of removal to another.By the amendment under Act 10 of 2000, with effect from01.07.2000, the words “normal price” and the words “in theBcourse 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 Industriesnoted the shift, at least in the language, of Section 4(1), fromC“normal price” to “transaction value”, the Constitution Benchdid not take note of one major area of difference, namely that thefocus of Section 4(1)(a) prior to 01.07.2000 was on finding outthe normal price in respect of sales made ordinarily in the courseof wholesale trade. The method of valuation, wherever there was Dno sale, was to be on the basis of the Rules, in view of Section4(1)(b). Even in cases where there was a sale—(i) in the course of wholesale trade but the conditionsstipulated in clause (a) were not satisfied or

(ii) the normal price could not be ascertained for any otherEreason, 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 thisregard. After the amendment under Act 10 of 2000, the normalFpricing method was gone, as the focus shifted from sale in thecourse 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 itGstood 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 delegatedlegislation to prescribe the method of valuation, for cases notcovered by clause (a). For the valuation under Section 4(1) toH

follow the “transaction value”, (after amendment) the threeconditions stipulated in clause (a), namely (i) that the goods aresold for delivery at the time and place of removal, (ii) that theassessee and buyer are not related and (iii) that the price is thesole consideration for the sale, should be satisfied. If the threeconditions, enumerated in clause (a) are not satisfied, then thecase 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 determinedin such manner as may be prescribed. [Paras 87-89][509-E-H]

1.7 After the amendment under Act 10 of 2000, the CentralGovernment issued a new set of rules called the Central ExciseValuation (Determination of Price of Excisable Goods) Rules,2000. These rules were issued in exercise of the power conferredby Section 37, in supersession of the 1975 Valuation Rules.Rule 3 of the aforesaid 2000 Rules makes it clear that the valueof excisable goods, for the purposes of clause (b) of sub-section(1) of Section 4, should be determined in accordance with thesaid Rules. Therefore, it is clear that the valuation as per theRules 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) ofsub-section (1) of Section 4 (after amendment), the value ofexcisable goods shall be the ‘transaction value’. This expression‘transaction value’ is defined in clause (d) of sub-section (3) ofSection 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 bedetermined in accordance with the 2000 Rules. Therefore, inessence, 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 threeconditions stipulated in clause (a) of sub-section (1) ofSection 4.

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AIn cases where there is a sale and the three conditions stipulatedin clause (a) of sub-section (1) of Section 4 are satisfied, theadjudicating authority should determine the value based uponthe transaction value. But (i) in cases where there is no sale and(ii) in cases where there is a sale but the three conditionsstipulated in clause (a) are not satisfied, then the adjudicatingBauthority 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 hadand had not done in these casesCBroadly, in the batches of cases on hand (with one or twoexceptions), the Adjudicating Authorities came to the followingconclusions:

(i) that there was undervaluation and evasion of duty; D(ii)that in respect of sales effected both before and after01.07.2000, the invoice value, together with the cashpaid over and above the invoice value, would representthe normal price or the transaction value, as the casemay be, and E(iii)that in cases where there was evidence to show thata dealer had paid more than the invoice value, theamount found to have been paid by such a dealer,though relatable only to a few out of the severaltransactions that he had with the assessee, should beFtaken to be the normal price or the transaction value,as the case may be, applicable to all the transactionsthat 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 evasionGof duty;

(ii) to hold that invoice price need not be taken as thenormal price in respect of cases prior to 01.07.2000and that wherever a particular amount is actually foundto have been paid by a dealer, the same could be taken H

COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAXv. M/S. CERA BOARDS AND DOORS

to be the transaction value, for cases after01.07.02000; and

(iii) to hold that the determination of the normal price orthe transaction value, as the case may be, should beconfined only to the evidence available on record, butnot to all the transactions across the board.[Paras 95, 96][511-A-F]

1.10 But the Adjudicating Authorities as well as CESTATare 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 weresales in the course of wholesale trade, satisfying the3 conditions prescribed therein, falling under clause(a) of sub-section (1) or whether the sales in questionfell 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 effectfrom 01.07.2000, whether the sales in question fellunder clause (a) or clause (b) of sub-section (1) ofSection 4;

(iii) Failure to find out, in the event of the sales in questionfalling under clause (b) of sub-section (1) of Section 4(before or after the amendment), whether thevaluation had to be done only in accordance with theRules (1975 Rules or the 2000 Rules, as the casemay be), and

(iv) Failure to find out, in cases covered by Section 4(1)(b),the specific rule that is applicable among the 1975 or2000 Rules, as there are different rules coveringdifferent contingencies, both in the 1975 Rules andin the 2000 Rules.

Since the Adjudicating Authorities as well as the CESTATfailed to make a determination as indicated above, the orders ofremand passed by the Tribunal, though for completely differentreasons, were justified. [Paras 97, 98][511-G; 512-A-D]

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478SUPREME COURT REPORTS

A1.11 Conclusion

These appeals are disposed of, confirming the impugnedorders of CESTAT setting aside the Orders-in-Original passedby the Adjudicating Authorities and remanding the matters backfor re-adjudication. However, while carrying out the exercise ofBre-adjudication, the Adjudicating Authorities should keep in mindthe principles enumerated hereunder:

A. Cases where the period of assessment is prior to01.07.2000

I.First ascertain the price at which such goods areCordinarily sold by the assessee to a buyer who is notrelated to him, in the course of wholesale trade, atthe time and place of removal and also find out whetherthe price is the sole consideration for the sale. If theAdjudicating Authority is able to find this out, he mayDtake such price as the normal price and treat the caseas covered by Section 4(1)(a), applying, whereverpermissible, the prescriptions contained in theproviso to clause (a) of sub-section (1) of Section 4.

II.If the normal price is not ascertainable, either for theEreason that the goods are not sold or for any otherreason, then he may take it that the case would fallunder 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 inFSection 4(1)(b) would include cases where the pricecharged in the course of wholesale trade is notdiscernible or where the same, though discernible,cannot be linked to delivery at the time and place ofremoval or where the price is not the soleconsideration for the sale, even though the priceGcharged in the course of wholesale trade for deliveryat the time and place of removal are available.

IV.If the case falls under Section 4(1)(b) and theAdjudicating Authority takes recourse to the methodof valuation prescribed in the 1975 Rules, he shallHfind out which among the relevant rules would apply COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX

v. M/S. CERA BOARDS AND DOORS

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to the cases on hand before proceeding with thevaluation.

B. Cases where the period of assessment is after01.07.2000

I.First ascertain the “transaction value”, with particularBreference to the definition of the said expressioncontained in Section 4(3)(d).II.Apply the transaction value so ascertained, to caseswhere three conditions, namely (i) the goods are soldfor delivery at the time and place of removal, (ii) theCassessee and buyer are not related and (iii) the priceis the sole consideration, are satisfied. This is becausesuch cases will fall under Section 4(1)(a).

III.In cases where one or more of the aforesaid threeconditions are not satisfied, and also in cases wherethere is no sale, the Adjudicating Authority shouldDtreat the cases as falling under Section 4(1)(b) andhence 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 theAdjudicating Authority takes recourse to the methodof valuation prescribed in the 2000 Rules, he shallfind out which among the relevant rules would applyto the case on hand before proceeding with thevaluation.

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Principles applicable in common (both pre and postamendment)

C. The Adjudicating Authority may treat any amountreceived either in cash or otherwise, over and above the invoicevalue, as the value of excisable goods even in cases falling underSection 4(1)(a) (after the amendment), as the definition of“transaction value” under Section 4(3)(d) means the price actuallypaid or payable.

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D. The Adjudicating Authority shall keep in mind the factthat while the expression “normal price” was not defined in H

ASection 4(1) before amendment, the expression “transactionvalue” is defined very exhaustively in Section 4(3)(d) and thisdefinition 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 reflectedBin the invoice, the additional payment made by him together withthe invoice value shall be taken to be the transaction value, forall the transactions that the particular dealer/customer had withthe assessee. In simple terms, if a dealer/customer has made 10purchases during the period in question, for a particular valuestated in the invoice, the transaction value determined on theCbasis of material relatable to a few out of those transactions, canbe applied to all the transactions of that customer/dealer acrossthe board for that period. However, the same value cannot beapplied to the other dealers/ customers. This principle shall befollowed in respect of cases arising after the amendment.

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F. Since the matters are more than a decade old, theAdjudicating Authorities may conduct hearings, afford adequateopportunities to the parties and pass orders in original as earlyas possible. [Para 99][512-E-H; 513-A-H; 514-A-G]

Collector of Customs, Madras v. D. Bhoormall (1983)E13 ELT 1546 (SC) – referred to.

Case Law Reference

[2018] 6 SCR 1099referred toPara 85

CIVIL APPELLATE JURISDICTION: Civil Appeal No.F7240-7248 of 2009.

From the Judgment and Order dated 24.03.2009 of the CustomsExcise & Service Tax Appellate Tribunal, South Zonal Bench atBangalore, in Appeal No. E/947-954/2006 and E/339/07.

With

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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. KrishnaPrasad, Mrs. Anil Katiyar, V. K. Monga, V. Lakshmikumaran,HMs. Charanya Lakshmikumaran, Aaditya Bhattacharya, Ms. Apeksha COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAXv. M/S. CERA BOARDS AND DOORS

Mehta, Kunal Kapoor, Ms. Mounica Kasturi, Gautam Narayan,Ms. Asmita Singh, Adithya Nair, M. P. Devanath, Advs. for the appearingparties.

The Judgment of the Court was delivered by

V. RAMASUBRAMANIAN, J.

Introduction

1. All the appeals on hand are by the Commissioners of CentralExcise, Customs & Service Tax of different Commissionerates, filedunder Section 35L(1)(b) of the Central Excise Act, 1944 (hereinafterreferred to as “the Act”), questioning the correctness of the orders passedby Customs, Excise and Service Tax Appellate Tribunal, South ZonalBench at Bangalore (CESTAT) in seven different batches of cases, butarising out of similar facts and raising identical questions.

2. For the purpose of convenience, the facts out of which the firstbatch of cases in Civil Appeal Nos. 7240-7248 of 2009 (which we maycall the lead case) arise, are recorded in detail. The facts in the otherbatches of cases are brought on record in brief and to the extent thatthey have some distinguishing features. As a matter of fact, the batch ofcases relating to the assessee by name, M/s. CERA Boards and Doors(the respondents in Civil Appeal Nos. 7240-7248 of 2009), was decidedfirst by CESTAT. Thereafter, CESTAT decided the other 6 batches ofcases on the basis of the ratio laid down in CERA Boards. This is whyCivil 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 assesseeconcerned in this batch of cases, admittedly manufactures plywood/blockboards. Searches were conducted by the Directorate General of CentralExcise Intelligence (DGCEI) at their factory premises at Kannur, Keralaand their depot at Bangalore, on 17.10.2002 and on subsequent days.Searches were also conducted at the residences of the partners of thefirm, the residences of some of their employees and the premises ofsome of their dealers.

4. CERA Boards and Doors is a partnership firm comprising ofone Mr. K. S. Harris and Smt. K. P. Rashida as partners. Their Bangaloredepot was managed by its manager, Sh. T. S. Bhaskar.

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A5. The investigation that followed the searches revealed that theassessee had undervalued the goods manufactured by them and clearedthe goods from their factory, resulting in the evasion of Central Exciseduty to the tune of Rs. 4,29,01,384 during the period from 01.12.1998 to05.12.2002.B6. After the search, CERA Boards made payment of a sum ofRs. 12,50,000 towards shortfall in duty for the clearances effected duringthe relevant period. Thereafter, show cause notices dated 07.04.2003and 22.12.2003 were issued. The show cause notice dated 07.04.2003was 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. ArihantCMarketing and M/s. Krishna Agencies, respectively valued atRs. 12,80,926, Rs. 27,961, Rs. 34,332, Rs. 2,88,585, Rs. 32,829 andRs. 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) paymentof differential duty to the tune of Rs. 4,29,01,384 under Section 11A(1)Dof the Central Excise Act, 1944, (ii) interest under Section 11AB of theAct, (iii) appropriation of the amount of Rs. 12,50,000 voluntarily paid bythem immediately after the search, towards duty liability, (iv) penalty interms of Section 11AC of the Act and also under Rule 173Q of theerstwhile Central Excise Rules, 1944/ Rule 25 of the Central ExciseERules, 2002, and (v) imposition of penalty on the Managing Partner andManager of the firm under Rule 209A of the erstwhile Central ExciseRules, 1944/ Rule 26 of the Central Excise Rules, 2002.

8. The material forming the basis of the aforesaid show causenotices were: (i) the loose sheets recovered from a Sales Executive byFname Mr. Dayanandan, (ii) computer print outs containing “overdue bills”statements, (iii) the price lists containing the actual rate per square feetof plywood/block boards of different thicknesses, (iv) certain slipscontaining the details of the sales made during the relevant period, (v)copies of statements of expenses, (vi) copies of periodical cash statementsand the statement of cash sent through one Mr. Xavier, (vii) collectionGbooks, (viii) a red colour notebook containing party-wise details of invoicedamounts and the amounts payable in cash, (ix) a notebook containingdetails of transactions with various dealers, (x) a green colour notebookand 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 (SalesExecutive), (iii) Mr. M. P. Narayanan, (iv) Mr. K. S. Harris (ManagingPartner), (v) Mr. K. S. Mohammad Ali (brother of K. S. Harris), (vi)Mr. Gajanan K. Kadolkar (one of the purchasers), (vii) Mr. K. S. AbdulBasheer (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. AbdulKhayoom (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 dated24.08.2005. Through these replies, the assessee sought permission tocross-examine all those whose statements were recorded by the DGCEIand took a stand that there was no undervaluation.

11. The assessee contended in their replies that they were effectingsupplies not only to the dealers and consumers in Bangalore but also todealers in Tamil Nadu and Kerala and that based upon a few documentsseized in relation to the transactions in Bangalore depot, an allegation ofundervaluation by 70% on all transactions, cannot be made.

12. It was also contended that though the Department sought torely upon private documents allegedly maintained by two of their staffmembers at the Bangalore depot, by name Suresh and Deepak Dhiman,they were not examined. According to the assessee, they were transactingwith 153 dealers during the period 2001-2002 and 3 dealers during theperiod 2002-2003, and that the Department was not entitled to reach aconclusion on the basis of the statements recorded from just 2 of thosedealers in Karnataka and only one out of 56 dealers in Kerala.

13. It was also contended by the assessee that in so far as theperiod prior to 01.07.2000 is concerned, what is relevant is the normalprice, 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 to01.07.2000. Hence they contended that even if they had realised a higherprice from certain buyers, the same would be irrelevant, as regards theperiod before 01.07.2000.

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A14. In so far as the period post 01.07.2000 is concerned, it wascontended by the assessee in their replies that the transaction valueshould be arrived at on the basis of the price indicated in each invoice.

15. After the receipt of the replies from the assessee, theCommissioner of Central Excise and Customs, Calicut, held personalBhearings, allowed the cross-examination of witnesses, perused the caselaw relied upon by the assessee and then passed an Order-in-OriginalNo. 14/2006 dated 09.05.2006. By this Order-in-Original, theCommissioner (i) confirmed the demand of duty in a sum of Rs. 79,21,663from the assessee under the proviso to Section 11A(1) of the Act, (ii)levied interest at the appropriate rate for the belated payment of theCduty under Section 11AB of the Act, (iii) imposed a penalty of Rs.79,21,663 under Section 11AC read with Rule 25, (iv) directed theconfiscation of goods seized from the assessee, valued at Rs. 12,80,926with 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,Dhowever, with an option to redeem the same upon payment of fine amountsranging 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) imposeda penalty of Rs. 5,000 each on the Managing Partner of the assesseeand its Manager at the Bangalore depot.

E16. It is relevant to note that the proposal as contained in theshow cause notice was for the imposition of differential Central Exciseduty to the tune of Rs. 4,29,01,384 for the period between 01.12.1998and 05.12.2002. But, the adjudicating authority confirmed the demandonly to the extent of Rs. 79,21,663. The findings recorded by theadjudicating authority, and the reasons given therefor are as follows:-F

I.That as per the statements recorded from the dealers, theassessee was usually showing a lesser amount in theinvoices than the actual sale consideration and was in thehabit of collecting the differential amount by way of cash; GII.That though some of the dealers retracted from their originalstatements, 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.H

seized by the DGCEI together with the statements recordedfrom the depot Manager and Sales Executives clearlyshowed under-invoicing;

IV.That though the Department had demanded differential dutyto the tune of Rs. 4,29,01,384 on the actual sales turnoverfor the period in question, the department collected evidenceonly in respect of 11 customers and not from all customerswhose names were mentioned in Annexure D to the showcause notice;

V.That therefore, the calculation of differential duty had to beconfined only to the sales turnover relatable to the aforesaid11 customers and the turnover relatable to 3 more customerswhose confession statements had been recorded;

VI.That in view of the law laid down by this Court in Collectorof Customs, Madras vs. D. Bhoormall,[1 ]the Departmentcould not plead its inability to examine all the dealers tocome to the conclusion of undervaluation in all transactions;

VII.That in respect of those 14 dealers, a clear case was madeout by the Department about the gross undervaluation ofthe sales price, and

VIII. That therefore, the differential duty co-relatable to the salesturnover in respect of those 14 dealers could be demanded.

17. Aggrieved by the Order-in-Original No. 14/2006 dated09.05.2006, one appeal was filed by the assessee, one appeal was filedby its Managing Partner, one appeal was filed by the Manager of theBangalore depot of the assessee, one appeal each was filed by fivedealers from whom seizure of material was effected and one appealwas filed by the Commissioner himself. Thus, there were 9 appeals, 8 ofwhich were at the instance of assessee, its Managing Partner, its Manager,and the five dealers, and the last of which was by the Commissioner ofCentral Excise.

18. While the 8 appeals filed at the instance of the assessee andits coterie were directed against the demand for differential duty, interest,penalty and confiscation, with an option of redemption, the appeal filedby the Commissioner was on the ground that as against the proposal for

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Aa differential duty of Rs. 4,29,01,384 made in the show cause notice, theadjudicating authority confirmed the demand only to the extent ofRs. 79,21,663.

19. By Final Order Nos. 245-253/2009 dated 24.03.2009, theCESTAT (i) rejected all the five appeals filed by the five dealersBchallenging the orders of confiscation of the seized goods with the optionfor redemption and (ii) allowed the three appeals filed respectively bythe assessee, its Managing Partner and its Manager, challenging thedemand for differential duty, interest, and penalty and remanded thematter for re-quantification of duty in light of the findings given. Theappeal filed by the Revenue also followed the fate of the three appealsCfiled by the assessee, its Managing Partner and its Manager.

20. The effect of the Final Orders passed by CESTAT is (i) thatthe appeals of the dealers against confiscation with the option ofredemption stood rejected and (ii) that the substantive appeals arisingout of the imposition of differential duty, interest, penalty, etc. stoodDallowed and remanded back to the adjudicating authority for a freshconsideration.

EI.That there was overwhelming evidence to show under-invoicing;

II.That in light of the statements made by depot officials aswell as dealers, the finding of the Adjudicating Authoritythat 30% of the actual value alone was mentioned in theinvoice cannot be interfered with;F

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 atwhich such goods were ordinarily sold in the course ofwholesale trade; and hence the Commissioner was obligedto find out what the normal price in the course of wholesaleGtrade was for the clearances made prior to 01.07.2000;

IV.That in respect of the sales made prior to 01.07.2000, theadjudicating authority should adopt the normal pricingmethod; H

V.That for the clearances made after 01.07.2000, thetransaction value had to be determined in respect of eachtransaction and the differential duty confined only to theevidence available on record;

VI.That the stand of the Revenue that 70% should be added tothe invoice value uniformly in respect of all clearances, couldnot be accepted and,

VII.That therefore, the matter required re-adjudication.

22. Therefore, the Revenue has come up with this batch of nineappeals, 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 CivilAppeal Nos. 7240-7248 of 2009. M/s. Prestige Boards Pvt. Ltd., Kannurwhich is the assessee concerned in this batch of cases, also manufacturesplywood/block boards. Similar searches conducted at their premisesrevealed that the assessee had grossly undervalued the goods clearedby them from their factory, resulting in evasion of Central Excise duty tothe tune of Rs. 2,72,03,232 during the period between 01.12.1998 and17.10.2002.

24. Show cause notices (i) dated 08.04.2003, for confiscation ofthe 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) ofthe Act, interest, penalty, etc. were issued.

25. After the receipt of the replies from the assessee to the twoshow cause notices, the Commissioner of Central Excise and Customs,Calicut, held an enquiry and passed an Order-in-Original No. 10/2006dated 27.03.2006, by which, he (i) confirmed the demand of duty to theextent of Rs. 1,50,23,911 from the assessee under the proviso to Section11A(1) of the Act, (ii) levied interest at the appropriate rate for thebelated payment of duty under Section 11AB of the Act, (iii) imposed apenalty of Rs. 1,50,23,911 under Section 11AC read with Rule 25,(iv) directed the confiscation of goods seized from the assessee, valuedat Rs. 14,24,286 with an option to redeem the same upon payment offine of Rs. 1,50,000, (v) directed the confiscation of goods seized fromM/s. Prestige Traders, valued at Rs. 5,49,176, with an option to redeemthe same upon payment of fine of Rs. 50,000, (vi) directed the confiscation A

B

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D

E

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Aof goods seized from M/s. Ply Home, valued at Rs. 29,270, with anoption to redeem the same upon payment of fine of Rs. 3000, (vii) directedthe 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. PrestigeBTraders, M/s. Ply Home and M/s. Gee Ply, and (x) imposed a penalty ofRs. 50,000 each on Sh. K. S. Mohammad Ali (Managing Director) andSh. Kunjuraman (Manager, Bangalore depot).

26. The Commissioner held that there was evidence to proveundervaluation, but the demand had to be confined only to the transactionsCthat the assessee had with 20 customers from whom alone evidencehad been collected. Like the Order-in-Original passed in the case ofCERA Boards, the Commissioner ruled in this case also that (i) withrespect to the period prior to 01.07.2000, the normal price should includethe price indicated in the invoice plus the amount collected by way of Dcash, and (ii) for the period post 01.07.2000, the transaction value wasnothing but the invoice value plus the amount collected in cash.

27. Aggrieved by the Order-in-Original No. 10/2006 dated27.03.2006, the assessee, its Managing Director (Sh. K. S. MohammadAli), its Sales Manager (Sh. Kunjuraman), M/s. Prestige Traders andEthe two dealers from whom seizure of material was effected, filed sixappeals before the CESTAT.

28. By Final Order Nos. 414-419/2009 dated 21.04.2009, theCESTAT (i) allowed the three appeals filed by the assessee, its ManagingDirector and Sales Manager challenging the demand for differential duty,Finterest and penalty, and remanded the matter for re-quantification ofduty in light of the findings given, and (ii) rejected the appeals filed byM/s. Prestige Traders and the two dealers challenging the orders ofconfiscation.

29. The findings recorded and the reasons therefor, as given byGCESTAT, 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, theAdjudicating Authority should have adopted the normalHpricing method;

III.That for the clearances made after 01.07.2000, thetransaction value has to be determined in respect of eachtransaction and the differential duty confined only to theevidences available on record;

IV.That the stand of the Revenue that 70% should be added tothe invoice value uniformly in respect of all clearances,cannot be accepted.

30. Aggrieved by the said order, the Revenue has come up withthis 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 DirectorateGeneral of Anti-Evasion (Central Excise) on 23.09.1997, simultaneouslyat the premises of eleven plywood manufacturing units located at Kumbla,Kasargod District, on the basis of intelligence reports that they wereindulging in undervaluation and evading payment of central excise duty.

32. After recovering incriminating evidence and recording thestatements of proprietors/partners, employees and dealers of the units inquestion, two show cause notices, one dated 23.03.1998 and anotherdated 02.08.1999 were issued. The first show cause notice was againstM/s. Universal Wood Crafts, Kumbla, M/s. Wood Crafts, Kumbla,M/s. Uniwoods, Kumbla, M/s. National Boards, Kumbla, M/s. DarveshPlywoods, Kumbla, Sri K. Mohammed Arabi, Kumbla, Sri KhaleelRahiman, Kayarkulam and Sri Mansoorul Huck, Kayarkulam, proposingthe confiscation of the seized plywood and the seized Indian currency,demand drafts and cheques.

33. The second show cause notice quantified the duty short paidby the seven plywood units, namely M/s. National Boards, M/s. DarveshPlywoods, M/s. Uniwoods, M/s., Wood Crafts, M/s. Universal WoodCraft Co., M/s. Mailatty Wood Industries and M/s. National WoodProducts, at Rs. 7,59,24,737 and the duty short paid by the chemical unitby name M/s. Bharath Chemicals, at Rs. 9,12,375, for the period from1994-1995 to 1999-2000 (up to June 1999). The notice also proposed thelevy of interest and penalty, apart from confiscation.

34. Subsequently, twelve periodical show cause notices wereissued to the plywood manufacturing/dealing units for different periodsof time.

A

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D

E

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G

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A

A35. After the receipt of the replies from the assessees and theirproprietors/partners to the two show cause notices, the Commissionerof Central Excise, Calicut, held an enquiry and passed an Order-in-Original No. 10/2005 dated 30.06.2005, wherein he confirmed the dutydemanded from the units in question, named in column 1 of the tablebelow, to the extent indicated in column 2 thereof. The AdjudicatingBAuthority also imposed penalties on each of them, to the extent indicatedin column 3 of the table:

36. In addition to the above, the Adjudicating Authority confirmedthe demand of interest under Section 11AB, ordered the confiscation ofmaterial with an option to redeem the same on payment of fine andFimposed penalties. However, (1) the currency of Rs. 20,66,940 and thedemand drafts and cheques seized from Sh. Mohammed Arabi wasdirected to be released and (2) the proceedings envisaged in the twelveshow cause notices on account of clubbing the value of clearances of allthe units, were dropped.

G

G37. The Adjudicating Authority ruled that there was sufficientevidence to prove undervaluation. However, he took the view that sincethe units were registered separately with the Departments of Industries,Sales Tax and the Income Tax, their clearances could not be clubbed todeny them the benefit of Small Scale Industries exemption underNotification No. 1/93.H

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/1145-1161/2005were disposed of by CESTAT, by a common order dated 01.04.2010.

A

39. In and by the said order, the CESTAT came to the followingconclusions:

B

I.That the finding of the Adjudicating Authority aboutundervaluation and clandestine clearance of goods resultingin evasion of duty, was unassailable;

II.That the units in question operated secret price lists forCsale of their finished products and paid duty on a muchlower value and also resorted to innovative methods ofaccounting;

III.That the previous decisions of the Tribunal in the case ofCERA Boards, Noble Ply and Prestige Boards, with regardto the fixation of normal price in respect of the clearancesDmade prior to 01.07.2000, should be followed and the matterremanded back;

IV.That as regards Bharat Chemicals, the demand ofdifferential duty of Rs. 9,12,375 together with other penalliabilities, was liable to be confirmed and their appeal liableEto be dismissed;V.That as regards the clandestine clearances made byM/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 WoodF

V.That as regards the clandestine clearances made byM/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 WoodCrafts Co., the matter had to be remanded back to theCommissioner, for the purpose of adjudicating whether theturnover reckoned by the Adjudicating Authority includedproceeds of sale of non-excisable goods;

VI.That as a consequence of the remand, the penalties imposedon the seven units (whose names are indicated in thepreceding point) should also be re-adjudicated after the re-quantification of the liability; G

VII.That the appeals filed against the confiscation of plywoodvalued at Rs. 2,86,389.20 seized from Khaleel Rehman H

A

Glass Centre, the appeals filed against the confiscation ofplywood sheets valued at Rs.15,056.20 seized fromMansarool Huck, with an option to redeem upon paymentof fine, and the appeals filed against the individual penaltiesimposed upon Khaleel Rehman and Mansarool Huck werealso liable to be rejected, and B

VIII. That all the other appeals are to be allowed, and the matterremanded for re-adjudication on the terms indicated above.

40. Aggrieved by the said order, the Revenue has come up withthis batch of appeals, Civil Appeal Nos. 2236-2253 of 2011.

CFacts 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 manufacturesplywood/block boards/particle boards. Searches conducted by the DGCEIat their premises revealed that the assessee had undervalued the goodsDmanufactured by them and cleared them from their factory, resulting inthe evasion of Central Excise duty to the tune of Rs. 7,51,53,570 duringthe period from 01.07.2000 to 28.08.2003.

42. A show cause notice dated 21.07.2005 was issued, demandingdifferential duty of Rs. 7,51,53,570 under Section 11A(1) of the CentralEExcise Act, 1944, interest, penalty, etc.

43. After the receipt of the reply from the assessee, theCommissioner of Central Excise, Mysore held an enquiry and passed anOrder-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 sumFof 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 bythe assessee, (iii) levied interest at the appropriate rate for the belatedpayment of the duty under Section 11AB of the Act, (iv) imposed apenalty 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 ResidentGDirector of the assessee.

44. The adjudicating authority held that undervaluation wasestablished only (i) to the extent of Rs. 3,79,452 in respect of the invoicesraised by the factory at Mysore, (ii) to the extent of Rs. 29,677 relatingto the six slips from the Lucknow office and (iii) to the extent ofH

Rs. 5,02,26,106 with respect to sales through assessee’s consignmentagent, M/s. Kela Brothers. The Adjudicating Authority further ruled thatthe evidence in respect of undervaluation in sales through M/s. UmiyaEnterprises, M/s. Balaji Glass & Plywoods, M/s. Rohini Plywood &Laminates, and the Ludhiana and Delhi office of the assessee wasinsufficient.

45. Aggrieved by the Order-in-Original No. 06/CCE/2006 dated05.10.2006, three appeals were filed, one by the assessee, another by itsResident Director and the third by the Commissioner of Central Excise,Mysore, before the CESTAT.

46. The assessee challenged the maintainability of the appeal filedby the Commissioner of Central Excise, Mysore, on the ground that asper the decision of the Committee of Chief Commissioners, it was onlythe Mangalore Commissioner and not the Mysore Commissioner whowas entitled to file an appeal.

47. In response to the said objection, the Commissioner of CentralExcise, Mysore then filed a Miscellaneous Application in its appeal beforethe CESTAT, placing on record, a corrigendum to the order of theCommittee of Commissioners authorising the Mysore Commissioner tofile the appeal.

48. By a Final Order passed in the three regular appeals and onemiscellaneous application, namely Final Order Nos. 985-987/2010 dated07.07.2010 and Miscellaneous Order No. 300/2010 dated 07.07.2010,the CESTAT (i) allowed the appeals filed by the assessee and its ResidentDirector challenging the demand for differential duty, interest and penaltyand remanded the matter to the Adjudicating Authority for re-quantificationof duty; (ii) allowed the appeal filed by the Revenue and remanded thematter for fresh adjudication (except on the clearances relating to Umiyaenterprises and sales from the Delhi branch) and (iii) allowed theMiscellaneous Application relating to the maintainability of the appealfiled by the Mysore Commissioner.

I.That the demand of Rs. 60,712 for the differential value ofRs. 3,79,452 in respect of the clearances reflected in theInter-Office memo was rightly confirmed by theAdjudicating Authority, by rejecting the retractions of the A

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D

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Astatements of Sh. K. Sridhar and Sh. Umeedmal Jain whohad admitted to undervaluation and collecting differentialamounts in cash;

II.That the demand of duty of Rs. 4748 on the differentialvalue of Rs. 29,677 with respect to clearances from theBLucknow branch was liable to be sustained;

III.That the demand of Rs. 80,36,177 on the differential valueof Rs. 5,02,26,106 for the clearances made to M/s. KelaBrothers was to be confirmed on the principle ofpreponderance of probability regarding undervaluation byCthe assessee;

IV.That since the demand was towards differential duty, thesame should have been correlated to particular invoicescovering such clearances, which the Adjudicating Authorityhad not done; D

V.That the Adjudicating Authority rightly dropped the demandrelating to M/s. Umiya Enterprises;

VI.That the Adjudicating Authority was correct in not applyingthe charge and level of undervaluation in respect of all theclearances, and E

VII.That differential duty could be demanded only whereundervaluation was established and in the light of transactionvalue introduced w.e.f. 01.07.2000, such evidence had tobe available in respect of each removal.

50. Aggrieved by the said order, the Revenue has come up withFthis 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 assesseeconcerned in this batch of cases, manufactures plywood/ block boards.GSearches conducted by the DGCEI at their premises revealed, accordingto the Revenue, that (i) the assessee had fraudulently undervalued thegoods manufactured and cleared, (ii) that the actual value of clearanceshad crossed the Small Scale Industries exemption limit of Rs. 1,00,00,000and (iii) that the assessee had thus, evaded Central Excise duty to thetune of Rs. 2,13,70,618 during the period from 01.10.2000 to 28.04.2004.H

52. A show cause notice dated 22.11.2005 was issued demandingdifferential duty of Rs. 2,13,70,618 under Section 11A(1) of the CentralExcise Act, 1944, interest, penalty, etc.

53. After the receipt of the replies from the assessee, theCommissioner of Central Excise, Mangalore, held an enquiry and passedan 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 theassessee under the proviso to Section 11A(1) of the Act, (ii) directedappropriation of Rs. 5,00,000 voluntarily paid by the assessee, (iii) leviedinterest at the appropriate rate for the belated payment of the duty underSection 11AB of the Act, (iv) imposed a penalty of Rs. 1,37,81,152 underSection 11AC read with Rule 25, (v) imposed a penalty of Rs. 1,00,000under Rule 173Q/ Rule 25 (vi) imposed a penalty of Rs. 10,00,000 underRule 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 onrecord proved that the assessee had undervalued the goods sold throughShree Shyam Plywoods by about 75% and those sold through otherdealers by about 70%.

55. Aggrieved by the Order-in-Original No. 10/2006 dated29.05.2006, the assessee, its Managing Director and the Commissionerof Central Excise, Mangalore filed three appeals before the CESTAT.

56. By Final Order Nos. 1145-1147/2010 dated 26.08.2010, theCESTAT allowed all the three appeals and remanded the matter forre-quantification of duty in the light of the findings given.

I.That the statements given by third parties in the course ofinvestigation stood in contrast to the statements given bythe employees of the assessee and that once retracted, thestatements of third parties would lose their evidentiary value;

II.That the pocket planner recovered from Sh. Ashraf wasnot an official record of the assessee but a private diary;

III.That the prices written on the letterhead of M/s. ShreeShyam Plywoods were not corroborated by the dealers and A

B

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DE

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H

A

even the statement of the proprietor could not be taken ascorroboration, as the said statement was retracted;

IV.That the price lists recovered from M/s. Plydeal could notbe relied upon as M/s. Plydeal did not purchase plywoodBfrom the assessee;

V.That the Adjudicating Authority’s decision to confirmundervaluation to the extent of 75% to M/s. Shree ShyamPlywoods and 70% to the other dealers was not appropriateand that undervaluation could not be presumed in respectCof all the clearances made by the assessee during thematerial period, by just examining clearances of only a fewdealers;

VI.That no concrete evidence of undervaluation and evasionwith reference to any particular clearance had been foundDby the Adjudicating Authority;

VII.That as seen from the statement of the Managing Director,there was no doubt about undervaluation and payment oflesser duty than what was due, and

VIII. That since the dispute was for clearances after 01.07.2000,Ethe value had to be determined based on each transaction.

58. Aggrieved by the said order, the Revenue has come up withthis batch of 3 appeals, Civil Appeal Nos. 3231-3233 of 2011.

Facts in Civil Appeal Nos. 6564-6567/2011

F

59. M/s. Thumbay Holdings Pvt. Ltd., Mangalore, which is theassessee concerned in this batch of cases, admittedly manufacturesplywood/block boards and is also engaged in construction and sale ofimmovable properties. Searches similar to the ones in the previous batchesof appeals were conducted by the DGCEI at their premises, whichGrevealed that the assessee had undervalued the goods manufactured bythem and cleared them from their factory, resulting in the evasion ofCentral Excise duty to the tune of Rs. 8,37,019 during the period from01.04.2003 to 31.03.2004.

60. Thereafter, a show cause notice dated 11.10.2006 was issued,Hdemanding differential duty of Rs. 8,37,019, interest, penalty, etc.

61. Unlike in the other batches of cases, the Joint Commissionerof Central Excise, Mangalore, was the Adjudicating Authority in thisbatch, in view of the monetary value of the demand. After receipt of theassessee’s reply to the show cause notice, he held an enquiry and passedan 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 asum of Rs. 7,21,568 from the assessee under the proviso to Section11A(1) of the Act, (ii) levied interest at the appropriate rate for thebelated payment of the duty under Section 11AB of the Act, (iii) imposeda penalty of Rs. 7,21,568 under Section 11AC, (iv) imposed a penalty ofRs. 50,000 under Rule 25 and (v) imposed a penalty of Rs. 50,000 eachon Sh. B. Abdul Salam, Sh. J. M. Ashraf and Sh. Manoj Kumar Aminunder Rule 26.

62. The Adjudicating Authority held that there was undervaluationon assessee’s part and that therefore, Section 4(1)(a) was not applicableto the assessee’s transactions and that the assessable value had to beascertained 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 dated29.06.2007, the assessee, Sh. B. Abdul Salam, Sh. J. M. Ashraf andSh. Manoj Kumar Amin filed four separate appeals before theCommissioner of Central Excise (Appeals).

64. The Commissioner of Central Excise (Appeals) dismissedthe appeals.

65. Aggrieved by the Orders-in-Appeal dated 18.09.2008, theassessee, Sh. B. Abdul Salam (Managing Director), Sh. J. M. Ashraf(Chief Executive Officer) and Sh. Manoj Kumar Amin (MarketingExecutive), filed four appeals before the CESTAT.

66. By Final Order Nos. 1505-1508 dated 07.12.2010, the CESTATallowed all the four appeals and remanded the matter for re-quantificationof duty liability and penal liability in light of the findings given.

I.That retraction by the witnesses of their statements at abelated stage was not acceptable; ABCDE

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G

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AII.That the entries in the slips had been corroborated bystatements of the witnesses and hence evasion of CentralExcise duty to an extent of 67% stood proved;

III.That since only 3 out of 25 dealers had recorded theirstatements and only one of those clearly incriminated theBassessee, which had also been later retracted, the totalevidence available may not be adequate to quantify evasionby the assessee for a whole year;

IV.That an analysis of the provisions of the Bankers’ BookEvidence Act, 1891 showed that the Adjudicating Authoritywas not barred from requisitioning the bank statement; C

V.That the Adjudicating Authority rightly held that the showcause notice was not barred by limitation;

VI.That however, the finding of evasion of duty could not beapplied to all the clearances by the assessee, and that if theDstandard of preponderance of probability was applied in thatrespect, it would contain an element of arbitrariness, and

VII.That the Adjudicating Authority’s quantification of duty duebased on a formula worked out on the basis of the slips anda few invoices, was not permissible, and that transactionEvalue had to be calculated with respect to each removal, interms Section 4 of the Act.

68. Aggrieved by the said order, the Revenue has come up withthis batch of 4 appeals, Civil Appeal Nos. 6564-6567 of 2011.

Facts in Civil Appeal Nos. 9988-9991 of 2011F

69. The facts of this last batch of appeals are also similar to thepreceding cases. M/s. Hajee Timber Complex, Mangalore, which is theassessee concerned in this batch of cases, manufactures plywood/blockboards. Searches conducted by the DGCEI at their premises revealedthat the assessee had undervalued the goods manufactured and clearedGby them, resulting in the evasion of Central Excise duty to the tune ofRs. 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 demandingdifferential duty of Rs. 50,42,761 under Section 11A(1) of the CentralExcise Act, 1944, interest, penalty, etc.H

71. After the receipt of the reply from the assessee, theCommissioner of Central Excise, Mangalore, held an enquiry and passedan 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 assesseeunder the proviso to Section 11A(1) of the Act, (ii) directed appropriationof Rs. 2,00,000 voluntarily paid by the assessee, (iii) levied interest at theappropriate rate for the belated payment of the duty under Section 11ABof the Act, (iv) imposed a penalty of Rs. 40,46,923 on the assesseeunder Section 11AC, (v) imposed a penalty of Rs. 2,00,000 on the assesseeunder 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. ManojKumar Amin under Rule 26 of the 2002 Rules.

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72. The Adjudicating Authority held that the documentary evidenceand witness statements clearly showed that the assessee had grosslyundervalued their products.

73. Aggrieved by the Order-in-Original No. 08/2007 dated29.03.2007, the assessee, Sh. B. Abdul Salam, Sh. J. M. Ashraf andSh. Manoj Kumar Amin filed four appeals before the CESTAT.

D

74. By Final Order Nos. 1509-1512/2010 dated 08.12.2010, theCESTAT allowed all the four appeals and remanded the matter for re-quantification of duty liability and penal liability in the light of the findingsgiven.

E

I.That the slips and price lists recovered from one of thedealers, the price list recovered from the BA group ofcompanies and the statements obtained from the dealersand employees of the BA group, revealed the modus operandifollowed by the assessee in undervaluation of excisablegoods; F

II.That the initial statements of the witnesses were voluntaryGand hence, valid evidence;

III.That the test of preponderance of probability could not beapplied to judicially quantify the duty short paid during theentire period of the dispute relying upon one slip showingactual price in respect of few transactions; H

AIV.That the proviso to Section 11A(1) was applicable to thepresent case and the show cause notice was not barred bylimitation, and

V.That each impugned clearance was assessable to duty onthe particular price (transaction value) charged for eachBremoval.

76. Aggrieved by the said order, the Revenue has come up withthis batch of 4 appeals, Civil Appeal Nos. 9988-9991 of 2011.

Common Issues arising in these appeals

C77. It may be seen from the facts involved in these batches ofcases that there is a common thread that runs along the fabric of thesecases. This common thread is that the assessees in these cases allegedlyundervalued the goods, sold them for a much higher price than whatwas reflected in the invoices and thereby they evaded the excise dutyactually payable. Though the assessees uniformly denied the saidDallegation, the CESTAT has recorded a categorical finding in all the casesthat there was undervaluation and evasion of excise duty. The said findinghas not been challenged by the assessees and hence it has attainedfinality. Therefore, what arises for adjudication is only the manner ofdetermining the value of the goods removed by the assessees for sale toEor through dealers.

78. In other words, the entire dispute now revolves around thequestion of valuation of excisable goods, for the purposes of charging ofduty. But for finding an answer to the said question, it is necessary for usto take note of the period of assessment. In some of these cases, theFperiod of assessment was both prior to and after 01.07.2000 and in othercases, the period was after 01.07.2000. According to the respondents,the method of determination of value before 01.07.2000 was differentfrom the method of valuation after 01.07.2000, since Section 4 of theCentral Excise Act, 1944 was amended with effect from 01.07.2000under Act 10 of 2000. The amended Section 4 also underwent someGchanges in the years 2003 and 2012. We are not concerned with thechanges brought forth in 2012.

79. Therefore, let us first take note of how the statutory prescriptionstood before 01.07.2000 and after the said date. The relevant portion ofSection 4 as it stood before 01.07.2000 and as it stands after 01.07.2000His presented in a tabular column as follows:

Section 4 as it stood beforeSection 4 as it stands afterA01.07.200001.07.2000, including theamendment in 2003 but notincluding the amendment in20124. Valuation of excisable goods4. Valuation of excisable goodsBfor purposes of charging of dutyfor purposes of charging of dutyof excise.—of excise. —(1) Where under this Act, the duty(1) Where under this Act, the dutyCof excise is chargeable on anyof excise is chargeable on anyexcisable goods with reference toexcisable goods with reference tovalue, such value, shall, subject totheir value, then, on each removalthe other provisions of this sectionof the goods, such value shall—be deemed to be—D(a) the normal price thereof,(a) in a case where the goodsthat is to say, the price at whichare sold by the assessee, forsuch goods are ordinarily solddelivery at the time and placeby the assessee to a buyer inof the removal, the assesseethe course of wholesale tradeand the buyer of goods are notfor delivery at the time andrelated and the price is the soleEplace of removal, where theconsideration for the sale, bebuyer is not a related personthe transaction value;and the price is the soleconsideration for the sale:(b) in any other case, includingthe case where the goods arenot sold, be the valueFdetermined in such manner asmay be prescribed.Provided that—(i) where in accordance withExplanation.— For the removalthe normal practice of theof doubts, it is hereby declaredGwholesale trade in suchthat the price-cum-duty of thegoods, such goods are soldexcisable goods sold by theby the assessee at differentprices to different classesof buyers (not being relatedH

H

Apersons) each such priceassessee shall be the priceshall, subject to the existenceactually paid to him for the goodsof the other circumstancessold and the money value of thespecified in clause (a), beadditional consideration, if any,deemed to be the normalflowing directly or indirectly fromBprice of such goods in relationthe buyer to the assessee into each such class of buyers;connection with the sale of suchgoods, and such price-cum-duty,excluding sales tax and othertaxes, if any, actually paid, shallbe deemed to include the dutyCpayable on such goods.(ia) where the price at which(2) The provisions of this sectionsuch goods are ordinarily soldshall not apply in respect of anyby the assessee is differentexcisable goods for which a tariffDfor different places ofvalue has been fixed under sub-removal, each such pricesection (2) of Section 3.shall, subject to the existenceof other circumstances(3) For the purpose of thisspecified in clause (a), besection—deemed to be the normalEprice of such goods in relationto each such place ofremoval;(a) “assessee” means [...];F(ii) where such goods are sold(b) persons shall be deemed to beby the assessee in the course“related” if— [...]of wholesale trade fordelivery at the time and placeof removal at a price fixedGunder any law for the time(c) “place of removal” means—being in force, or at a price,(i) a factory or any otherbeing the maximum, fixedplace or premises ofunder any such law, then,production or manufacturenotwithstanding anythingcontained in clause (iii) ofof the excisable goods;H

this proviso, the price or the(ii) a warehouse or anyAmaximum price, as theother place or premisescase may be, so fixed, shall,wherein the excisablein relation to the goods sogoods have beensold, be deemed to be thepermitted to be depositednormal price thereof;without payment of duty,B(iii) where the assessee so(iii) a depot, premises ofarranges that the goods area consignment agent orgenerally not sold by himany other place orin the course of wholesalepremises from where thetrade except to or throughexcisable goods are to beCa related person, thesold after their clearancenormal price of the goodsfrom the factory;sold by the assessee to orthrough such relatedperson shall be deemed tofrom where such goodsDbe the price at which theyare removed;are ordinarily sold by therelated person in thecourse of wholesale tradeat the time of removal, to(cc) “time of removal”, indealers (not being relatedrespect of the excisable goodsEpersons) or where suchremoved from the place ofgoods are not sold to suchremoval referred to in sub-dealers, to dealers (beingclause (iii) of clause (c), shallrelated persons) who sellbe deemed to be the time atsuch goods in retail;which such goods are clearedFfrom the factory;(d) “transaction value” means(b) where the normal pricethe price actually paid orof such goods is notpayable for the goods, whenascertainable for thesold, and includes in additionreason that such goodsto the amount charged asGare not sold or for anyprice, any amount that theother reason, the nearestbuyer is liable to pay to, or onascertainable equivalentbehalf of, the assessee, bythereof determined inreason of, or in connectionwith the sale, whether payableH

[2020] 11 S.C.R.

Asuch manner as may beat the time of the sale or atprescribed.any other time, including, butnot limited to, any amount(2) Where, in relation to anycharged for, or to makeexcisable goods the price thereofprovision for, advertising orfor delivery at the place ofBremoval is not known and thepublicity, marketing andselling organisationvalue thereof is determined withexpenses, storage, outwardreference to the price forhandling, servicing, warranty,delivery at a place other than thecommission or any otherplace of removal, the cost ofmatter; but does not includeCtransportation from the place ofthe amount of duty of excise,removal to the place of deliverysales tax and other taxes, ifshall be excluded from suchany, actually paid or actuallyprice.payable on such goods.D(3) [...](4) For the purposes of thissection—E(a) “assessee” means [...];(b) “place of removal”Fmeans—(i) a factory or any otherplace or premises ofproduction ormanufacture of theGexcisable goods;(ii) a warehouse or anyother place or premisesH

COMMNR. OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX505v. M/S. CERA BOARDS AND DOORS [V. RAMASUBRAMANIAN, J.]wherein the excisableAgoods have beenpermitted to bedeposited withoutpayment of duty;B(iii) A depot, premises ofa consignment agent orany other place orpremises from theCexcisable goods are tobe sold after theirclearances from thefactory and,Dfrom where such goodsare removed;(ba) “time of removal”, inErespect of goods removedfrom the place of removalreferred to in sub-clause (iii)of clause (b), shall bedeemed to be the time atwhich such goods areFcleared from the factory;(c) “related person” means[...]G(d) “value”, in relation to anyexcisable goods—H

H

H

A(i) where the goods aredelivered at the time ofremoval in a packedcondition, includes thecost of such packingBexcept the cost of thepacking which is of adurable nature and isreturnable by the buyerto the assessee.CExplanation.—[...](ii) does not include theDamount of the duty ofexcise, sales tax andother taxes, if any,payable on such goodsand, subject to suchrules as may be made,Ethe trade discount (suchdiscount not beingrefundable on anyaccount whatsoever)allowed in accordanceFwith the normal practiceof the wholesale tradeat the time of removal inrespect of such goodssold or contracted forsale.GExplanation.—[...]H

80. In simple terms, 2 different methods of valuation wereprescribed in Section 4 as it stood prior to 01.07.2000:

C

(i) one covered by clause (a) of sub-section (1) of Section 4,where the emphasis was on normal price, the determinationof which co-related to ordinary sale in the course of wholesaletrade (satisfying certain conditions), and D

(ii) another covered by clause (b) of sub-section (1) of Section 4,which related to cases where there were no sales, and caseswhere normal price could not be ascertained for any otherreason.

81. The prescriptions contained in clause (a) of sub-section (1) ofSection 4, before amendment in 2000, are summarized as follows:

E

I.As a first rule, the normal price, namely the price at whichsuch goods are ordinarily sold in the course of wholesaletrade shall be taken as the value, if the buyer is not a relatedperson and the price is the sole consideration for the same.

F

II.But in cases where different prices are charged to differentclasses of buyers, each such price should be taken to bethe normal price in relation to each such class of buyers.

III.Similarly, if different prices are charged at different placesof removal, the normal price shall be the price charged inrelation to each such place of removal.

G

IV.Where the goods are generally not sold in the courseof wholesale trade, except to or through a related person,the normal price shall be the price at which the goods are H

Aordinarily sold by the related person, in the course ofwholesale trade to other dealers.

82. Thus it is clear that under Section 4(1)(a), as it stood before01.07.2000, the method of valuation prescribed therein was directlylinked to the normal price for an ordinary sale in the course ofBwholesale trade. But in cases where normal price was not ascertainable,the same would fall under Section 4(1)(b) and the valuation in suchcases 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, inwhich, the normal price may not be ascertainable. In addition, clause (b)also recognises the fact that there may be cases where normal price isCnot ascertainable for any other reason. These cases may perhapsinclude 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 neednot be the same universally, but could vary from one class of buyers toDanother or from one place of removal to another.

84. By the amendment under Act 10 of 2000, with effect from01.07.2000, the words “normal price” and the words “in the course ofwholesale trade” were removed. Instead, the words “transaction value”were inserted in Section 4(1)(a).

E

85. As rightly pointed out by the learned Additional SolicitorGeneral, the third question referred to the Constitution bench in CCE vs.Grasim Industries Limited[2] was whether or not the concept of“transaction value” makes any material departure from the deemednormal price concept of the erstwhile Section 4(1)(a) of the Act. In theFpenultimate paragraph of its decision, the Constitution bench answeredthis question in the following manner:

“Further, we hold that “transaction value” as defined inSection 4(3)(d) brought into force by the Amendment Act,2000, statutorily engrafts the additions to the “normal price”Gunder the old Section 4 as held to be permissible in BombayTyre International Ltd. (supra) besides giving effect to thechanged description of the levy of excise introduced in Section3 of the Act by the Amendment of 2000. In fact, we are of theview that there is no discernible difference in the statutory concept of “transaction value” and the judicially evolvedmeaning of “normal price”.”

86. Though the Constitution Bench in Grasim Industries notedthe shift, at least in the language, of Section 4(1), from “normal price” to“transaction value”, the Constitution Bench did not take note of onemajor 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 respectof sales made ordinarily in the course of wholesale trade. Themethod of valuation, wherever there was no sale, was to be on the basisof the Rules, in view of Section 4(1)(b). Even in cases where there wasa sale—

(i) in the course of wholesale trade but the conditions stipulated inclause (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 implicationflowing out of the words “for any other reason” found in clause (b)before amendment is of significance in this regard. After the amendmentunder Act 10 of 2000, the normal pricing method was gone, as the focusshifted from sale in the course of wholesale trade.

87. While clause (a) of sub-section (1) of Section 4, as it stoodbefore amendment, laid emphasis on normal price, clause (a) of sub-section (1) of Section 4, as it stands after amendment, speaks abouttransaction value. Clause (b) of sub-section (1), both before and afterthe amendment, leaves it to the delegated legislation to prescribe themethod of valuation, for cases not covered by clause (a).

88. For the valuation under Section 4(1) to follow the “transactionvalue”, (after amendment) the three conditions stipulated in clause (a),namely (i) that the goods are sold for delivery at the time and place ofremoval, (ii) that the assessee and buyer are not related and (iii) that theprice is the sole consideration for the sale, should be satisfied.

89. If the three conditions, enumerated in clause (a), (indicatedabove) are not satisfied, then the case would fall under clause (b) ofsub-section (1) of Section 4, which starts with the words “in any othercase”. In other words, in cases not covered by clause (a), the value canbe determined in such manner as may be prescribed.

A

B

C

D

E

F

G

H

A

90. After the amendment under Act 10 of 2000, the CentralGovernment issued a new set of rules called the Central Excise Valuation(Determination of Price of Excisable Goods) Rules, 2000. These ruleswere issued in exercise of the power conferred by Section 37, insupersession of the 1975 Valuation Rules.

B91. Rule 3 of the aforesaid 2000 Rules makes it clear that thevalue 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 permissibleonly in cases covered by Section 4(1)(b) and not by Section 4(1)(a). Forthe purpose of the issues on hand, it may not be necessary for us toCdwell 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 goodsshall be the ‘transaction value’. This expression ‘transaction value’ isdefined in clause (d) of sub-section (3) of Section 4. But if a case is notDcovered by clause (a) of sub-section (1) of Section 4, then the value ofthe excisable goods should be determined in accordance with the 2000Rules.

93. Therefore, in essence, an adjudicating authority is obliged todo the following, in respect of transactions that took place afterE01.07.2000:

(i) first, he must see whether there is a sale and

(ii) next, he must see if such sale satisfies the three conditionsstipulated in clause (a) of sub-section (1) of Section 4.

F

F94. In cases where there is a sale and the three conditions stipulatedin clause (a) of sub-section (1) of Section 4 are satisfied, the adjudicatingauthority 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 asale but the three conditions stipulated in clause (a) are not satisfied,then the adjudicating authority should fall back upon the Central ExciseGValuation (Determination of Price of Excisable Goods) Rules, 2000.

What the Adjudicating Authority and the Tribunal had andhad not done in these cases

95. First, let us see what they did, before looking at what they didnot. Broadly, in the batches of cases on hand (with one or two exceptions),the Adjudicating Authorities came to the following conclusions:

A

(i) that there was undervaluation and evasion of duty;

(ii) that in respect of sales effected both before and afterB01.07.2000, the invoice value, together with the cash paidover and above the invoice value, would represent the normalprice or the transaction value, as the case may be, and

(iii) that in cases where there was evidence to show that adealer had paid more than the invoice value, the amountCfound to have been paid by such a dealer, though relatableonly to a few out of the several transactions that he hadwith the assessee, should be taken to be the normal priceor the transaction value, as the case may be, applicable toall the transactions that the particular dealer had with theassessee.D

D

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 normalprice in respect of cases prior to 01.07.2000 and thatwherever a particular amount is actually found to have beenpaid by a dealer, the same could be taken to be thetransaction value, for cases after 01.07.02000; and E

(iii) to hold that the determination of the normal price or thetransaction value, as the case may be, should be confinedonly to the evidence available on record, but not to all thetransactions across the board.

F

97. But the Adjudicating Authorities as well as CESTAT are alsoguilty 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 itstood prior to 01.07.2000, whether there were sales in thecourse of wholesale trade, satisfying the 3 conditionsprescribed therein, falling under clause (a) of sub-section(1) or whether the sales in question fell under clause (b) ofsub-section (1) of Section 4; G

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A(ii)Failure to find out, in cases covered by Section 4(1) as itstands amended by Act 10 of 2000 with effect from01.07.2000, 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 fallingBunder clause (b) of sub-section (1) of Section 4 (before orafter the amendment), whether the valuation had to be doneonly in accordance with the Rules (1975 Rules or the 2000Rules, as the case may be), and

(iv) Failure to find out, in cases covered by Section 4(1)(b), theCspecific 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 CESTATfailed to make a determination as indicated above, we are of the viewDthat the orders of remand passed by the Tribunal, though for completelydifferent reasons, were justified. Hence the appeals are liable to bedisposed of, confirming the orders of remand passed by CESTAT, with aclarification on the legal issues so that the Adjudicating Authorities knowhow to proceed.

ConclusionE

99. In fine, these appeals are disposed of, confirming the impugnedorders of CESTAT setting aside the Orders-in-Original passed by theAdjudicating Authorities and remanding the matters back for re-adjudication. However, while carrying out the exercise of re-adjudication,Fthe Adjudicating Authorities should keep in mind the principles enumeratedhereunder:

A. Cases where the period of assessment is prior to 01.07.2000

I.First ascertain the price at which such goods are ordinarilysold by the assessee to a buyer who is not related to him, inGthe course of wholesale trade, at the time and place ofremoval and also find out whether the price is the soleconsideration for the sale. If the Adjudicating Authority isable to find this out, he may take such price as the normalprice and treat the case as covered by Section 4(1)(a), H

applying, wherever permissible, the prescriptions containedin the proviso to clause (a) of sub-section (1) of Section 4.

A

II.If the normal price is not ascertainable, either for the reasonthat the goods are not sold or for any other reason, then hemay take it that the case would fall under Section 4(1)(b)and take recourse in such cases, to the Central ExciseB(Valuation) Rules, 1975.

III.The phrase “for any other reason” appearing in Section4(1)(b) would include cases where the price charged in thecourse of wholesale trade is not discernible or where thesame, though discernible, cannot be linked to delivery atthe time and place of removal or where the price is not thesole consideration for the sale, even though the pricecharged in the course of wholesale trade for delivery at thetime and place of removal are available.

C

IV.If the case falls under Section 4(1)(b) and the AdjudicatingAuthority takes recourse to the method of valuationprescribed in the 1975 Rules, he shall find out which amongthe relevant rules would apply to the cases on hand beforeproceeding with the valuation.

D

B. Cases where the period of assessment is after 01.07.2000

E

I.First ascertain the “transaction value”, with particularreference to the definition of the said expression containedin Section 4(3)(d).

II.Apply the transaction value so ascertained, to cases wherethree conditions, namely (i) the goods are sold for deliveryat the time and place of removal, (ii) the assessee and buyerare not related and (iii) the price is the sole consideration,are satisfied. This is because such cases will fall underSection 4(1)(a).

F

III.In cases where one or more of the aforesaid three conditionsare not satisfied, and also in cases where there is no sale,the Adjudicating Authority should treat the cases as fallingunder Section 4(1)(b) and hence take recourse to the CentralExcise Valuation (Determination of Price of ExcisableGoods) Rules, 2000.

G

H

AIV.If a case falls under Section 4(1)(b) and the AdjudicatingAuthority takes recourse to the method of valuationprescribed in the 2000 Rules, he shall find out which amongthe relevant rules would apply to the case on hand beforeproceeding with the valuation.

Principles applicable in common (both pre and post amendment)

B

C. The Adjudicating Authority may treat any amount receivedeither in cash or otherwise, over and above the invoice value, as thevalue of excisable goods even in cases falling under Section 4(1)(a)(after the amendment), as the definition of “transaction value” underCSection 4(3)(d) means the price actually paid or payable.

D. The Adjudicating Authority shall keep in mind the fact thatwhile the expression “normal price” was not defined in Section 4(1)before amendment, the expression “transaction value” is defined veryexhaustively in Section 4(3)(d) and this definition is both inclusive aswell as exhaustive.D

E. Wherever there is a finding that a particular dealer/ customerhas paid a consideration over and above what is reflected in the invoice,the additional payment made by him together with the invoice value shallbe taken to be the transaction value, for all the transactions that theEparticular dealer/customer had with the assessee. In simple terms, if adealer/customer has made 10 purchases during the period in question,for a particular value stated in the invoice, the transaction valuedetermined on the basis of material relatable to a few out of thosetransactions, can be applied to all the transactions of that customer/dealer across the board for that period. However, the same value cannotFbe applied to the other dealers/ customers. This principle shall be followedin respect of cases arising after the amendment.

F. Since the matters are more than a decade old, the AdjudicatingAuthorities may conduct hearings, afford adequate opportunities to theparties and pass orders in original as early as possible.

G

The appeals are disposed of accordingly. There will be no orderas to costs.

H

Divya Pandey