Chennai CESTAT: Dept. Has No Power to Re-Determine MRP of Laptop with Bags

The department cannot re-determine the MRP of laptops imported by Acer India, Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) witnessed that though the adjudicating authority has remarked that Rule 6 of 2008 is applied to redetermine RSP, it can be glimpsed that the procedure of arriving at the redetermined MRP is not under the norms of Section 4A of the Central Excise Act. and Rules.

The adjudicating authority’s procedure is to deduct the negotiated price of the backpack from the purchase order price. The purchase order price, or bid price, is inclusive of items that are not imported. Further, the department has no case that such a backpack can be obtained for Rs. 225 from the market.

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The petitioner has been importing and clearing notebook and laptop computers and supplying them before M/s. Electronics Corporation of Tamil Nadu Ltd. (ELCOT) and other state government agencies for free distribution to students. SIIB officers inspected the goods stored at the warehouse of the importer, on specific intelligence that the appellant exceeded the actual sale price by mis-declaring the MRP to evade customs duty (CVD).

It came to know on inquiry that the laptop bags were bought locally and packed in a box along with the laptop computer, and a combined MRP of Rs. 16,899 had been affixed to both the laptop computer and the laptop bag. Several tax invoice copies billed to schools in Nilgiris District, Tamil Nadu, were also found and seized.

The laptops of the Acer brand were signified for supply to M/s. Rajcomp Info Services Ltd. for free distribution to the students of Rajasthan. The department registered an offence for evasion of duty concerning the same laptops, for which an SCN (Show Cause Notice) was issued separately. The dispute is about the notebook and laptop computers meant for supply to M/s.ELCOT for free distribution to schools in Tamil Nadu only.

It has been remarked by the department that there was a distinction between the MRP affixed to the laptops during import and the MRP that was affixed to the laptop including a carry bag that was to be supplied before ELCOT. During importing certain entry bills, the MRP reported for a laptop alone was Rs. 14,399, whereas the MRP asserted that supply to ELCOT with a carry bag was inclusive of VAT.

The importer asserted that the cost difference was because the supply to ELCOT was to be made with a laptop bag, whereas the order placed with the foreign supplier was just for a laptop. The laptop bags were in possession locally through the appellant at a rate of Rs. 225, though the market price of the laptop bag is Rs. 2500.

After packing the laptop along with the carry bags the appellant had affixed the new MRP for supply to ELCOT, and hence the difference in MRP during the import and at the time of supply to M/s. ELCOT.

It was argued by the department that the appellant had undervalued the MRP during the import of the laptop to evade payment of countervailing duty (CVD). On August 8, 2017, SCN was issued asking to reject the MRP declared by the appellant in the Bills of Entry and to re-determine it under section 4A of the Central Excise Act., 1944, read with the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. SCN offered to ask for a differential CVD accompanying interest and also offered to assess penalties, apart from offering to hold the goods accountable for seizure.

Post due procedure of statute, the original authority refused the MRP declared via the appellant during the import and re-determined it.

The adjudicating authority ordered the seizure of the goods, established the demand for differential duty (CVD) including interest, and gave the option to redeem the goods on payment of a redemption fine. Penalties were also levied.

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Section 4A was introduced with effect from May 14, 1977, and no provision was there for claiming (or redetermining) the price (RSP) in the case of a breach of the provisions. Subsection (4) to Section 4A for ascertaining or redetermining the RSP came to be introduced only w.e.f. 14.5.2003. Subsection (4) then cites that the RSP of the goods will be claimed in the specified manner.

The Rules 2008 putting forth the specified manner or ascertaining procedure were introduced under Notification 13/2008 (NT) dt. 1.3.2008 only. The adjudicating authority has resorted to Rule 6 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008.

Under Rule 3, as aforesaid, the rules shall be applicable for the case of redetermination of the sale price (RSP) of excisable goods under subsection (4) of Section 4A of the Central Excise Act. Nothing quoted that it would apply to Section 3 of the Customs Tariff Act. Pertinently, Section 3 of the Customs Tariff Act, though it refers to Section 4A, does not adopt it to determine the assessable value.

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The tribunal, for payment of CVD on imported goods notified under subsection (1) of Section 4A, the value of the imported article would be considered to be the RSP declared on the imported article less such amount of abatement.

The proviso to Section (3) itself defines how the value ought to be determined for imported goods to which the Legal Metrology Act, 2009, and Rules thereunder apply. No provision is envisaged for redetermination of the MRP.

The proviso to subsection (2) of Section 3 merely refers to subsection (1) of Section 4A to indicate the class or description of goods notified. Subsection (2) of Section 4A is referred to as permitting abatement on the declared MRP to specify the payment of CVD value. The proviso to subsection (2) of Section 3 does not use the words that ‘the entire provision of Section 4A would be applicable’.