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S.T.A. No.729/LB of 2004, decided on 16th September, 2008.

----Ss.4(2) & 3-B---Central Excise Rules, 1944, R.210---Determination of value for the purposes of duty---Levy of additional tax---Appellant was directed to pay short paid amount of central excise duty, sales tax and further tax along with additional duty under S.3-B of the Central Excise Act, 1944 upon the subsisting market retail price as against the retail price fixed by the appellant-Validity-Words used in S.4(2) of the Central Excise Act, 1944 were "should be sold the general bodies of the consumers" and not "is sold to the general bodies of the consumers"---Manufacturer was required to fix the retail price inclusive of all charges at which the goods should be sold---Manufacturer was not supposed to be responsible for any irresponsible act of the retailer---Condition levied upon the manufacturer in S.4(2) of the Central Excise Act, 1944 was that the retail price was legibly, prominently and indelibly printed or embossed on each article, packet, container, packages, wrapper or label as the case may be---No allegation was levelled that the manufacturer/appellant had not met these conditions---Department had persuaded the appellant to fix the retail price at the price at which it was being sold by the retailers, but the appellant had declined---Necessary measures could be taken by the appropriate authorities to combat the illegal profiteering but the central excise duty could not be charged at the will of the retailer---Show-cause notice and the orders were not in accordance with law---Appeal was accepted and additional demand was set aside by the Appellate Tribunal. Messrs Riaz Bottlers v. C.B.R. 2000 PTD 353 ref. Messrs Atlas Battery Limited, Karachi v. Superintendent, Central Excise and Land Customs, Circle-C, Karachi and others PLD 1984 SC 86 distinguished. Sardar Ahmad Jamal Sukhera for Appellant. Taqueer Zaman, S.I.O. for, Respondent. Date of hearing: 10th September, 2008.

The appellant has assailed, in this appeal, the Order-in-Original No.CE-15/04, dated 5-8-2004, vide which the appellant had been directed to pay the central excise duty upon the subsisting market retail price as against the retail price fixed by the appellant and was ordered to pay short paid amount of Rs.40,29,01, Rs.60,43,526 and Rs.12,08,705 on account of central excise duty, sales tax and further tax respectively, along with additional duty under section 3-B of the Central Excises Act, 1944 and penalties amounting to Rs.25,000 under Rule 210 of the Central Excise Rules, 1944 and Rs.1,81,305.78 being 3% of the amount of sales tax involved under section 33(2)(cc), Rs.25,000 under section 4(f), Rs.25,000 under section 33(5) and Rs.25,000 under section 33(6) of the Sales Tax Act, 1990. 2. The appellant set up a case in the memo. of appeal that it was a manufacturer of Fruit Juices, Syrups and Squashes. The said products of the appellant were charged to central excise duty under section 4(2) of the Central Excises Act, 1944, which inter alia provided that the manufacturer will fix the retail price of the products and central excise duty will be built into in such a retail price. The appellant received a Letter C. No.11/Inq/61/02/3172, dated 25-11-2002, from the Superintendent, Directorate General of Intelligence and Investigation (Customs, Central Excise and Sales Tax), Central Region, Gulberg-III, Lahore, alleging that the products of the appellant were being sold in the open market at a price higher than the one which was fixed by the appellant and the appellant was paying duties and taxes on a less price than the one at which the appellant should have paid the said taxes and duties. Reply thereto, dated 3-13-2002, was sent to the Superintendent, Directorate General of Intelligence and Investigation, Lahore. The Superintendent did not agree with the submissions raised by the appellant and a Letter C. No.11/Inq/61/02/2007, dated 18-11-2003, was issued by the Deputy Director, requiring the appellant to adjust the retail price in line with the market price. Subsequently, a Show-Cause Notice C. No.76-Add-Col-II/3/5118, dated 20-10-2003, was issued by the respondent No. l. Reply dated 18-11-2003, was submitted. Respondent No.1, rejected submissions made by the appellant and issued Order-in-Original No.CE-15/04, dated 5-8-2004. It has been contended that the impugned order was arbitrary and unlawful on so many grounds. The entire case of the department revolved around so called market survey on the basis of which it had been alleged that the products of the appellant were being sold in open market at a higher price than the one fixed by the appellant and the appellant short paid duties and taxes in this regard. The evidence submitted by the department to substantiate the so-called market survey was merely three cash memos. The particulars whereof were as bellow:--

3. It has been contended that the said market survey was conducted behind the back of the appellant and merely provided three cash memos of three retailers out of more than 15,000 retailers in the market and gave price of 5 bottles out of 4,93,55,112 bottles sold during the year by the appellant. The first cash memo. was without date and the second was outside the notice period for which the show cause had been issued. All the 3 cash memos did not bear any number at all. It was evident that no survey was conducted and only 3 cash memos were obtained from the retailers in a mala fide manner just to harass the appellant. It has further been contended that the appellant did not succumb to the illegal demand. During the course of hearing the appellant submitted cash memos from the same persons from whom the department had obtained the cash memos and the said cash memos obtained by the appellant established that the same retailers were selling the product of the appellant at the price which had been fixed by the appellant and not at a higher price as alleged in the show-cause notice and in the impugned order. The data collected by the appellant was as below:--

4. The appellant has further submitted that the Directorate of Intelligence had no powers to demand the duties and taxes on the basis of market price instead of price declared by the manufacturer as held by the Hon"ble Superior Courts and this Tribunal from time to time. Once the appellant/manufacturer declared the retail price and published the same in the leading Newspapers, it discharged its obligation and could not be held responsible for any irresponsible act of the retailers. The prices were reduced from 1st November, 2002 to 31st January, 2003, whereas calculation of short paid duties and taxes included 12 months on the months on the basis of 3 alleged cash memos which was arbitrary. It has, however, been pleaded that the reply to the show-cause notice should also be read as a part of the memo. of appeal. It has been prayed that the show-cause notice C.No. 76-Add/Coll-2/03/5118, dated 20-10-2003, and Order-in-Original No.CE-15/04, dated 5-8-2004, may be set aside and the declared as without any lawful authorities. 5. Before enumerating the departmental comments, the crux of the reply to the show-cause notice may also be mentioned. It had been submitted in the reply to show-cause notice that Shezan Juices were classifiable under PCT Heading 20.09 and were chargeable to central excise duty @ 10% of the retail price and sales tax @ 15% on the retail price. It had been alleged in the show-cause" notice that during the period January, 2002 to January, 2003, the manufacturer had evaded central excise duty to the tune of Rs.40,29,018, sales tax Rs.60,43,526 and further tax Rs.12,08,705, total being Rs.1,12,81,249. The staff of Customs Intelligence had framed this case on the presumption that the goods must necessarily be available in the open market at the retail price which was fixed by the manufacturer and is printed on the pack/container and the detecting agency had also made all the products of answering manufacturer to which other brands i.e. Frost and Tropica were allegedly being sold at Rs.8 per pack and in the opinion of staff of Customs that the manufacturer were being paid duty in accordance with section 4(2) of the Central Excises Act, 1944 and section 2(27) of the Sales Tax Act, 1990 and the detecting agency had also referred to certain foreign brands of aerated water viz. Pepsi Cola, Coca Cola and R.C. Cola, the bottles of which were being sold at Rs.8 per bottle and the excise duty was, being paid on the retail price of Rs.6.26 per bottle. The detecting staff had observed that the consumer price fixed was Rs.8 per pack, the chilling charges were @ 10% being Re.0.80 per pack. The consumer price of unchilled pack was Rs.7.20 per pack and actual price after element of sales tax @ 15% was Rs.6.26 per pack. The impugned show-cause notice was misconceived and prejudiced. The language of section 4(2) of the Central Excises Act, 1944 was clear and provided that retail price shall be the price fixed by the manufacturer inclusive of all charges and taxes. Once the price was embossed, no one from the general bodies of consumer would be prepared to pay in excess of the printed price. It had been observed in Messrs Riaz Bottlers v. C.B.R. reported as 2000 PTD 353 that if some person sells the bottles at a higher price than one printed on the bottle, the manufacturer could not be saddled with the responsibility. 6. The Department furnished the comments. They admitted to the extent that the products of the appellant were charged to central excise duty under section 4(2) of the Central Excises Act, 1944. However, the following ingredients of retails price had been defined by the Hon"ble apex Court in Civil Appeal No.274/79 Messrs Atlas Battery Limited Karachi v. Superintendent, Central Excise and Land Customs, Circle-C, Karachi and others, reported as PLD 1984 SC 86.

(i) It shall be price fixed by the manufacturer,

(ii) It shall be inclusive of all charges and taxes.

(iii) It shall be the price at which the particular brand or variety of such article should be sold to the general body of consumers.

(iv) If more than one such price is so fixed for the same brand or variety it shall be the highest of such price. 7. The department denied that the Order-in-Original No.CE-15/04, dated 5-8-2004, was arbitrary and unlawful. Section 4(2) of the Central Excises Act, 1944 mentioned that:--

"It shall be the price fixed by the manufacturer inclusive of all charges and taxes and it shall be the price at which the particular brand or variety of such article should be sold to general bodies of consumers." 8. The products of the appellant were being sold to the general bodies at the higher rate than fixed by them. The contention of the appellant that the market survey was conducted at behind back of the appellant was not correct. The juice manufacturers, whose declared retail prices were not in accordance with the provisions of section 4(2) of the Central Excise Act, 1944 and section,2(27) of the Sales Tax Act, 1990, hurriedly established an Association namely Pakistan Fruit Processor Association to cope with the situation. The said Association vide their Letter No.207 of 2002, dated 7-2-2003, addressed to the Director Intelligence and Investigation (Customs and Excise), Central Region, Lahore had reiterated their arguments as already submitted to the detecting agency and asked for a personal meeting in this regard with the Director. A meeting was held wherein the manufacturers took up the point that they had printed and declared the price, but the retailers were getting undue profits and they had no control on the retailers. It was explained by the Department that one of the essential ingredients of the retail price is the availability of the product according to the declared retail price, while their products were being sold at Rs.8 per bottle, whereas other units, whose products are available to the consumers at Rs.8 per bottle, were paying central excise duty and sales tax accordingly. The Association claimed that their product was being sold at Rs.7 per bottle and offered for a joint market survey to verify their version, but they did not turn up, therefore, the detecting agency had no option, but to proceed in the matter and collect samples from the open market, the proof of which was available on the record. The same situation still prevail in the open market. The contravention report was submitted to the concerned Adjudicating Authority on 4-4-2003, along with evidential documents and the appellant had neither produced the receipts in question nor it discussed in their reply to the show-cause notice. If, the appellant had got any such subsequently collected cash memos they could have produced the same to the learned adjudicating authority. The demand in the show-cause notice was just in accordance with law. The appellant had reduced the retail price of their products from Rs.5.48 to Rs.4.70 during the period November, 2002 to January, 2003, whereas printing on the crown corks of the bottle were never changed and when inquired from the representative of the aforesaid unit they admitted the fact and stated that they had got huge quantity of printing crown corks bearing higher price, therefore, they did not reprint crown corks and used the same. The manufacturer was asked to produce the sale invoice, but they did not turn up. It was pertinent to mention that Frost and Tropica brand juices with the same ingredients, as the product of the appellant, were being sold at Rs.8 per pack and their manufacturers were paying central excise duty accordingly. They prayed for the dismissal of appeal as being without merit. 9. Arguments were heard. The learned counsel argued that once the manufacturer printed the price upon the pack and published it widely in the Newspapers and periodicals and other Electronic Media, it discharged its obligation and was not responsible for any delinquent attitude of the retailer, who tried to make any un-necessary game. The learned counsel further argued that the appellant had no control over the retailers, who offered that the appellant had no control over the retailers, who offered the bottle under their own exigencies, priorities, arrangements and environments. The appellant had no police force or any other mechanism to bridle the retailers. The same beverage was sold for example at Rs.7 per bottle at a Kokha and the same was being sold at Rs.15 in some cozy or reputed restaurant. 10. The learned Auditor defended the impugned order. He submitted that the department had furnished detailed comments and it cited the case of the Hon"ble Supreme Court of Pakistan as well which may be gone into. 11. We have carefully gone through the rival contentions put forth by the parties orally as well as in writing and find that the appeal is tenable and worthwhile. Subsection (2) of section 4 of the Central Excises Act, 1944 may be reproduced for ready reference:-- 4(2) Notwithstanding the provisions of subsection (1), the Federal Government may, by notification in the official Gazette, declare that in respect of any goods or class of goods the duty shall be charged on the retail price fixed by the manufacturer, inclusive of all charges and taxes, other than sales tax levied and collected under section 3 of the Sales Tax Act, 1990 [****]at which any particular brand or variety of such article should he sold to the general body of consumers or, if more than one such price is so fixed of the same brand or variety, the highest of such price:

Provided that the retail price shall be legibly, prominently and indelibly printed or embossed on each article, packet, container, package, cover or label, as the case may be. 12. The words used in subsection (2) of the section 4 are "should be sold to the general bodies of the consumers" and not "is sold to the general bodies of the consumers". The manufacturer was required to fix the retail price inclusive of all charges at which the bottles should be sold. He is not supposed to be responsible for any irresponsible act of the retailer. It is, of course, required that the availability of the product should be sufficient if not in abundance it was only one of the beverages offered to the public and not a sole beverage. As revealed from the memo. of appeal, the appellant had supplied during the period 4,93,55,112 bottles which had not been denied in the corresponding part of the comments. The supply, therefore, appeared to be quite adequate. 13. It had been rightly argued that once cash memos collected by the respondent did not carry any date, the other was beyond the period of show-cause notice and the third one being the solitary instance, which could hardly form the basis for taking the drastic action. 14. The appellant had placed on record vouchers from the same retailers which also indicated that it was the volatile act of the retailers and not any contravention of the appellant that the same bottle was being sold at different price on two occasions. 15. We have gone through the case of Messrs Atlas Battery Limited Karachi v. Superintendent, Central Excise and Land Customs, Circle-C, Karachi and others relied upon by the respondents in the comments. With utmost respect of the apex Court we find that the question in the cited case was not the same as the question before us. It had been observed by their lordships that the manufacturer is entitled to fix the retail price of the goods under subsection (2) of section 4 of the Central Excises Act, 1944, yet all such price should not be fixed arbitrarily and if the price printed on the goods did not constitute retail price then the assessment was to be made under the category of article chargeable with duty at ad valorem rate and the dominant element at the foundation of the concept of the retail price was the price at which the goods were offered to the general public of consumers. It was further observed that in fixing the retail price all charges and taxes were to be taken into account and included. The lis before the Hon"ble Supreme Court of Pakistan was not that any product was being sold at a higher price than the declared, printed and embossed by the retailers. 16. The condition levied upon the retailer in the subsection (2) of section 4 was that the retail price was legibly, prominently and indelibly printed or embossed on each article, packet, container, packages, wrapper or label as the case may be. There is no allegation that the manufacturer/appellant had not met these conditions. The department had persuaded the appellant to fix the retail price at the price at which it was being sold by the retailers, but the appellant had declined. The appellant obviously felt that keeping in view the cost of production etc., the appellant could supply at the retail price declared by it and not at enhanced retail price. Necessary measures could be taken by the appropriate authorities to combat the illegal profiteering, but the central excise duty could not be charged at the will of the retailers. With this discussion, we find that the show-cause notice and the impugned orders were not in accordance with law. Hence, the appeal is accepted and any additional demand is hereby set aside. C.M.A./120/Tax(Trib.) Appeal accepted.

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