COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, ROHTAK versus MERINO PANEL PRODUCT LTD.

Citation: [2022] 18 S.C.R. 28 · Decided: 05-12-2022 · Supreme Court of India · Bench: SURYA KANT · Disposal: Disposed off

Cited by 2 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 18 S.C.R.
COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX,
ROHTAK
v.
MERINO PANEL PRODUCT LTD.
(Civil Appeal No. 6891 of 2018)
DECEMBER 05, 2022
[SURYA KANT AND J.B. PARDIWALA, JJ.]
Central Excise Act, 1944 – s.4(1)(a) – Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000 – rr. 9, 11
– Customs, Excise and Service Tax Appellate Tribunal set aside the
show cause notice issued by the Appellant-Revenue to the Assessee-
Respondent, on the ground that it had invoked an incorrect method
of valuing related party transactions – Correctness of – Held: The
assessable value for the related party sales can be established by
referring to the normal price u/s.4(1)(a) of the CEA, which is readily
available in the present case – This is the true meaning and intention
underlying the CBEC Circular of 01.07.2002 – Reference to r.11 in
Point No. 12 of the Circular simply mandates the usage of
“reasonable means” keeping in mind s.4(1)(a) of the CEA and r.9
of the CEVR – This is merely a method by which the Revenue is
required to apply its mind to a case of partial sales to both
independent and related parties – Point No. 12 in the Circular of
01.07.2002 is not contrary to the intent of the CEA and CEVR and
the object behind it is to merely use “reasonable means” as outlined
u/r.11 of the CEVR, in conformity with s.4(1)(a) of the CEA and r.9
of the CEVR, so as to reach the assessable value of goods for
determination of excise duty – When the normal price that is
ordinarily charged in dealings where the price itself is the sole
consideration of the transaction is available, as it is here, that price
can be transposed onto the related party purchases as well, to arrive
at the assessable value – Hence, the order of the Commissioner
regarding the value of the goods sold to the Respondent’s sister
concerns is in consonance with Supreme Court’s earlier judgments
and the Circular dated 01.07.2002 – Demand made by the Appellant
is confirmed however, the levy of interest and penalties upon the
   [2022] 18 S.C.R. 28
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Respondent is not approved – These amounts be reduced from the
total recoverable amount from the Assessee.
Tax/Taxation – Held: Maintaining predictability in taxation
law is of utmost importance and, for this reason, the Court should
not accept an argument by the Revenue that waters down its own
Circular – Revenue’s stance against its own circular can potentially
lead to a chaotic situation where, with one hand, the Revenue would
lay down instructions on how to interpret the relevant statutes and
rules, and with the other hand, it would promptly disobey those
very directions.
Central Excise Act, 1944 – s.4(1)(a), (b) – Held: Principles
u/s.4(1) of the CEA are geared toward determination of the ‘value’
of goods – Under s.4(1)(a), the value of goods for the purposes of
excise duty, is deemed to be the ‘normal price’ of the goods that are
‘ordinarily sold’ in the course of business, and where the price is
the ‘sole consideration’ for the transaction – It is only when this
cannot be gleaned from the set of transactions available on record
that s.4(1)(b) is resorted to.
Excise Duty – Determination of excise duty on related
transactions – Held: Price charged from independent parties for
the sale of excisable goods can be used as a benchmark for
determination of excise duty on related transactions when such a
price is readily available – However, when making such calculations
via transposition, the Revenue cannot act in a mechanical way –
The assessment of the appropriate value of the related party
transaction must be made after considering relevant material and
due application of mind – The entire quasi-judicial process of issuing
a show cause notice and considering the distinguishing factors
placed by the Assessee must be completed before the price of sales
to independent buyers is utilized as a benchmark for sales to related
parties – The general principles of s.4(1) of the CEA, r/w r.11 of the
CEVR, are meant to provide a pathway for determination of the
“normal price” and “value” of goods in cases where no alternative
methodology is applicable – This fulfils the dual objectives of being
in consonance with the Circular dated 01.07.2002 and harmonizing
different provisions of the CEA and CEVR – Central Excise Act,
1944 – s.4(1) – Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000 – r.11.
COMMNR. OF CENTRAL EXCISE & S

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