Confiscation and Double Duty Demands Quashed: CESTAT Orders Fresh Quantification of Differential Duty on Inflated MRP Sales [Read Order]

The New Delhi Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside double duty demands and confiscation of goods imposed, thereby directing the Adjudicating Authority to freshly quantify the differential duty strictly on instances already established of sales at inflated Maximum Retail Prices (MRPs).

The assessee-appellant, Sharaya International, is a regular importer of deodorants and perfumes, filed the Bill of Entry No.8107125 dated 27.01.2015.

On examination by the officers, the goods were found not to be affixed with MRP labels, which was a requirement for assessment and clearance of these items in terms of Notification No.24/2000 issued by the Directorate General of Foreign Trade (DGFT), read with Excise Notification No.01/2002, Notification No. 05/2001 and 49/2008.

On completion of the investigation, proceedings were initiated against the appellant on the allegation that they had not revealed the MRP before the Customs and sold the goods at a higher MRP and thereby evaded the customs duty of ₹ 6,23,664 in respect of the live consignment seized at the port.

During search operations in the business premises of the appellant, where 121890 pieces of imported body spray/perfumes and gift packs worth ₹ 37,97,010 were found, which did not have MRP affixed on them. These goods were imported by paying duty on the declared Retail Selling Price (RSP).

A Show Cause Notice (SCN) was issued to the appellant. The Adjudicating Authority

confirmed the customs duty of ₹6,23,664 in respect of the goods covered by the live consignment, duty of ₹14,22,622 on the goods recovered in the godown, and duty of

₹91,86,981 in respect of the past imports of similar goods during the year 2014–2015, along with interest and penalty, while confiscation was ordered under Section 111(m) of the Customs Act, 1962.

On appeal in 2017, the Tribunal held that the duty demands and finding of violation on the live consignment were premature and cannot be sustained. It also held that the duty demand on the goods found in the godown cannot be sustained.

The Tribunal also held that, as the appellant admitted that the goods were sold on much higher MRP after changing the MRP label and that the goods were sold through retailers in Kerala, the MRP was more than double in certain cases, there was a clear violation and therefore, the demand of differential duty as well as penal action was justified. However, since the quantification was made in a summary manner, the matter was remanded to the original authority for re-quantification of duty.

On remand, the Adjudicating Authority failed to appreciate the limited scope of its jurisdiction and reconsidered all the issues on the merits.

The bench comprising Binu Tamta (Judicial Member) and P.V.Subba Rao (Technical Member)

observed that the Adjudicating Authority had exceeded its jurisdiction as the findings of the tribunal had already attained finality. Referring to Union of India v. Kamlakshi Finance Corporation Ltd.(1991) and Commissioner of Customs v. Kushalchand & Company (2015), it held that the orders of higher appellate authorities should be followed unreservedly by the subordinate authorities.

The Tribunal accordingly modified the impugned order as the confiscation under section 111(m) of the Act was set aside and consequently, the redemption fine also does not stand.

The Tribunal also set aside the amount of ₹6,23,664 relating to Bill of Entry No.8107125 dated 27.01.2015 and the customs duty amounting to ₹14,22,622, remaining amount of ₹66,41,737 was affirmed. Also, the penalty under Section 112(a) was reduced from ₹25,00,000 to ₹5,00,000 and under Section 114AA amounting ₹2,00,000 was set aside.

Accordingly, the appeal was partly allowed. The adjudicating authority’s overreach is corrected, and only the limited issue of quantification of differential duty on inflated MRP sales remains to be sustained in law.

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