By TIOL News Service

MUMBAI, SEPT 18, 2015: IN the year 1999, appellant cleared 3928 numbers of luxury pillows at a low rate of Rs. 10/- per pillow though similar goods were being sold at Rs. 162/- per piece.

Revenue wanted to know the reasons for the ridiculously low price and, therefore, called for the documents and also summoned the Excise officer of the company. He informed that he would visit the CE office with all documents but he did not turn up for over a year. Later, it was learnt that the excise officer had left the organisation. Thereafter, the department summoned the Finance Manager but he too whiled away time.

After a year or so, the Finance Manager claimed that the subject pillows were lying in stock since 1994 and were badly damaged and so they sold these pillows in 1999 at low rate of Rs10/- per pillow. He, however, could not justify from the records viz. RG-1 that the said pillows were lying with them for the last 5 years. In his statement, he admitted that it was not possible to correlate and give proof of stock of product in question. The invoices issued too did not indicate that the pillows being sold are old and damaged.

A SCN came to be issued demanding differential duty and the AC, CEX, in November 2004, confirmed the demand of Rs. 1,43,293/- and imposed equal amount of penalty and also interest.

The Commissioner (A), in April 2005, rejected the appeal of the assessee.

Before the CESTAT, the appellant submitted that they were manufacturing luxury pillows for Bombay Dyeing and in 1994 their contract was terminated and these pillows were left alone .By 1999, these pillows got badly damaged and were in a bad shape and, therefore, they were sold at a price of Rs.10/- per pillow. Further, the department had not submitted evidence that the normal price of the pillow is Rs.162/- per piece and in the absence of evidence relating to the normal price, value of Rs.162/- pillow cannot be taken. In any case the pillows were badly damaged and would not have fetched any value and, therefore, they were sold just like that. So also, as the copy of the invoices were available with the department, they could have made enquiry with the buyer of the goods to ascertain the facts but it was not done. Moreover, the extended period cannot be invoked as nothing was suppressed from the department.

The AR submitted that this was a theory floated by the appellant (that the pillows were old and damaged); that the invoices nowhere indicated the state of the pillows; no evidence or statutory records were produced to show that the pillows were so old; there is no evidence of the contract being terminated; that a prudent manufacturer would not have kept such a huge number of pillows for over 5 years without disposing them of. The apex court decision in CCE vs. Fiat India P. Ltd. 2012-TIOL-58-SC-CX was relied upon.

The appellant offered his rebuttal to the aforesaid submissions of the AR and mentioned that the apex court in paragraph 50 has clarified that there can be case when a manufacturer may sell the goods at lower price if goods are not sold within reasonable time. Furthermore, the RG1 account is already with department and internal production report was also shared; that it is for the revenue to prove that the date of manufacture is not 1994.

The Bench observed -

+ Firstly, we observe the present case pertains to the period 1999 when the old Section 4 was in force and the concept was of the normal value of the goods and not of the transaction value. We also note that at the time of issuance of the show-cause notice itself revenue has claimed that the normal value of the said pillow is Rs162/-. Appellant has not questioned the same and did not produce any evidence to show that they were selling at some other price to other customers. Ld. counsel's contention that Revenue has not produced any evidence that normal value is Rs.162/- is therefore dismissed. Further, we note that the invoice and the documents nowhere indicates that the pillow sold were old and damaged. Appellants have also not been able to produce any evidence in support of their contention that the pillow were old and damaged. No statutory or other records could be produced by them which would indicate that the pillow manufactured in 1994 were lying with them till 1999.

+ There is no evidence that RG-1 register are with Revenue. On the contrary, during investigation Shri Parikh was asked to justify from the RG-1 register and he failed to do. Similar is the position regarding internal reports of tailoring department.

+ It is the appellant who is claiming that goods cleared in 1999 were actually manufactured in 1994. It is for the appellant to produce evidence in support of his claim. The evidences produced do not support the case of appellant. Normally no prudent businessman will keep pillows for five years.

+ In the overall facts of the case, we are therefore of the considered view that the normal price at which such pillow were being sold will be the correct assessable value for the goods in question.

Holding that the case made by the Revenue was correct, the demand was upheld.

The plea of the demand being hit by limitation was also rejected by observing that self assessment was prevalent at the material time and the fact of their selling the pillows at a low price was suppressed. Penalty and interest imposed u/s 11AC, 11AB respectively was also held to be proper.

In fine, the appeal was dismissed.

In passing: Additional consideration…when pillows talk ….

(See 2015-TIOL-1968-CESTAT-MUM)