2008 (3) TMI 565 - AT - Central Excise

Valuation - MRP Based Valuation - whether neam active tooth paste shall form part of the combi pack containing two Margo soaps?

Summary

Issues:
1. Valuation of neem active toothpaste in a combination package.
2. Interpretation of Section 4A of the Central Excise Act, 1944.
3. Applicability of Standards of Weights and Measures (Package Commodities) Rules, 1977.
4. Impact of the definition of "combination package" under Rule 2(c) of SWM Rules.

Issue 1: Valuation of neem active toothpaste in a combination package
The appellant challenged an order holding that the value of neem active toothpaste in a combi pack with two Margo soaps should be included in the MRP declared on the package. The authority relied on the definition of "multi Piece package" under SWM Rules, 1977. The appellant argued that Section 4A(2) of the Central Excise Act, 1944 governs the valuation of packaged commodities, and the neem toothpaste value should not be added to the MRP.

Issue 2: Interpretation of Section 4A of the Central Excise Act, 1944
The appellant contended that Section 4A prescribes the valuation method for package commodities and overrides the nature of sale. The appellant cited the Apex Court judgment in Jayanti Food Processing (P) Ltd. v. Commissioner of Central Excise, Rajasthan, emphasizing that the valuation should be based on the retail sale price declared on the packages. The appellant argued that any addition to the MRP declared on the package is contrary to the law.

Issue 3: Applicability of Standards of Weights and Measures (Package Commodities) Rules, 1977
The JDR for Revenue argued that the neem toothpaste given free in the package should be taxed by adding its value to the other packed goods. However, the Tribunal's decision in Vinayaka Mosquito Coil Manufacturing Co. v. C.C.E., Bangalore was cited by the appellant to support that even free items in a package should not affect the valuation method under Section 4A(2) of the Central Excise Act, 1944.

Issue 4: Impact of the definition of "combination package" under Rule 2(c) of SWM Rules
The Tribunal found that the goods in question were governed by Section 4A(1) of the Central Excise Act, 1944, and attracted Section 4A(2) for valuation purposes. The MRP declared on the package was deemed the value for excisability of the contents in the package, as per the overriding provision of Section 4A(2). The definition of "combination package" under Rule 2(c) of SWM Rules was crucial in determining that the MRP declared on the package is the sole value for excisability, leading to the appellant's success in the appeal.

This detailed analysis of the judgment highlights the key legal arguments, interpretations, and precedents considered by the Appellate Tribunal in deciding the issues related to the valuation of neem active toothpaste in a combination package under the relevant legal provisions.