2009 (4) TMI 698 - AT - Central Excise

Summary

Issues Involved:
1. Whether base paints are pre-packed commodities under the Standards of Weights and Measures Act (SW&M Act) and the Packaged Commodities (PC) Rules.
2. Whether the valuation of base paints should be done u/s 4A or u/s 4 of the Central Excise Act.
3. Whether the demand for differential duty is justified and if the extended period of limitation is applicable.

Summary:

1. Pre-packed Commodity Status:
M/s. Berger Paints Ltd. (Berger) manufactures base paints, which are pre-packed commodities with MRP affixed. The authorities argued that base paints are not pre-packed commodities under the SW&M Act because the package is opened at the retail shop for tinting before sale to the ultimate consumer. However, the Tribunal found that the Ministry of Consumer Affairs had authorized Berger to pre-pack base paints in non-standard quantities, and base paints were included in Schedule III to the PC Rules. Thus, base paints continued to be pre-packed commodities under the PC Rules.

2. Valuation u/s 4A vs. u/s 4:
The authorities contended that the valuation of base paints should be done u/s 4 of the Central Excise Act, as they are not sold in pre-packed condition to the ultimate consumer. Berger argued that base paints are covered under the PC Rules and should be valued u/s 4A. The Tribunal held that base paints are pre-packed commodities with MRP affixed, and the ultimate consumer buys the base paint from the dealer for tinting. Therefore, the valuation should be done u/s 4A, and the Commissioner's orders denying MRP-based assessment were unsustainable.

3. Demand for Differential Duty and Limitation:
The Department demanded differential duty without considering the transaction value at which base paints are sold to dealers, calculating the differential by deducting 5% trade discount from MRP. The Tribunal found this calculation incorrect as MRP is irrelevant when assessing under Section 4. Berger also argued that the demand for differential duty was hit by limitation, as the Department was aware of the practice of tinting base paints since 2000. The Tribunal did not address the computation errors or the issue of limitation as the appeal was allowed on the primary grounds.

Conclusion:
The Tribunal set aside the Commissioner's orders and allowed the appeals filed by M/s. Berger Paints, holding that base paints are pre-packed commodities and should be valued u/s 4A of the Central Excise Act.