2007 (2) TMI 35 - AT - Central Excise

Revenue can not go beyond its own circular Goods sold in bulk which are not meant for retail sale but for free consumption shall be assessed on transaction value not on MRP.

Issues Involved:
1. Applicability of Section 4A of the Central Excise Act, 1944 for valuation based on Maximum Retail Price (MRP).
2. Interpretation of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
3. Relevance of CBEC Circular No. 625-16-2002-CX, dated 28-2-2002.
4. Precedent cases and conflicting judgments.
5. Limitation and bona fide belief regarding duty evasion.

Detailed Analysis:

1. Applicability of Section 4A of the Central Excise Act, 1944 for valuation based on Maximum Retail Price (MRP):

The appellants argued that the pesticides supplied to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. in 100 ml packs were not intended for retail sale and did not bear any retail price. Therefore, these goods should not be valued under Section 4A of the Central Excise Act, 1944, which mandates valuation based on MRP. The appellants continued to value these goods under Section 4 of the Act at transaction value.

2. Interpretation of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977:

The appellants referenced Rule 3 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which states that the provisions apply to packages intended for retail sale. They contended that since the pesticides were not intended for retail sale but for free distribution, they were not required to declare an MRP on the packages. This interpretation was supported by Rule 2(q), defining "retail sale" as sales for consumption by individuals or groups.

3. Relevance of CBEC Circular No. 625-16-2002-CX, dated 28-2-2002:

The appellants cited the CBEC Circular, which clarified that Section 4A applies only to goods required to declare MRP under the Standards of Weights and Measures Act or other relevant laws. The circular provided examples where MRP-based assessment would not apply, such as bulk supplies for industrial use, items supplied free as marketing strategies, and goods meant for export. The appellants argued their case was covered by this circular as the pesticides were supplied free and not intended for retail sale.

4. Precedent cases and conflicting judgments:

The appellants referenced several Tribunal decisions supporting their stance, such as G.S. Enterprises v. CCE, Jaipur and CCE, Ludhiana v. Pepsi Foods Limited, where goods supplied free without MRP were valued under Section 4. However, they acknowledged contrary judgments like Nestle India Limited v. CCE and Jayanti Food Processing Pvt. Ltd. v. CCE, which held that once goods are notified under Section 4A, they must be assessed on MRP regardless of retail sale. The appellants distinguished their case by noting that no MRP was declared on their products.

5. Limitation and bona fide belief regarding duty evasion:

The appellants argued that they had no intention to evade duty and believed in good faith that their goods were not subject to MRP-based valuation due to the lack of retail sale. They contended that the adjudicating authority could not adopt the MRP of similar products without prescribed rules for determining MRP in such cases.

Conclusion:

The Tribunal concluded that for MRP-based assessment under Section 4A(1), two criteria must be met: the goods must be specified by the Central Government and must be required to declare MRP under relevant laws. The Tribunal noted that the CBEC Circular dated 28-2-2002 and various CESTAT decisions supported the principle that MRP-based assessment applies only if there is a statutory requirement to declare MRP. The Tribunal held that the pesticides supplied in bulk to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. were not meant for retail sale and thus, should be assessed under Section 4 on transaction value, not under Section 4A. The appeal was allowed on merit, and the limitation aspect was not addressed.

Pronouncement:
The judgment was pronounced in court on 23-2-2007.

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