2012 (12) TMI 920 - AT - Central Excise

Valuation of goods - Determination of assessable value on the basis of their MRP - Penalty u/s 11AC - Held that - all the items which are being cleared in combination pack are notified under Section 4A for assessment of the duty on the basis of their MRP. There is also no dispute that each of the items in the combination pack was individually packed and while the individual items of the combination pack were not carrying individual MRP on them, there was MRP for the combination. There is also no dispute that the combination packs were not further packed in a bigger pack and according to the Appellant were being delivered together tied by a ribbon. The point of dispute is that as to whether in respect of clearances of such combination packs , duty liability is to be determined in respect of each item in the combination on the basis of its individual MRP or duty is to be calculated by treating the combination as one item on the basis of its combined MRP. There is one more reason as to why the combined MRP of the combo pack can not be the basis for determining the assessable value under Section 4A. Rule 15 of the SWM Rules refers to the combination pack of dissimilar items which are actually packed in a bigger pack on which MRP is required to be declared. In this case, admittedly the combination packs of Referigerator with water purifiers, Refrigerators with washing machines or CTVs with VCD players are not actually packed in a bigger package. The combination packs in this case have to be treated as combination sales as a marketing strategy under which on purchase of two items refrigerator with washing machines, refrigerator with water purifier or CTVs with VCD players, the price charged is less than their individual MRP. Such combination sales, in our view, cannot be treated as combination pack or packaged commodity as understood in SWM Rules and have to be treated as sale of individually packed items at a combined price - Decided against assessee.

Summary

Issues:
1. Duty liability on combination packs of dissimilar items under Section 4A of the Central Excise Act, 1944.
2. Applicability of MRP for determining assessable value of combination packs.
3. Interpretation of Central Excise Rules regarding duty payment on combination packs.
4. Relevance of Board's Circular on multi-piece packages to combination packs.
5. Whether combination sales can be treated as combination packs under SWM Rules.

Analysis:
1. The case involved duty liability on combination packs of dissimilar items under Section 4A of the Central Excise Act, 1944. The appellant argued that the MRP declared for the combination pack should be the basis for determining the assessable value, citing Tribunal judgments and a Board's Circular. The department contended that duty should be calculated separately for each item in the combination pack based on individual MRPs.

2. The Tribunal analyzed the provisions of the Central Excise Act and Rules regarding duty payment. It highlighted that duty is payable on excisable goods at the time of clearance, whether sold individually or in combination packs. The Tribunal emphasized that for combination packs of dissimilar items, duty should be determined separately for each item based on individual MRPs, considering possible variations in abatements and duty rates.

3. The Tribunal discussed the relevance of the Board's Circular on multi-piece packages to combination packs. It concluded that the Circular's application is limited to packages containing similar items and cannot be extended to combination packs of dissimilar items. The judgment in the case of G.S. Enterprises was cited as applicable, affirming duty calculation based on individual MRPs for such combination packs.

4. Additionally, the Tribunal addressed the distinction between combination packs and combination sales as marketing strategies. It noted that combination packs of dissimilar items, such as refrigerators with washing machines, should not be treated as packaged commodities under SWM Rules but rather as individually packed items sold at a combined price. This further supported the argument for duty calculation based on individual MRPs.

5. Considering the arguments and legal provisions, the Tribunal upheld the impugned order, dismissing the appeal. It concluded that duty liability for combination packs of dissimilar items under Section 4A should be determined based on individual MRPs, not the combined MRP of the pack. The judgment was pronounced on 11-12-2012.