2014 (9) TMI 661 - AT - Central Excise

Waiver of pre deposit - Valuation - MRP value or Transaction value - whether the tem-adhesive cleared by the applicant packages containing 5 to 25 Itrs. is required to be chargeable to duty as per Section 4A of the said Act - Held that - classification is not disputed as the goods have been classified under Central Excise Tariff heading No. 3506 91 90. The said Chapter is notified to affix MRP. Therefore, it is to be seen that whether the applicant is entitled for exemption as per Rule 2A of the Weights & Measures (PC) Rules, 1977 or not. In this case learned Technical Member has relied upon the statement of Shri O.P. Agarwal, Vice-President, Plant dated 28-8-2011 wherein there is an admission on this point that basic and only use of the product tem adhesive is for retreading of tyre. The noticee in their statement submitted that tem adhesives are capable of being used in house but no evidence has been placed on record. Therefore, looking into the nature of the product, it is clear that tem adhesive is consumed by Industrial consumers and provisions of Section 4A are not applicable in unit containers as per Rule 2A(ii) Explanation. Plain reading of the explanation to Rule 2A of the said rules clearly shows that if goods are sold to institutional/industrial consumers directly by the manufacturer, the said rule will not apply. In Para 70 of the impugned order, the learned Commissioner has recorded the findings that since noticee s product tem adhesive is not directly sold to the retailer, but these are sold through dealers and distributors that too some distributors have their own tyre retreading nature. When these facts were on record, it is proved that the applicant has not sold these goods directly to the industrial/institutional consumers, therefore, the applicant cannot avail exemption from affixing MRP on their finished product. To all other institutional or industrial consumers of prepared commodity sold as retail package that chapter would apply. Explanation of industrial or institutional consumer in Rule 2A must also be read only to the provisions to Rule 2(p) for the purpose of Chapter 2. Therefore, the only purchaser of packaged commodities who are institutional or industrial consumer and buy the goods directly from the manufacturers are not required to affix MRP. Admittedly, in this case industrial consumers have not bought the goods from the applicant directly - Therefore, the applicant is not entitled for exemption under Rule 2A of the Standards of Weights & Measures (P.C.) Rules, 1977. In these facts, prima facie, I am of the view that the applicant is required to pay duty as per Section 4A of the Central Excise Act, 1944. - Pre-deposit of duty and penalty shall stand waived and its recovery stayed during the pendency of the appeal - Decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of Section 4A of the Central Excise Act to tem-adhesives in packages of 5 to 25 kg.
2. Requirement to declare MRP on packages under the Standards of Weights and Measures (Packaged Commodity) Rules.
3. Invocation of the extended period of limitation.
4. Waiver of pre-deposit of duty and penalty.

Issue-wise Detailed Analysis:

1. Applicability of Section 4A of the Central Excise Act to tem-adhesives in packages of 5 to 25 kg:
The primary issue is whether the packages containing 5 to 25 litres of tem-adhesive 'C' are required to be cleared under Section 4A, which allows clearance based on the MRP endorsed on the packages after allowing abatement. The appellant's product is classifiable under Heading 3506, which relates to prepared glues and other prepared adhesives, and is notified under Section 4A. The adjudicating authority's reasoning that packages from 5 kg to 25 kg should be considered industrial or institutional packages was found to be inconsistent with Rule 2A of the Packaged Commodity Rules. The appellant's goods are not covered by the exclusion clause of Rule 2A and thus are required to endorse the packages with the MRP.

2. Requirement to declare MRP on packages under the Standards of Weights and Measures (Packaged Commodity) Rules:
The Standard of Weights and Measures (Packaged Commodity) Rules require all packed commodities to declare the MRP on the packages, except those expressly exempted by the Rules. Rule 2A excludes packages of commodities containing quantities of more than 25 kg or 25 litres and those meant for industrial or institutional consumers. The appellant sells the adhesives through a network of distributors, dealers, and retailers, and not directly to industrial or institutional consumers. Therefore, the appellant's goods are not exempt from declaring the MRP under Rule 2A.

3. Invocation of the extended period of limitation:
The show cause notice observed that the alleged discrepancies were noticed during the audit of the appellant's records, indicating that the appellant maintained all statutory records properly and filed statutory returns. The ER-1 returns indicated that the goods were being assessed under Section 4A. Therefore, no suppression or misstatement with the intent to evade payment of duty can be attributed to the appellant, and the major part of the demand is barred by limitation.

4. Waiver of pre-deposit of duty and penalty:
The appellant made a good case on merits, and considering the above observations, the condition of pre-deposit of the entire amount of duty and penalty was dispensed with, and recovery of the same was stayed during the pendency of the appeal.

Separate Judgments Delivered by the Judges:
The Member (Judicial) concluded that the products are rightly classifiable under Section 4A and applicable to all sizes of containers. Full waiver of pre-deposit was granted. The Member (Technical) disagreed, stating that Section 4A under MRP is restricted to adhesives packed in one litre for retail sale, and other containers should be assessed under Section 4. A pre-deposit of 50% of the duty demanded was proposed. The third Member (Judicial) concurred with the Member (Judicial), granting full waiver of pre-deposit.

Final Stay Order:
In view of the majority order, the pre-deposit of duty and penalty was waived, and its recovery was stayed during the pendency of the appeal. The stay petition was accordingly allowed.