2014 (11) TMI 920 - AT - Central Excise

Valuation of goods - MRP based valuation or transaction value - Whether the impugned goods supplied to TNCSC, which are intended for free distribution to the women beneficiaries belonging to families holding family cards eligible for drawal of rice as per the T.N. Government scheme are to be assessed under the provisions of Section 4 or Section 4A of the Central Excise Act, 1944 - Held that - M/s. Butterfly Gandhimati Appliances Ltd. and M/s. LLM Appliances Ltd. are manufacturing Mixies, Table Top Wet Grinders falling under heading 85094010 and Electric Fans and Electric Rice Cookers falling under Chapter Heading 84145190 and 85166000 respectively and clearing the goods on payment of appropriate Central Excise duty on Retail Sale Price (R.S.P.) as per Section 4A of the Central Excise Act. The period of dispute in these appeals is September 2011 to September 2013. There is no dispute on the fact that the impugned goods are covered under Section 4A and also listed in the Notification No.49/2008 as amended for availing the abatement. TNCSC carried out procurement of Mixies, Table Top Wet Grinders, Electric Table Fans and Electric Rice Cookers for free distribution to the women beneficiaries, who are holding family cards eligible for drawal of rice on behalf of Tamil Nadu Government. The TNCSC is an undertaking of the Government of Tamil Nadu similar to M/s.ELCOT. M/s.ELCOT had been entrusted by Govt. of Tamil Nadu for procurement of colour T.V sets and in the present case, TNCSC has been entrusted to procure Mixes, Table Top Wet Grinders, Electric Fans & Electric Rice Cookers. - goods were sold by the appellant to TNCSC and there is consideration of sale and the goods are covered under Section 4A of the Central Excise Act. The appellants have rightly cleared the said goods on payment of Central Excise duty as per RSP in terms of Section 4A read with Notification No.49/08. - appellants correctly discharged the duty under Section 4A based on RSP basis. Accordingly, we set aside the impugned orders passed by the Adjudicating Authority in respect of both the appellants - Following decision of PG Electroplast Ltd. 2014 (7) TMI 575 - CESTAT NEW DELHI and Jayanti Food Processing Private Ltd. Vs CCE Rajasthan 2007 (8) TMI 3 - Supreme Court - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the goods supplied to TNCSC should be valued under Section 4 or Section 4A of the Central Excise Act.
2. Whether TNCSC qualifies as an "institutional consumer" under the Legal Metrology (Packaged Commodities) Rules, 2011 (LMR).

Detailed Analysis:

1. Valuation under Section 4 or Section 4A of the Central Excise Act:

The appellants, M/s. Butterfly Gandhimati Appliances Ltd. and M/s. LLM Appliances Ltd., manufactured goods such as Mixies, Table Top Wet Grinders, Electric Table Fans, and Electric Rice Cookers, which were supplied to TNCSC for free distribution under a government scheme. The appellants assessed the goods under Section 4A of the Central Excise Act, paying duty on the Retail Sale Price (RSP) after availing abatement as per Notification No.49/2008-CE (NT). The Revenue contended that the goods should be valued under Section 4, arguing that TNCSC is an "institutional consumer" and the goods were not intended for retail sale but for free distribution. The Tribunal referred to the Supreme Court's decision in Jayanti Food Processing Pvt. Ltd., which emphasized the importance of the requirement to declare MRP on packages and held that the nature of sale (bulk or retail) is not as important as the requirement of printing MRP on the packages. The Tribunal found that the appellants correctly assessed the goods under Section 4A.

2. TNCSC as an "Institutional Consumer":

The adjudicating authority held that TNCSC is a "service institution" and thus an "institutional consumer" under Rule 3 of the LMR, which excludes sales to institutional consumers from the declaration of RSP. The appellants argued that TNCSC does not qualify as an institutional consumer because it does not consume the goods itself but distributes them to ultimate beneficiaries. The Tribunal referred to the case of PG Electroplast Ltd., where it was held that entities like TNCSC, which procure goods for free distribution on behalf of the government, do not qualify as "service institutions" or "institutional consumers" as their activities are not commercial. The Tribunal concluded that TNCSC is not an institutional consumer and the goods should be assessed under Section 4A.

Conclusion:

The Tribunal set aside the orders of the adjudicating authority, holding that the appellants correctly discharged the duty under Section 4A based on RSP. The appeals were allowed with consequential reliefs, if any. The Tribunal's decision was based on the interpretation of the Central Excise Act and relevant case law, emphasizing the requirement of declaring MRP on packages and the nature of the transaction between the appellants and TNCSC.