2015 (10) TMI 1554 - AT - Central Excise

Classification of goods - MRP based Valuation - Section 4A - free supply of items - Invocation of extended period of limitation - Held that - Regarding re-classification of chloromint under Heading No.30.03, it is clear that the second show cause notice, which resulted in the impugned order, was issued after the matter was already agitated by an earlier notice dated 4.3.2005, which finally entered in settlement of the case vide order dated 20.11.2005 - The fact that the appellant was classifying the product under Heading No. 1704 was always in the knowledge of the Department through ER-1 Returns, classification, declarations, letter dated 5.11.97 and also the demand and settlement of the demand as discussed earlier in the latter period. As such, we find that the demand for excise duty on Chloromint indicating extended period is not sustainable because of application of time bar under Section 11 A of Central Excise Act, 1944. Regarding valuation of free supply items when the goods are subjected to MRP based assessment, we find strong force in the appellant s plea that the retail packing in these cases are the jars, which bear the MRP declaration as per the legal requirements and also clear indication to the effect that numbers of free pieces inside the said pack - Jar. The retailers could be selling individual pieces (not having MRP printed on them to the individual ultimate consumers) is no reason to disregard the retail sale pattern observed by the appellant. - CBEC vide Circular dated 28.10.2002 clarified that if an individual item is supplied free in the multi pack and has no MRP printed on it, the MRP printed on the multi pack will be taken for the purposes of valuation under Section 4 A. We find that the case law and the clarification of the Board are applicable to the present situation and as such, we hold that the demand of central excise duty in respect of such free items is not sustainable. The lower authority had disallowed the discounts only on the ground that the same are referred to as promotional schemes and not as quantity discounts. We find that all discounts are basically promotional schemes. This could not be the reason for disallowing a discount if all other conditions are fulfilled. The nature of these transactions is that certain extra numbers of items are supplied free which can very well be considered as quantity discounts since they are known before hand. There is no reason to deny such abatement from assessable value and as such, we find that the demand of differential duty on this ground is not sustainable. - Decided in favour of assesee.

Summary

Issues Involved:
1. Classification of Chloromint under Heading 30.03
2. Valuation of free supply items under Section 4 A
3. Valuation of free supply items with other Section 4 items
4. Additional quantities of products supplied as free items along with products assessable under Section 4

Analysis:

Issue 1: Classification of Chloromint under Heading 30.03
The appellant contested the demand of central excise duty on re-classification of chloromint, citing limitation under Section 11A of the Central Excise Act. They argued that the demand for the period 1.3.2003 to 31.01.2004 was legally untenable as a previous show cause notice had already addressed the issue for a different period. The Tribunal agreed, emphasizing that the facts were known to the authorities, and suppression of facts could not be alleged. The demand for excise duty on Chloromint during the extended period was deemed unsustainable due to the time bar under Section 11A.

Issue 2: Valuation of Free Supply Items under Section 4 A
The appellant contended that the jars containing products subjected to MRP-based assessment included extra free items for market promotion, with the cost of free supply already included in the MRP affixed on the jars. The Tribunal upheld the appellant's argument, stating that the provisions of Section 4 A were not applicable in cases of free supply, as clarified by a relevant CBEC circular. The demand for excise duty on such free items was deemed unsustainable.

Issue 3: Valuation of Free Supply Items with Other Section 4 Items
Regarding additional quantities of products supplied as free items along with products assessable under Section 4, the lower authority disallowed discounts on the grounds that they were promotional schemes and not quantity discounts. The Tribunal disagreed, stating that all discounts could be considered promotional schemes and upheld the appellant's argument that the free additional items were akin to quantity discounts. The demand of differential duty on this ground was deemed unsustainable.

In conclusion, the Tribunal found no sustainable reasons for the demands raised against the appellant and allowed the appeal, disposing of the misc. application for extension of stay as infructuous. The judgment provided detailed analysis and legal references to support the decisions on each issue involved in the case.