2015 (10) TMI 1570 - AT - Central Excise

Valuation - Section 4 or 4A - whether the Powder Hair Dye (PHD) be assessed to duty by determining its value under Section 4 or under Section 4A of CEA, 1944 - whether the appellant is required to print/affix MRP on sachets and/or on the mono pack containing 6/8 sachets - Held that - both sachets and mono pack are capable of being sold in retail, a situation fairly accepted by the Appellant. But, the Appellant insisted on their plea that it was not their intention to sale the sachets in retail but the mono pack. Needless to mention that the provisions of Section 4A would be applicable only when there is a legal requirement of printing/affixing the MRP on the package of the notified goods under the Standards of Weights and Measures Act, 1976 or Legal Metrology Act, 2009. Neither the appellant nor the Revenue collected any information/opinion on the said issue from the appropriate authority i.e. Legal Metrology Department of the State to the effect that whether the appellant would be required to affix the MRP on the sachets or on the multi piece packages or on both under the aforesaid Acts and the Rules made thereunder. - The method of valuation under Sec.4 of CEA,1944 and consequently computation of the demand adopted by the Ld.Commissioner, in the respective appeals, in our opinion is erroneous. It is an admitted fact that the appellant removed the goods from their factory to the Depot from where the same were sold. We find in Appeal No.( E/70200/13), the adjudicating authority has adopted average selling price whereas in appeal No. (E/76111/14), the adjudicating authority has adopted the abated value i.e. after deducting 35% from the declared MRP as the basis for determination of value under Section 4 of CEA, 1944. In our opinion, both the methods are incorrect in as much as since the goods were not sold from the factory but sold from the depots, therefore, Section 4(1)(b)read with Rule 7 of the Central Excise Valuation Rules, 2000 are relevant for determination of the assessable value. - Impugned Orders are set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Powder Hair Dye (PHD) should be assessed under Section 4 or Section 4A of the Central Excise Act, 1944.
2. Determination of assessable value under Section 4 of the Central Excise Act, 1944.
3. Applicability of extended period of limitation for issuing demand notices.
4. Imposition of penalties under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Assessment under Section 4 or Section 4A of the Central Excise Act, 1944:
The core issue is whether the PHD should be assessed under Section 4 or Section 4A of the Central Excise Act, 1944. The appellants argued that the mono packs containing 6/8 sachets of 3 grams each should be assessed under Section 4A because they were intended for retail sale, and the total weight exceeded 10 grams, thus falling outside the exemption under Rule 34(b) of the PC Rules, 1977 and Rule 26(a) of the PC Rules, 2011. The Revenue contended that the sachets, each weighing less than 10 grams, should be assessed under Section 4 since they were intended for individual retail sale, and there was no legal requirement to affix MRP on the mono packs.

2. Determination of Assessable Value under Section 4:
The appellants argued that if the PHD is to be assessed under Section 4, the correct method should be applied. They contended that the Revenue's computation was erroneous as it assumed MRP as the assessable value for certain periods and included entry tax and excise duty. The proper method should be in accordance with Section 4(1)(b) read with Rule 7 of the Central Excise Valuation Rules, 2000. The Tribunal found merit in this argument, noting that the goods were sold from depots, and the assessable value should be determined accordingly.

3. Applicability of Extended Period of Limitation:
The appellants argued that the demand notices were barred by limitation as the relevant facts were within the knowledge of the Department, evidenced by the sanctioning of refund claims up to March 2009. The Tribunal did not make a definitive ruling on this issue, as it was contingent on the resolution of the core issue of assessment under Section 4 or Section 4A.

4. Imposition of Penalties under Section 11AC:
The appellants contended that penalties under Section 11AC were not imposable as they had been filing refund claims and ER-1 Returns regularly, and there was no suppression of facts. The Tribunal did not decide on the imposition of penalties, leaving it open for adjudication after the core issue is resolved.

Conclusion:
The Tribunal set aside the impugned orders and remanded the appeals to the adjudicating authority for fresh consideration. The adjudicating authority is directed to seek an opinion from the Legal Metrology Department regarding the requirement of affixing MRP on the sachets and/or mono packs. The determination of whether the goods are to be assessed under Section 4 or Section 4A will be based on this opinion. The other issues, including the method of valuation under Section 4 and the applicability of penalties, are to be decided after resolving the core issue.