2023 (3) TMI 1419 - AT - Central Excise

Valuation of goods - actual MRP declared on the package is less than 2.5 times the FOB value - declaration of more than one MRP. SCN relied on Explanation 2(a) to Section 4A of the Central Excise Act, 1944, where more than one MRP is declared, the maximum of such MRPS shall be deemed to be the MRP for the purposes payment of duty and duty is to be discharged on the maximum of such MRP. HELD THAT - The appellants are industrial consumers. Therefore, even if the appellants declare MRP at the time of importation, MRP declared thereon should be ignored for the purpose of Standards of Weights and Measures Act, 1976 and rules made thereunder. Therefore, the MRP declared at the time of importation cannot be considered as MRP of the goods imported. Hence, in law, the appellants have declared MRP only once i.e., when the goods were cleared from the Panvel warehouse - The scheme of the Section 4A provides for determination of the value on the basis of the declared MRP/ RSP at the time of clearance. It do not provide for re-determination of the MRP/ RSP by the revenue authorities at the time of clearance. The same can be done only in the manner and subject to the conditions as per Section 4A (4). The provision of Section 4A (4) do not get attracted, even if the case of revenue is that the imported goods were cleared on payment of duty on the basis of Adhoc value, which was higher than the declared MRP. The Adhoc value based on the thumb rule of 2.5 times the FOB value cannot be the declared MRP but a determined value for the specific purpose of the clearance of the goods by the customs authority at the port of importation. Further the goods cleared from the custom port have suffered manufacturing process as per the section 2 f of the Central Excise Act, 1944 and are not the same goods as cleared from the port. There are no merits in the impugned order - appeal allowed.

Summary

Issues Involved:
1. Determination of MRP for payment of Central Excise Duty.
2. Applicability of Explanation 2(a) to Section 4A of the Central Excise Act, 1944.
3. Validity of differential duty demand based on assumed MRP.
4. Admissibility of credit of CVD & SAD paid on imported goods.

Issue-wise Detailed Analysis:

1. Determination of MRP for payment of Central Excise Duty:
The appellants were involved in the activity of unpacking, quality checking, and repacking automobile parts, and affixing labels indicating the Panvel warehouse address. They declared a single MRP on the packages both at the time of importation and clearance from the warehouse. The appellants paid CVD based on MRP declared at the time of importation until 17.03.2010, and subsequently, as directed by Customs, paid CVD on an amount which is 2.5 times the FOB value less abatement. The tribunal observed that the goods cleared from the warehouse underwent a manufacturing process as defined under Section 2f(iii) of the Central Excise Act, 1944, and were required to be cleared on payment of duty based on the declared MRP after deducting abatement. The tribunal found that the appellants declared a single MRP on the packages and paid the duty accordingly.

2. Applicability of Explanation 2(a) to Section 4A of the Central Excise Act, 1944:
The tribunal noted that Explanation 2(a) to Section 4A applies when more than one retail sale price is declared on the package, and the maximum of such prices is deemed to be the retail sale price for duty purposes. In this case, the tribunal found that the packages bore only one MRP, and hence, Explanation 2(a) was not applicable. The tribunal emphasized that there was no provision under the Standards of Weights and Measures Act, 1976, or the Central Excise Act, 1944, to ignore the actual MRP affixed and declared on the package and re-determine it in an ad hoc manner.

3. Validity of differential duty demand based on assumed MRP:
The tribunal found that the demand for differential duty was based on the incorrect assumption that the MRP declared on the goods imported was 2.5 times the FOB value when the actual MRP was less. The tribunal held that this assumption was factually incorrect and without any basis. The tribunal also referenced a subsequent show cause notice for the period August 2012 to March 2013, where the demand was dropped, as there was no allegation of different MRPs on the packages at the time of importation and clearance from the warehouse. The tribunal concluded that the scheme of Section 4A provides for the determination of value based on the declared MRP at the time of clearance and does not allow for re-determination of MRP by the revenue authorities.

4. Admissibility of credit of CVD & SAD paid on imported goods:
The tribunal noted that the appellants availed credit of CVD & SAD paid on the imported goods and utilized this credit for payment of central excise duty on goods cleared domestically from the Panvel warehouse. The tribunal did not find any issue with the admissibility of this credit, as the appellants had declared and paid the duty based on the MRP affixed on the packages.

Conclusion:
The tribunal found no merit in the impugned order and allowed the appeals, emphasizing that the appellants had complied with the provisions of the Central Excise Act, 1944, and the Standards of Weights and Measures Act, 1976, by declaring a single MRP and paying duty accordingly. The tribunal held that the differential duty demand based on an assumed MRP was incorrect and without legal basis. The appeals were allowed, and the order pronounced in the open court.