2008 (7) TMI 319 - AT - Central Excise

Appellant s factory situated at Silvassa (Sales Tax exemption zone) two MRPs printed on two different types of A.C., depending upon area in which goods to be sold - difference in the two MRPs was exactly equivalent to the sales tax element involved since no two MRPs fixed on single package, Expl. 2(a) to Section 4A cannot be applied good sold in Silvassa carrying different MRP, on account of non-levy of sales tax, is required to be adopted as correct MRP for levy of Central Excise duty

Summary

Issues:
- Interpretation of Section 4A of the Central Excise Act regarding the declaration of Maximum Retail Price (MRP) on excisable goods.
- Application of Explanation 2(a) and 2(b) of Section 4A in determining the retail sale price for excise duty valuation.
- Imposition of duty demand based on higher MRP declared on packages meant for stock transfer.
- Validity of penalties imposed on the manufacturing company and its legal head.

Analysis:

1. Interpretation of Section 4A: The appellant, engaged in manufacturing air conditioners, declared different MRPs on packages based on sales within or outside Silvassa. The Commissioner confirmed duty demand using Explanation 2(a) of Section 4A, deeming the highest MRP as the retail sale price. However, the Tribunal clarified that Explanation 2(a) applies only when multiple MRPs are on the same package, which was not the case here. The Tribunal cited the High Court judgment emphasizing that each retail sale price on different packages for different areas should be considered for excise duty valuation.

2. Application of Explanation 2(a) and 2(b): The Tribunal highlighted the relevance of Explanation 2(b) of Section 4A, which allows different MRPs on packages for sale in various areas. It noted that the appellant's practice of setting different MRPs based on the sales location aligns with this provision. The Tribunal concluded that the adoption of separate MRPs, supported by a justifiable explanation, is in accordance with Section 4A, especially when goods are sold in different areas with varying tax implications.

3. Duty Demand and Penalties: The Commissioner's order imposing duty demand and penalties was overturned by the Tribunal. It emphasized that no evidence existed of goods being sold at a higher price than the declared MRP. The Tribunal stressed that the manufacturer's discretion in setting prices should be respected unless proven otherwise. Additionally, the Tribunal found the penalties imposed on the manufacturing company and its legal head to be unwarranted, given the absence of any wrongdoing in setting MRPs and selling goods.

4. Precedents and Legal Interpretations: The Tribunal referenced past judgments, such as the H&R Johnson case and the Goa Bottling Co. Ltd. case, to support its interpretation of Section 4A. These cases emphasized the importance of considering the declared MRPs on packages meant for specific sales regions and not applying a higher MRP from different packages. The Tribunal's decision aligned with these precedents, ensuring consistency in the application of excise duty valuation rules.

In conclusion, the Tribunal set aside the impugned order, allowing all appeals and providing consequential relief to the appellants. The judgment emphasized adherence to the statutory provisions of Section 4A, particularly regarding the declaration of MRPs on excisable goods for accurate excise duty valuation.