2018 (3) TMI 485 - AT - Central Excise

Valuation - cylinder liners - appellants cleared the said goods in bulk to State Transport Undertakings for being used by them in the maintenance of their fleet - section 4 of the Central Excise Act, 1944 - Held that - the appellant had cleared the cylinder liners in bulk to State Transport Undertakings for their own consumption. There is no dispute that the goods were not cleared for retail sale. Chapter 2 of Standards of Weights and Measures Act and Rules 1977 provides that the said Rules do not apply when the goods are not intended for retail sale - The exemption provided under Rule 34 is not available to the appellant for the reason that the subject goods are used in the service station / workshop of the Transport Undertakings. The major period involved in these appeals is after 17.7.2006. The demand confirmed on the basis of Rule 34 which is not in existence is unsustainable and requires to be set aside. The demand prior to 17.7.2006 is also unsustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of duty levy on cylinder liners under MRP basis
- Application of Standards of Weights and Measures Act to goods supplied to State Transport Undertakings
- Validity of demand, interest, and penalties imposed by lower authorities
- Compliance with Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977

Analysis:
1. Interpretation of Duty Levy: The appellants, engaged in manufacturing cylinder liners, contested the duty levy based on MRP for goods supplied to State Transport Undertakings. They argued that since the goods were not intended for retail sale, MRP affixing was unnecessary. The lower authorities relied on Rule 34, which was amended in 2006, to impose duty. The Tribunal found the reliance on the amended rule post-2006 as erroneous, leading to the unsustainability of the demand based on MRP for the period after the amendment. Additionally, for the period pre-amendment, the goods not being meant for retail sale to ultimate consumers rendered the demand unsustainable.

2. Application of Standards of Weights and Measures Act: The appellant's contention that MRP affixing was unnecessary for goods supplied to State Transport Undertakings was challenged by the respondent. It was argued that the goods, used as replacements in workshops for repairing motor vehicles, did not qualify for exemption under Rule 34. The Tribunal observed that the goods were not intended for retail sale, as per the Act, and the demand based on MRP was unjustified.

3. Validity of Demand and Penalties: The lower authorities confirmed duty demand, interest, and penalties, upholding the MRP-based levy. However, the Tribunal found the reliance on Rule 34, specifically post-amendment, as erroneous. The demand, interest, and penalties were deemed unsustainable due to the incorrect application of the rule.

4. Compliance with Rule 34: Rule 34 of the Standards of Weights and Measures Act exempts certain packages from its provisions, particularly those meant for industrial or institutional consumers. The Tribunal noted that the goods supplied to State Transport Undertakings did not fall under the retail package definition, as they were not intended for retail sale. The demand based on Rule 34, both pre and post-amendment, was deemed unsustainable, leading to the setting aside of the impugned orders and allowing the appeals with consequential relief.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeals and granting relief to the appellants due to the incorrect application of Rule 34 and the unjustified imposition of duty based on MRP for goods not intended for retail sale.