2019 (5) TMI 871 - AT - Central Excise

Method of Valuation - clearance of tooth brushes in combo pack/bulk/naked condition to manufacturer of Toothpaste for free distribution by inserting the brush in the tooth brushes pack - valued u/s 4 or u/s 4A of CEA - case of the department is that the tooth brushes so cleared was required to be assessed under Section 4A of the Central Excise Act, 1944. i.e. on MRP basis, on the basis that the toothpaste manufactured by the appellant for their customer were also packed in the blister packing in 1/2/3/4 prices in pack printed with MRP at it, as per Standards of Weights and Measures Act and were assessed as per section 4A of the Central Excise Act, 1944. HELD THAT - The facts is not under dispute that the tooth brushes manufactured and supplied by the appellant were cleared either in bulk form or combo pack or in naked condition that means without any retail packing. Goods were supplied to tooth paste manufacturer who in turn used these tooth brushes for making a combo pack with tooth paste for free supply, therefore, the tooth brushes cleared by the appellant was neither sold as such in retail either by the appellant or the buyers i.e. M/s Colgate Palmolive (India) Limited, Oral care etc. In this identical fact the issue was considered by the Hon ble Supreme Court in the case of JAYANTI FOOD PROCESSING (P) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN 2007 (8) TMI 3 - SUPREME COURT where it was held that valuation cannot be done u/s 4A of CEA. Relying on the Hon ble Supreme Court judgment the Mumbai Bench of the Tribunal in the case of NESTLE INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, GOA 2017 (10) TMI 203 - CESTAT MUMBAI also held that promotional pack of maggi noodles supplied free with Packet of Tata Tea and such packs of maggi noodles were not bearing MRP with declaration free with Tata Tea . Therefore, provisions of Standards of Weights and Measures Act, 1976 and Rules made there under would not apply on such supplies. Thus, the tooth brushes supplied by the appellant which is not for retail sale but for free supply by the tooth paste manufacturer will not be valued under Section 4A in the hands of the appellant - the value adopted by the appellant under Section 4 is correct and legal which does not need any interference. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the valuation of tooth brushes supplied in bulk or combo packs for free distribution should be assessed under Section 4 or Section 4A of the Central Excise Act, 1944.
2. Applicability of the Standards of Weights and Measures Act, 1976, and related rules to the valuation of goods supplied for free distribution.

Issue-wise Detailed Analysis:

1. Valuation under Section 4 vs. Section 4A of the Central Excise Act, 1944:

The appellant, engaged in manufacturing tooth brushes, supplied these in bulk/combo packs to toothpaste manufacturers for free distribution. The appellant assessed these tooth brushes based on transaction value under Section 4 of the Central Excise Act, 1944. The department contended that these should be assessed under Section 4A, i.e., on the MRP basis, as the toothpaste was packed with MRP and assessed accordingly.

The appellant argued that the tooth brushes were not intended for retail sale, were not packed in retail packs, and did not have MRP declared. They cited the Bombay Tribunal's decision in International India Pvt. Ltd Vs. CCE-Goa and various other judgments supporting that goods not intended for retail sale should not be assessed under Section 4A.

The Tribunal found that the tooth brushes were cleared in bulk or combo packs without retail packing and were used by toothpaste manufacturers for free supply. Thus, they were not sold in retail by either the appellant or the buyers. The Tribunal referred to the Supreme Court's decision in Jayanti Food Processing (P) Ltd. Vs. Commissioner of Central Ex., Rajasthan, which dealt with similar issues. The Supreme Court held that goods supplied for free distribution under a contract and not for retail sale should be assessed under Section 4, not Section 4A.

2. Applicability of Standards of Weights and Measures Act, 1976, and Related Rules:

The appellant argued that since the tooth brushes were not for retail sale and did not have MRP, the provisions of the Standards of Weights and Measures Act, 1976, and related rules did not apply. They cited the Board Circular No. 625/16/2002-CE and various judgments supporting their claim.

The Tribunal agreed with the appellant, noting that the tooth brushes were supplied for free distribution and not for retail sale. Therefore, the provisions of the Standards of Weights and Measures Act, 1976, and related rules did not apply. The Tribunal referred to the Supreme Court's decision in Jayanti Food Processing (P) Ltd., which supported this view.

Conclusion:

The Tribunal concluded that the tooth brushes supplied by the appellant for free distribution by toothpaste manufacturers should be valued under Section 4 of the Central Excise Act, 1944, and not under Section 4A. The value adopted by the appellant under Section 4 was correct and legal. The impugned order was set aside, and the appeal was allowed.