2020 (12) TMI 504 - AT - Central Excise

Interpretation of statute - rule 3 of Central Excise Rules - Provisions Applicable to Packages Intended for Retail Sale - Method of Valuation - wall putty in packages of 40kg - to be valued under section 4 of the Central Excise Act, 1944 or under section 4A of the Excise Act? - Extended period of limitation - Legal Metrology Department clarified to the Appellant that if wall putty is packed in packages above 25 kgs, as per Rule 3(a) of the said Rules, the provisions of Chapter II including Rule 6(1)(e), (requiring printing of MRP) do not apply to such packages and further that packages of 40 kg and 50 kg of all the goods other than cement fertilizer, are exempted from affixing of MRP declaration. HELD THAT - Merely because MRP was declared on the package will not mean that the valuation of the excisable goods for the purposes of charging of duty of excise should be carried out under section 4A of the Excise Act, if otherwise in law, the valuation is required to be undertaken under section 4 of the Excise Act. The Board by a Circular dated February 28, 2002, has also clarified that section 4A of the Excise Act will not be attracted when there is no statutory requirement of affixing MRP on the goods in question, even though an assessee may have voluntarily affixed the MRP on such goods. As the appellant had cleared wall putty in packages of 40 kg, the provisions of rule 6 contained in Chapter II of the Rules will not apply and if this be so, the provisions of section 4A of the Excise Act under which the value of goods is deemed to be the retail sale price declared on such goods, would not be applicable. The appellant was, therefore, justified in determining the value of the goods under section 4 of the Excise Act. In H R JOHNSON (INDIA) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD 2014 (6) TMI 453 - CESTAT MUMBAI the assessee cleared tiles in retail packages to real estate developers after affixing MRP and paid duty on MRP basis under section 4A of the Excise Act. The Department contended that since the sales were made to institutional/industrial consumers, the Rules would have no application and duty must be paid under section 4. The Tribunal held that there is no difference in respect of packages sold to retail customers and sold to the alleged industrial consumers. The Tribunal also held that the clarifications issued by the Legal Metrology Department, cannot be disregarded. The decision would have no application in the present case since there is no requirement to examine whether the 40 kg packages are capable of being sold in retail since such packages are outrightly excluded from the purview of the Rules. The Principal Commissioner was not justified in concluding that the valuation of wall putty in packages of 40 kg was required to be determined under section 4A of the Excise Act - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the valuation of wall putty in packages of 40kg should be determined under section 4 or section 4A of the Central Excise Act, 1944.
2. Applicability of the Legal Metrology (Packaged Commodities) Rules, 2011.
3. Validity of the extended period of limitation for demanding central excise duty.
4. Justification for the imposition of interest and penalty.

Issue-wise Detailed Analysis:

1. Valuation of Wall Putty in 40kg Packages:
The core issue was whether the valuation of wall putty in 40kg packages should be determined under section 4 (transaction value) or section 4A (retail sale price) of the Central Excise Act, 1944. The appellant argued that section 4A was inapplicable as there was no statutory requirement to affix MRP on 40kg packages. The Tribunal examined the provisions of sections 4 and 4A, noting that section 4A applies only when the Central Government specifies goods requiring MRP declaration under the Legal Metrology Act, 2009. The Tribunal concluded that since the 40kg packages were not required to have MRP under the Legal Metrology (Packaged Commodities) Rules, 2011, section 4A did not apply, and valuation should be done under section 4.

2. Applicability of the Legal Metrology (Packaged Commodities) Rules, 2011:
The appellant contended that rule 3 of the Rules exempts packages over 25kg from MRP declaration. The Tribunal analyzed rule 3, which states that Chapter II provisions do not apply to packages over 25kg or those meant for industrial/institutional consumers. The Tribunal upheld the appellant's interpretation that the conditions in rule 3(a) and 3(b) are independent, supported by previous Tribunal decisions in Heidelberg Cement (India) Ltd. and ACC Ltd., and a clarification from the Legal Metrology Department. Hence, the 40kg packages were exempt from MRP declaration.

3. Validity of the Extended Period of Limitation:
The show cause notice invoked the extended period of limitation, alleging suppression of facts. The appellant argued against this, stating that there was no statutory requirement to declare MRP on 40kg packages. The Tribunal did not explicitly address the extended period of limitation but implicitly rejected the suppression allegation by setting aside the Principal Commissioner’s order.

4. Justification for Imposition of Interest and Penalty:
The appellant argued that penalties and interest were unjustified. The Tribunal, agreeing with the appellant's valuation method under section 4, found no grounds for penalties or interest, as the appellant had not contravened any provisions. The Principal Commissioner’s findings were overturned, and the imposition of penalties and interest was deemed unwarranted.

Conclusion:
The Tribunal concluded that the valuation of wall putty in 40kg packages should be under section 4 of the Excise Act, not section 4A. The Legal Metrology (Packaged Commodities) Rules, 2011, exempt such packages from MRP declaration. The Principal Commissioner’s order was set aside, and the appeal was allowed, negating the demand for additional duty, interest, and penalties.