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2022 (11) TMI 1225 - AT - Central ExciseValuation of goods - Recovery of short paid duty - packaged drinking water - goods sold to institutional buyers - requirement to pay duty as per Section 4A or in terms of Section 4? - Circular No. 625/16/2002-CX dated 28.02.2002 - HELD THAT - It is quite evident that the goods in question were not meant for retail sale but were for the consumption of MCD for their various schemes. MCD was an institutional buyer and thereafter no retail sale was ever envisaged. Commissioner (Appeals) has recorded that the goods were meant for retail sale through the customer only at snack bars owned by ABCTC. There being so, the goods were not being consumed by ABCTC themselves but further sold in retail and as such in terms of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 the goods were required to be sold on the declared and printed MRP only - where the goods were actually sold in retail, Section 4A of the Central Excise Act will become applicable as has been held by 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 . Reliance placed by the Revenue on the case of FEDERATION OF HOTEL AND RESTAURANT ASSOCIATIONS OF INDIA VERSUS UNION OF INDIA AND ORS. 2018 (1) TMI 1221 - SUPREME COURT also does not help the case as the issue involved in the said case was not with reference to the provisions of Section 4A of the Central Excise Act. In the said decision Hon ble Supreme Court has held that the sale of packaged mineral water by hotel to their clients is inclusive of the cost of bottle plus the services provided. Accordingly they have held that the sale at price higher than the affixed MRP is not in contravention of the provisions of Legal Metrology Act. There is no merit in the impugned order - appeal allowed.
Issues Involved:
1. Valuation of packaged drinking water for excise duty purposes under Section 4A vs. Section 4 of the Central Excise Act, 1944. 2. Applicability of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. 3. Determination of whether the goods were sold to institutional buyers or for retail sale. 4. Imposition of penalties and interest under the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Valuation of Packaged Drinking Water: The primary issue revolves around whether the packaged drinking water should be valued under Section 4A or Section 4 of the Central Excise Act, 1944. The appellant argued that the product is covered under Section 4A, which mandates valuation based on the Maximum Retail Price (MRP). This position was supported by precedents such as Jayanti Foods Processing (P) Ltd. and Liberty Shoes Ltd. The Revenue contended that since the goods were sold to institutional buyers like Coffee Day and Amalgamated Coffee Bean Trading Co. (ABCTC), they should be valued under Section 4. 2. Applicability of Standards of Weights and Measures (Packaged Commodities) Rules, 1977: The Revenue's argument was based on Rule 2A of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which exempts goods sold to institutional buyers from the requirement of declaring MRP. The appellant countered that the goods were sold for retail at snack bars, making MRP declaration mandatory. The Tribunal observed that the goods were indeed meant for retail sale through snack bars owned by ABCTC, thus necessitating MRP declaration as per the Rules. 3. Determination of Institutional Buyer vs. Retail Sale: The Tribunal examined whether ABCTC qualified as an institutional buyer. It was noted that the goods were sold at snack bars, indicating retail sale rather than institutional consumption. This distinction was crucial as it determined the applicability of Section 4A, which requires MRP-based valuation for retail sales. The Tribunal relied on the Supreme Court's ruling in Jayanti Foods Processing (P) Ltd., which clarified that goods intended for retail sale must be valued under Section 4A. 4. Imposition of Penalties and Interest: The original orders imposed penalties and interest on the appellant for short payment of duty. The Tribunal found that the demand for differential duty under Section 4 was not sustainable as the goods were correctly valued under Section 4A. Consequently, the penalties and interest imposed under Sections 11AC and 11AB of the Central Excise Act, 1944, were also deemed unsustainable. Conclusion: The Tribunal concluded that the packaged drinking water should be valued under Section 4A based on the declared MRP, as the goods were sold for retail at snack bars. The impugned order was set aside, and the appeal was allowed. The Tribunal emphasized the necessity of adhering to the legal requirements for MRP declaration and valuation for retail sales, aligning with the Supreme Court's precedents. The penalties and interest imposed on the appellant were also annulled.
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