2024 (2) TMI 1017 - AT - Central Excise

Method of Valuation - section 4 of Central Excise Act, 1944 or section 4A of Central Excise Act, 1944 - packages of cake mixes manufactured having been affixed with retail sale price (RSP) - recovery of differential duty by resort to transaction value specified by section 4 of Central Excise Act, 1944 alongwith interest and penalty - HELD THAT - The demand for the disputed period straddles two governing enactments by reference to which levy of duties of central excise on retail sale price , less permitted abatement, was enabled. Till the notification of Legal Metrology (Packaged Commodities) Rules, 2011 with effect from 1st April 2011, Standards of Weights and Measures (Packaged Commodities) Rules, 1977 , issued under the authority of The Standards of Weights and Measures Act, 1976, was in force even after the parent statute was substituted by the Legal Metrology Act, 2009. Both the laws have undergone streamlining and consolidation through amendments as did the respective Rules framed thereunder. The specific bar on retail sale on packages cleared by appellant is adequate discharge as evidence of overriding intent with fact prevailing over presumption of intent. Consequently, for the period preceding commencement of Legal Metrology (Packaged Commodities) Rules, 2011, the impugned notification does not apply to goods cleared by the appellant. - For the period thereafter, such intent does not circumscribe packages deployed anywhere in chapter II of Legal Metrology (Packaged Commodities) Rules, 2011 and, therefore, does not restrict the empowerment of notifying of goods for the purpose of section 4A(1) of Central Excise Act, 1944. The substantive distinction between deemed circumscribing of packages for the enforcement of rule 5 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and absence of such curtailed meaning of package for requirement to comply with rule 6 of Legal Metrology (Packaged Commodities) Rules, 2011 makes for the difference in interpreting the extent and reach of power conferred on the Central Government to resort to retail sale price assessment. Consequently, all commodities in pre-packaged form, to the extent incorporated in the impugned notification, are subject to assessment on retail sale price less abatement as prescribed therein after March 2011. The distinguishment of ultimate consumer as the criteria for applicability of section 4A of Central Excise Act, 1944 to the impugned transactions has no basis in law. It is worth noting that even in relationship to industrial usage or institutional deployment, the buyer yet remains consumer. There is no reason to suppose, as the adjudicating authority has, from the tax statute or the consumer protection laws that bakeries are not intended recipients of such protection. The adjudicating authority has stretched logic to conclude that the transformation on a product, by change of form and attributes, does not alter the product for ascertainment of actual consumer. These unsubstantiated conclusions on the intent of consumer protection law and the extent of taxing statute are inappropriate justification for alteration of assessment methodology. The adjudicating authority has placed reliance on the decision of the Hon ble High Court of Karnataka in re Ewac Alloys Ltd. 2011 (9) TMI 688 - KARNATAKA HIGH COURT - Reference was also made to the decision of the Hon ble Supreme Court in re Jayanthi Food Processing (P) Ltd. 2007 (8) TMI 3 - SUPREME COURT . On behalf of respondents, the decision of the Hon ble Supreme Court in Commissioner of Central Excise Service Tax, Kanpur v. AR Polymers Pvt Ltd 2023 (3) TMI 951 - SUPREME COURT was cited. The two judgements of the Hon ble Supreme Court found that institutional consumers, which were the recipients of goods impugned therein, are not final consumers because the goods are subject to further sale in that very form. The facts of the present case are totally at variance as the goods impugned here lose the form in which they have been cleared by the appellant in the hands of those erroneously held as not being final consumers even on the admitted reality that customers of bakeries are in the market for cakes and bakes which would render the bakeries to be the final consumer. The demand of differential duty for the period prior to 1st April 2011 is upheld while setting aside the demand for the period thereafter. The intention of the appellant not to clear for retail sale during the former period is evident despite which they resorted to abatement from retail sale price even though not entitled thereto. Nothing has been brought on record to evince that such intent, espoused in the markings, was not prompted by clear appreciation of the legal limitation on the jurisdiction of the Central Government to notify goods for alternative assessment - there are no reason to interfere with the penalty mandated under section 11AC of Central Excise Act, 1944. Appeal allowed in part.

Summary

Issues Involved:
1. Valuation for assessment to duty under Section 4 vs. Section 4A of the Central Excise Act, 1944.
2. Applicability of Legal Metrology (Packaged Commodities) Rules, 2011.
3. Determination of "industrial consumer" and implications for tax liability.
4. Assessment methodology and penalty under Section 11AC of Central Excise Act, 1944.

Summary:

1. Valuation for Assessment to Duty:
The core issue revolves around whether the valuation for assessment to duty should be under Section 4 or Section 4A of the Central Excise Act, 1944. The appellant, M/s General Mills India Pvt Ltd, contended that their products, 'cake mixes' and 'bakery mixes,' were cleared by resort to 'retail sale price' assessment as mandated by Section 4A. However, the tax authorities determined that the valuation should be under Section 4 of the Central Excise Act, 1944, due to the packages being marked 'not for retail sale.'

2. Applicability of Legal Metrology (Packaged Commodities) Rules, 2011:
The appellant argued that the products were statutorily required to comply with the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, and later the Legal Metrology (Packaged Commodities) Rules, 2011, which included affixing 'retail sale price' on packages. The central excise authorities initiated proceedings for recovery of differential duty by resorting to 'transaction value' specified by Section 4, arguing that the packages were marked 'not for retail sale.'

3. Determination of "Industrial Consumer":
The appellant contended that the differential duty should only apply to clearances made directly to bakeries, as sale to 'industrial consumers' was not established. The adjudicating authority found that the goods were sold entirely to 'industrial consumers' and thus were excepted from the mandate of details under the Legal Metrology Act, 2009. The tribunal held that the specific bar on 'retail sale' on packages was adequate evidence of intent, and for the period preceding the Legal Metrology (Packaged Commodities) Rules, 2011, the notification did not apply to goods cleared by the appellant.

4. Assessment Methodology and Penalty:
The tribunal noted that the appellant conceded that 'direct sales' merited assessment as urged by the central excise authorities and offered to discharge the differential duty liability. The adjudicating authority emphasized that the Standards of Weights & Measures Act, 1977, and the Legal Metrology Act, 2009, were legislated for the protection of the 'ultimate consumer.' The tribunal found that the adjudicating authority's reliance on the decision of the Hon'ble High Court of Karnataka in Ewac Alloys Ltd and the Hon'ble Supreme Court in Jayanti Food Processing (P) Ltd was misplaced. The tribunal upheld the demand for differential duty for the period prior to 1st April 2011 but set aside the demand for the period thereafter. The penalty under Section 11AC of Central Excise Act, 1944, was upheld due to the appellant's clear intent not to clear for retail sale during the former period.

Conclusion:
The appeal was partly allowed, with the tribunal upholding the demand for differential duty for the period prior to 1st April 2011 and setting aside the demand for the period thereafter. The penalty under Section 11AC of Central Excise Act, 1944, was upheld.