2006 (1) TMI 23 - AT - Central Excise

Central Excise Assessable value MRP based valuation The goods were cleared by the assessee as per the contract price on the ground that they were meant for free distribution Penalty not imposable

Summary

Issues: Valuation of toilet soaps under Section 4 vs. Section 4A of the Central Excise Act, applicability of MRP for assessment, penalty imposition

In this case, the dispute revolves around the valuation of "Cinthol Lime Fresh" and "Cinthol Scent Fresh" toilet soaps supplied free with other products. The assessee argues for valuation under Section 4 of the Central Excise Act, while the revenue contends that Section 4A should apply, assessing duty based on MRP after abatement. The original adjudicating authority upheld Section 4A assessment, imposing demands and penalty. However, the Commissioner (Appeals) accepted the assessee's stance, noting the absence of MRP on the package and the free distribution nature of the goods. He emphasized that Section 4A applies when goods are sold under MRP as per Weights and Measures Act requirements. The Commissioner set aside the original order, leading to the revenue's appeal.

Upon review, the Tribunal considered precedents like Nestle India Ltd and BPL Telecom Pvt Ltd, emphasizing that goods notified under Section 4A, even if distributed free, must be assessed based on MRP. The Tribunal highlighted that wholesale pricing does not alter this requirement, as all goods, regardless of valuation under Section 4 or 4A, typically enter trade through wholesale channels. The Tribunal also referenced Intel Industries Pvt Ltd, reinforcing the assessment under Section 4A for goods cleared on a contract basis. In contrast, the Tribunal's decision in G.S. Enterprises v. CCE, Jaipur, regarding razors distributed free with shoe polish, was deemed inapplicable due to the absence of MRP declaration on the razor packs.

Ultimately, the Tribunal overturned the Commissioner (Appeals) decision, reinstating the original adjudicating authority's order to continue duty demand under Section 4A. Regarding the penalty, the Tribunal cited Nestle India Ltd, indicating that no malicious intent was present in the legal interpretation, leading to the penalty's reversal. Consequently, the penalty imposed on the respondents was not upheld. The judgment was pronounced on 27-1-2006.