2003 (9) TMI 245 - AT - Central Excise

Valuation (Central Excise) - duty demand - Telecom instruments - Actual sale price - contract sales to DOT/BSNL - HELD THAT - There is no dispute that the telecom instruments involved in the present dispute were cleared in terms of Packaged Commodities Rules. It is also specifically noted that MRP has been declared on the individual cartons . Telecom instruments are specified goods u/s 4A of the Central Excise Act also. Section 4A specifically excludes the application of provision of Section 4 of the Central Excise Act to goods specified under Section 4A. In these circumstances, we are of the view that telecom instruments in question fell for valuation under Section 4A. They were so valued and duty paid at the time of their removal from the factory. That they were sold in wholesale to a big customer like DOT/MTNL/BSNL against contract prices is altogether irrelevant for the purpose of their excise valuation. It is also no requirement under Packaged Commodities Rules or u/s 4A of the Central Excise Act that goods covered by those provisions should actually be sold in retail. This is made clear by the definition of 'retail sale' under Rule 2 of Packaged Commodities Rules. The definition makes it clear that 'retail sale' includes distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual . We also find that South Regional Bench of this Tribunal at Bangalore has also taken a view that telephone instruments sold to MTNL/DOT on contract sales are also required to be valued u/s 4A of the Central Excise Act in Appeal Nos. E/701 and 962/2002 in the case of M/s. ITEL Industries P. Ltd. 2003 (10) TMI 140 - CESTAT, BANGALORE . Thus, the appeal is allowed with consequential relief, if any, to the appellants.

Summary

Issues involved:
The issues involved in this case are the valuation of telephone instruments sold to the Department of Telecom/Bharat Sanchar Nigam Limited, the application of Section 4A of the Central Excise Act for valuation, and the dispute regarding the duty demand amounting to over Rs. 33 lakhs.

Valuation of Telephone Instruments:
The impugned order confirmed a duty demand on telephone instruments sold by the appellants to DOT/BSNL, stating that the goods should be assessed based on their actual sale price under Section 4 of the Central Excise Act, not under Section 4A. The Order-in-Original highlighted that the contract sales to DOT/BSNL are not covered by Section 4A, and the valuation based on contract price with abatement of 40% is inadmissible. The appellant argued that telephone instruments, being specified goods under Section 4A, should be valued as per Section 4A, not at wholesale price under Section 4. The appellant emphasized that once goods fall for valuation under Section 4A, actual sale price becomes irrelevant for excise valuation.

Application of Section 4A:
The appellant contended that telephone instruments, meeting the requirements under Packaged Commodities Rules by affixing retail sale price, should be valued under Section 4A. The appellant cited the decision of the South Regional Bench in a similar case, supporting valuation under Section 4A for telephone instruments sold to MTNL/DOT. The Tribunal noted that telecom instruments were cleared in compliance with Packaged Commodities Rules, with MRP declared on individual cartons, and fell under Section 4A for valuation, irrespective of being sold wholesale to DOT/MTNL/BSNL.

Judicial Precedent:
The Tribunal referred to the decision of the South Regional Bench in the case of M/s. ITEL Industries P. Ltd., which held that clearances of telephone instruments to DOT/MTNL should be assessed under Section 4A, not Section 4 of the Central Excise Act. The majority order in the mentioned case supported valuation under Section 4A for such transactions. Consequently, the Tribunal allowed the appeal in the present case, providing consequential relief to the appellants based on the valuation under Section 4A.

This summary outlines the key aspects of the judgment, including the dispute over valuation methodology, the application of Section 4A for specified goods like telephone instruments, and the reliance on judicial precedent to support the appellant's position.