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2008 (9) TMI 471 - HC - Central ExciseSettlement of the proceedings valuation Cookies sold to industrial consumers like airlines, hotel, industry etc. - Settlement Commission, in the absence of declaration of retail sale price on the packages by the first respondent in respect of Cookies manufactured by it and in the absence of any obligation on its part to make such declaration of retail sale price as per the Standards of Weights and Measures Act, 1976 (Act 60/76), there is absolutely no reason for the second respondent Settlement Commission to show leniency by making assessment under Section 4-A - In any event, the M.R.P. not having been declared on the packages, when the assessee has been selling the packages to the institutional customers for the purpose of consumption of their customers, the correctness or otherwise of the plea of the assessee should have been verified, which can be possible only by adjudication or at least by the Settlement Commission taking the role of Central Excise Officer as per section 32-I(2) of the Act by conducting proper enquiry. In the absence of such procedure being followed, certainly the impugned order of the Settlement Commission giving benefit to the first respondent under section 4-A of the Act in respect of bulk quantities of Cookies manufactured by it and supplied to the institutional customers is not proper, hence it is set aside
Issues Involved:
1. Alleged non-payment of duty on Dough by the first respondent. 2. Determination of whether the duty on Cookies should be assessed under Section 4 or Section 4-A of the Central Excise Act, 1944. Detailed Analysis: 1. Alleged Non-Payment of Duty on Dough: The petitioner, Commissioner of Central Excise, Chennai-II, contends that the first respondent cleared Dough without payment of duty from 1-3-2005 to 31-12-2005, resulting in a demand for duty and interest. The first respondent admitted the liability and paid the duty and interest, asserting a bona fide belief that Dough was not liable to duty due to its non-marketability and lack of awareness about the amendment in the Central Excise Tariff Act, 1985. The court acknowledged the first respondent's payment and resolved this issue, leaving the main contention regarding the assessment of Cookies. 2. Assessment of Duty on Cookies (Section 4 vs. Section 4-A): The primary dispute revolves around whether the duty on Cookies supplied to institutional customers like Jet Airways and Taj Group of Hotels should be assessed under Section 4 (transaction value) or Section 4-A (retail sale price) of the Central Excise Act, 1944. Petitioner's Arguments: - The petitioner argued that the goods were supplied in bulk to institutional customers without MRP declaration, thus falling under Section 4 of the Act. - The petitioner emphasized that there is no statutory obligation to declare MRP under the Standards of Weights and Measures Act, 1976, for such bulk supplies. - The petitioner contended that the Settlement Commission exceeded its jurisdiction by applying Section 4-A and granting immunity from penalties and prosecution despite finding clandestine removal of goods. First Respondent's Defense: - The first respondent argued that the Cookies were supplied to institutional customers for consumption, not for retail sale, and thus should be assessed under Section 4-A. - They relied on the Supreme Court judgment in Jayanthi Food Processing Pvt. Ltd. v. Commissioner, Central Excise, Rajasthan, which held that duty is payable on MRP for goods notified under Section 4-A, irrespective of the nature of the customer. - The first respondent also pointed out that the Settlement Commission granted partial immunity from interest and full immunity from penalties and prosecution after considering the facts. Court's Findings: - The court noted that the first respondent did not declare MRP on the packages, which is a mandatory requirement for applying Section 4-A. - The court found that the Settlement Commission's decision to assess under Section 4-A was incorrect, as there was no statutory requirement for the first respondent to declare MRP. - The court referenced the Supreme Court's criteria in Jayanthi Food Processing Pvt. Ltd., which mandates that all five factors (including statutory requirement to declare MRP) must be present for Section 4-A to apply. - The court concluded that the Settlement Commission should have referred the matter for adjudication by the Central Excise Officer to ascertain the factual position regarding the nature of the supply and the applicability of Section 4 or 4-A. Conclusion: The court set aside the Settlement Commission's admission-cum-final order dated 6-12-2006, ruling that the assessment should be under Section 4 of the Central Excise Act, 1944, due to the absence of MRP declaration and statutory obligation. The writ petition was allowed, and the impugned order was annulled.
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