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Section 4A of Central Excise Act, 1944 (‘Act’ for short) deals with the valuation of excisable goods with reference to retail sale price. Section 4A (1) provides that the Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Legal Metrology Act, 2009 or the rules made there under or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of 4A (2) shall apply. Section 4A (2) provides that where the goods specified under section 4A (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette. Section 4A (3) provides that where any goods specified under section 4A (1) are excisable goods and the manufacturer-
then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section. Explanation 1 defines the term ‘retail sale price’ as the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and the price is the sole consideration for such sale. In case the provisions of the Act, Rules or other law as referred to in section 4A(1) required to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly. Explanation 2 provides for the purpose of this Section-
Rule 4 of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 (‘Rules’ for short) provides that where a manufacturer removes the excisable goods specified under sub-section (1) of section 4A of the Act,-
if more than one retail sale price is ascertained under clause (i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods. For the purposes of this rule, when retail sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis. Exemption from mentioning MRP Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 gives exemption in respect of certain packages (now replaced by Legal Metrology (Packaged Commodities) Rules, 2011. In ‘Commissioner of Central Excise, Jaipur V. Alwars Lamps Private Limited’ – 2015 (8) TMI 1049 - SUPREME COURT auto bulbs are sold in packaged form without mentioning MRP. The said bulbs were sold to industrial units/OE manufacturers at retail price less than ₹ 20/- per bulb. The Supreme Court held that the bulbs were classifiable under sub-heading 8539.10 of the Central Excise Tariff Act and not under sub heading 8539.90. Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 exempts mentioning of MRP, and in view thereof there was no necessity to mention retail price. Section 4A of Central Excise Act in its wholesome could not be applied in its entirety in cut and paste form. In ‘Venkateswara Cans Private Limited V. Commissioner of Central Excise, Mumbai’ – 2007 (12) TMI 451 - CESTAT MUMBAI it was held that affixing MRP on packages of lipsticks of 10 gms or less are exempt under Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977. The valuation is to be done under Section 4 of the Central Excise Act. In ‘Sarvotham Care Limited V. Commissioner of Customs & Central Excise, Hyderabad’ – 2013 (4) TMI 505 - CESTAT BANGALORE it was held that weight of all pieces, in a multi piece package, has to be taken into consideration for the applicability of exemption under Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977. If the total weight of the package is more than 20 grams exemption is not available and MRP based valuation under Section 4A of Central Excise Act, 1944 would apply. Section 26 of Legal Metrology Act, 2009 provides exemption to the following:
Re-determination of MRP by Revenue In ‘ACME Ceramics V. Commissioner of Central Excise, Rajkot’ – 2014 (3) TMI 164 - CESTAT AHMEDABAD it was held that prior to 01.03.2008 there is no procedure to revise MRP existed even there was a provision under Section 4A of the Central Excise Act, 1944. Redetermination of MRP by revenue is without authority of law in the absence of legal machinery during the relevant period. MRP based valuation Section 4A of Central Excise Act provides for MRP based valuation. The following case laws discussed the applicability of Section 4A of the Act: In ‘Legrand (India) Private Limited V. Commissioner of Customs (Imports), Mumbai’ – 2014 (2) TMI 407 - CESTAT MUMBAI the goods were imported in bulk packing not meant for retail sale and packing only for purpose of ease of transportation. The declaration that goods specially packed for exclusive use in any industry as raw material and not for retail sale, having been made before sale in market amounts to due compliance of law. The MRP based valuation under Section 4A of the Act is not applicable. Goods are liable to be assessed under Section 4 of the Act. In ‘Meghdoor Chemicals Limited V. Commissioner of Central Excise, Thane’ – 2013 (9) TMI 1035 - CESTAT MUMBAI no MRP is declared on the physician samples. The MRP of medicines of which they are sample is not to be treated as declaration of their MRP. Assessment is to be done under Section 4 of Central Excise Act and not under Section 4A. In ‘Commissioner of Central Excise, Pune-II V. Yashwant Industries Works Private Limited’ – 2015 (3) TMI 296 - CESTAT MUMBAI the Tribunal found that the examiner’s report is not in dispute which clearly classified the product as ‘other mastics’. Although the product in question is covered under Chapter 3214 is ‘other mastics’ but ‘other mastics’ have been excluded for levy of duty as per Section 4A of Central Excise Act. Therefore both the lower authorities have rightly held that the duty on the product is to be leviable as per Section 4 of the Central Excise Act. In ‘NITCO Tiles V. Commissioner of Central Excise, Raigad’ – 2014 (11) TMI 117 - CESTAT MUMBAI the Tribunal held that manufacturing of tiles is a continuous process, therefore goods are meant for retail sale. MRP affixed on each package of tiles even if quantity specified in boxes of 15 tiles meaning that supplies are retail packs on which MRP printed. The goods are not meant for industrial/institutional customers. Duty correctly discharged under Section 4A of the Act. In ‘Bajaj Food Products (P) Limited V. Commissioner of Central Excise, Rohtak’ – 2014 (12) TMI 822 - CESTAT NEW DELHI the biscuits were supplied to Municipal Corporation of Delhi under National Program of Nutritional Support of Primary Education. The sales to MCD were qualified to be sales to institutional buyer. MRP is not required to be printed on such goods. The provisions of Chapter 2 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 is not applicable. MCD supplied wheat to the appellant free of cost, negotiated and fixed the price. Therefore the MRP on goods are not legal but it is just a figure mentioned in the name of MRP. The assessment is to be done in terms of Section 4 of Central Excise Act and not under Section 4A. The Tribunal held that the fact of free supply of wheat by buyer was not declared thereby deliberately and misleadingly claimed MRP based assessments. The appellants just printed a price in name of MRP for sake of making claim for assessment under Section 4A. The fact was suppressed with the intent to evade duty. The demand was upheld. The Directors of the appellant knowingly abetted evasion of duty and hence are liable for penalties. Provisional release In ‘Riddhi Siddhi Collection V. Commissioner of Customs (I), Nhava Sheva’ – 2013 (9) TMI 1000 - CESTAT MUMBAI the goods were seized upon the intelligence. Wide variations are found in MRP declared by the applicant and those found on web site. DRI got the MRP details in respect of only seven items. In respect of remaining items, Revenue is not having any MRP but have estimated the same as five times the declared MRP by the applicant and for differential duty, bond and bank guarantee demanded on the basis of the said estimated MRPs. The Tribunal held that asking 100% in cash/bank guarantee for differential duty based purely on estimation basis is not correct. The Department adopted two different criteria in respect of goods which have been assessed but not cleared so far and in respect of goods which are yet to be assessed. Conditions in both the situations should be same, good being same/similar the Tribunal directed the goods to be released on 100% of re-determined assessable value i.e., 40% of MRP. On payment of 50% differential duty applicable is to be paid in respect of 7 items and on execution of bank guarantee (with self renewable clause) for 10% of re-determined value. Revenue neutral In ‘Commissioner of Customs & Central Excise, Noida V. India Yamaha Motor Private Limited’ – 2014 (2) TMI 399 - CESTAT NEW DELHI the goods were being cleared by the respondents from their Noida Unit on payment of duty under Section 4 of the Central Excise Act to their Faridabad Unit, which were fixing the goods with MRP sticker and were again paying the duty on the MRP of the goods. The Tribunal agreed with the findings of the Commissioner that the entire situation is revenue neutral and no duty can be said to have been evaded by the respondent. MRP in multipacking In ‘Aura Oil Industries V. Commissioner of Central Excise, Thane-II’ – 2011 (1) TMI 1009 - CESTAT, MUMBAI the issue involved in this case is whether a pack of 3 soaps having individual MRP printed on them, which are secured by a wrapper indicating that the 3 soaps are for sale for MRP of ₹ 24/- are to be assessed accordingly or on MRP of ₹ 12/- indicated on individual pack or not. The Tribunal held that the valuation had to be at aggregate of price printed on individual pack and not at price printed on two sides of wrapper of muti-packing. The Tribunal upheld the order of Adjudicating Authority that the assessee has to discharge the duty @ ₹ 36/- for a pack of 3 soaps less admissible abatement. Since the issue involved in this case is of interpretation no penalty shall be imposed. Erroneous declaration In ‘Panasonic Energy India Company Limited V. Commissioner of Customs (Imports), Mumbai’ – 2014 (8) TMI 993 - CESTAT MUMBAI the Tribunal held that it stands established that MRP was erroneously declared on imported goods as ‘per piece’ instead of ‘per package’. The CESTAT in its earlier order remanded the matter for re-adjudication. The Adjudication Authority rejected such request made by the appellant. The Tribunal held that the lower authorities were in error in out rightly rejecting the request. The Tribunal quashed the order and set aside the order. Warranty stickers In ‘Beltek (India) Limited V. Commissioner of Central Excise, Noida’ – 2014 (2) TMI 720 - CESTAT NEW DELHI it was held that mere putting warranty stickers and pasting chassis number will not amount to manufacture as goods are already packed and being MRP stickers at the stage of import itself. Absence of MRP In ‘Union of India V. Kamakhya Cosmetics and Pharmaceuticals’ – 2014 (11) TMI 1187 - GAUHATI HIGH COURT the High Court held that where the goods do not carry MRP, with reference to the marginal cost and prevalent market price of similar goods in comparison to the market price of similar goods, the malpractice of over valuation can be detected at the time of refund. Responsibility of the importer Rule 33 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 is applicable to packaged commodities imported in India. Rule 33(2) provides that the responsibility for making mandatory declarations shall rest with the importer. In ‘Videocon International Limited V. Commissioner of Customs, Mumbai – I’ – 2006 (6) TMI 499 - CESTAT MUMBAI the appellant imported TV sets claiming the benefit of CVD @ 16% under Notification No. 5/99-CE. The Revenue denied the benefit on the ground that MRP fixed on packages are by foreign supplier and not by importer after importation which is not in accordance to Rule 33 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977. The importer alone is not to affix MRP, he merely to ensure declaration made in proper manner. The importer’s instruction to foreign supplier affixing MRP is not in violation of Rule 33(2). The Tribunal allowed the benefit of Notification.
By: Mr. M. GOVINDARAJAN - December 11, 2015
Discussions to this article
Dear Sir, Thank you for your excellent Article on MRP based valuation. To the bouquet of case laws cited by you, please add the decision dt.9.9.2015 of the Supreme Court in Commissioner of Central Excise, Bangalore v Himalaya Drug Company (Civil Appeal No.227 of 2007 and 8549 of 2009) = 2015 (9) TMI 1272 - SUPREME COURT. The assessee gave away FREE Face Wash Gel along with its own product Dandruff Shampoo bound together with a sticker label. The Dept sought to levy duty on the value of the Face Wash Gel [which is given FREE by the assessee]. The CESTAT held in favour of the assessee after referring to Oswal Fats and Surya Foods cases. The SCI affirmed the decision of the CESTAT in favour of the assessee.
Thank you, Sir. I have also seen the judgment referred to by you. But before that I have completed this article and forwarded to TMI. However I appreciate your updation in case laws.
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