2013 (6) TMI 448 - AT - Central Excise

Valuation - whole sale packing - MRP Based valuation u/s 4A or Transaction value u/s 4 - Sugar confectionery - Penalty - Held that - The Larger Bench which considered the issues referred to by this Bench in the case of M/s. Roys Industries Ltd. 2010 (9) TMI 257 - CESTAT, BANGALORE rendered a split verdict. The minority view, which is in favour of the assessee, is to the effect that, with the dismissal of Civil Appeal No. 7559/2008 (which was filed by the Commissioner of Central Excise, Mangalore against the Tribunal s decision in the case of Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. v. Commissioner - 2008 (2) TMI 103 - CSTAT CHENNAI) by the Supreme Court, the issue stands settled in favour of the assessees. The majority view is based on the Supreme Court s judgment in CCE v. Kraftech Products coupled with the Tribunal s Larger Bench decision in the case of Commissioner v. Uricson Cosmetics Ltd. and the same is to the effect that, as the total weight of multi-piece retail package (pet jar/polybag) is more than 20 grams, the exemption under Rule 34(b) is not available and consequently the goods must be assessed to duty on the basis of MRP in terms of Section 4A. Placed as we are between the split verdict of the Larger Bench and the judgments of the Apex Court, we have got to identify the binding case law. The majority decision of the Larger Bench in the case of Roys Industries 2010 (9) TMI 257 - CESTAT, BANGALORE cannot be followed as a precedent inasmuch as the binding judgments of the Apex Court in the cases of Swan Sweets Pvt. Ltd. 2010 (9) TMI 10 - SUPREME COURT and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. exist in favour of the assessees. Decided in favor of assessee.

Summary

Issues Involved
1. Assessment of goods under Section 4A of the Central Excise Act.
2. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis

1. Assessment of Goods under Section 4A of the Central Excise Act

Background:
The primary issue in the appeals, excluding Appeal No. E/1103/2005, was the assessment of goods under Section 4A of the Central Excise Act. The appellants argued that their products should be assessed under Section 4 of the Act as they were not required to indicate MRP under the Standards of Weights and Measures Act, 1976, and its rules. The department contended that the goods should be assessed based on MRP under Section 4A.

Assessees' Argument:
The assessees, namely Sampre, Roys, and Prayagh, contended that their packaging of sugar confectionery in pet jars and polybags did not require MRP labeling as these were wholesale packages. They argued for exemption under Rule 34(b) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, claiming that the goods were not for retail sale and hence should be assessed under Section 4.

Department's Argument:
The department rejected the assessees' claims, stating that the individual pieces within the pet jars/polybags were capable of being sold in retail, making the packages retail packages under Rule 2(j) of the SWM (PC) Rules. Consequently, the goods were subject to MRP-based assessment under Section 4A.

Tribunal's Findings:
The Tribunal noted that the goods in question were notified under Section 4A for MRP-based assessment. It referred to the Larger Bench's split verdict in the case of M/s. Roys Industries Ltd., where the majority view held that multi-piece packages exceeding 20 grams were not eligible for the exemption under Rule 34(b) and should be assessed under Section 4A. However, the Tribunal also considered the Supreme Court's judgments in the cases of Swan Sweets Pvt. Ltd. and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd., which favored the assessees, holding similar packages as wholesale packages exempt from MRP-based assessment.

Conclusion:
Given the binding nature of the Supreme Court's decisions, the Tribunal followed the judgments in Swan Sweets Pvt. Ltd. and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd., setting aside the impugned orders and allowing the appeals.

2. Imposition of Penalty under Rule 26 of the Central Excise Rules, 2002

Background:
Appeal No. E/1103/2005, filed by the Managing Director of the assessee-company (appellant in E/1102/2005), challenged the imposition of a penalty of Rs. 5,00,000/- under Rule 26 of the Central Excise Rules, 2002.

Tribunal's Findings:
The Tribunal did not provide a separate detailed analysis for this specific appeal within the judgment text. However, by setting aside the impugned orders related to the assessment under Section 4A, it implicitly addressed the penalty issue.

Conclusion:
The penalty imposed under Rule 26 was also set aside as part of the overall decision to allow the appeals, based on the Supreme Court's binding judgments favoring the assessees.

Summary
The Tribunal addressed two primary issues: the assessment of goods under Section 4A of the Central Excise Act and the imposition of a penalty under Rule 26 of the Central Excise Rules, 2002. The Tribunal favored the assessees, setting aside the impugned orders and allowing the appeals, based on the binding Supreme Court judgments in Swan Sweets Pvt. Ltd. and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd., which held that similar packages were wholesale packages exempt from MRP-based assessment.