2019 (10) TMI 633 - AT - Central Excise

Method of Valuation - clearance of tooth brushes in combo pack/bulk/naked condition to manufacturer of Toothpaste for free distribution - applicability of section 4 and section 4A of CEA - case of the department is that the tooth brushes so cleared were required to be assessed under Section 4A of the Central Excise Act, 1944. i.e. on MRP basis instead of transaction value - period February 2013-June 2017 - HELD THAT - It can be seen that from Hon'ble Supreme Court judgment in the case of JAYANTI FOOD PROCESSING (P) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN 2007 (8) TMI 3 - SUPREME COURT where the issue is no longer res integra as the identical facts are involved in the present case, therefore, the tooth brushes supplied by the appellant which is not for retail sale but for free supply by the tooth paste manufacturer will not be valued under Section 4A in the hands of the appellant. The value adopted by the appellant under Section 4 is correct and legal which does not need any interference - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification and valuation of tooth brushes cleared in bulk/combo packs/naked condition for free distribution.
2. Applicability of Section 4A of the Central Excise Act, 1944 versus Section 4 for valuation.
3. Precedent applicability from previous Tribunal and Supreme Court judgments.

Detailed Analysis:

1. Classification and Valuation of Tooth Brushes Cleared in Bulk/Combo Packs/Naked Condition for Free Distribution:
The appellant, engaged in the manufacture of tooth brushes under Chapter 96 of the Central Excise Tariff Act, 1985, cleared the tooth brushes in bulk/combo packs/naked condition to toothpaste manufacturers for free distribution. These tooth brushes were assessed on the transaction value based on the contract price under Section 4 of the Central Excise Act, 1944. The department contended that these should be assessed under Section 4A on MRP basis, as they were also packed in blister packs with MRP printed, as per the Standards of Weights and Measures Act.

2. Applicability of Section 4A of the Central Excise Act, 1944 Versus Section 4 for Valuation:
The Tribunal found that the tooth brushes supplied were not sold in retail but were used for free supply with toothpaste, thus not requiring MRP printing. This was supported by the Supreme Court judgment in Jayanti Food Processing (P) Ltd. vs. Commissioner of Central Excise, Rajasthan, which held that goods supplied for free distribution are not subject to MRP-based valuation under Section 4A but should be valued under Section 4.

3. Precedent Applicability from Previous Tribunal and Supreme Court Judgments:
The Tribunal referred to its own previous decision in the appellant's case and the Supreme Court's ruling in the Jayanti Food Processing case, which established that goods supplied for free distribution are not subject to MRP-based valuation. Additionally, the Tribunal cited the Mumbai Bench's decision in Nestle India Limited, which held that promotional packs supplied free with another product and not bearing MRP should be valued under Section 4.

The Tribunal concluded that the tooth brushes supplied by the appellant, which were not for retail sale but for free supply by toothpaste manufacturers, should be valued under Section 4. The Tribunal set aside the impugned order and allowed the appeals, affirming that the valuation method adopted by the appellant was correct and legal.

Conclusion:
The Tribunal ruled that the valuation of tooth brushes supplied for free distribution should be done under Section 4 of the Central Excise Act, 1944, and not under Section 4A. The impugned order was set aside, and the appeals were allowed, aligning with the precedent set by the Supreme Court and previous Tribunal decisions.

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