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TMI Blog2007 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant claims to have given free goods in various percentages to the wholesale dealers/distributors as quantity discount. As for example, 25 boxes are given free along with purchase of 100 boxes. (d) The goods which are given as quantity discount to the wholesalers also contained MRP prices printed on them as the same are requirements under the DPCO. (e) The original authority held that as the goods a recovered under the provisions of Section 4A of the Central Excise Act, 1944, the quantity discount claimed was not admissible and the assessable value was to be arrived at for the entire quantity by adopting the retail sale price less abatement at 40%. (f) Commissioner (Appeals) has upheld the order of the adjudicating authority. (g) In the case relating to Appeal No. E/183/07, a demand of Rs. 4,47,974/- relating to the period June 2005 to December 2005 stands confirmed besides imposition of equal penalty under Section 11AC. In addition, interest under Section 11AB is also demanded. (h) In the case relating to Appeal No. E/184/07, a sum of Rs. 1,71,735/- stands demanded also for the period June, 2005 to December 2005 along with interest. Penalty under Section 11AC a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified are goods for which the retail prices are required to be affixed either under the Standards of Weights and Measures Act or other laws like Drug (Prices Control) Order. In respect of such notified goods, the Central Govt. also specifies the quantum of abatement from maximum retail price (MRP) that should be given to arrive at the assessable value. No other deductions is permissible. 5.3 The provisions of Rules 12, 14 and 16 of the Drug (Prices Control) Order require that the manufacturers of medicines are to indicate the retail prices and also prescribe the mode of fixing the retail price and the extent of margin/discount that should be given to the retailers so that the goods reach the ultimate customer at a price not exceeding the maximum retail price. The said rules prescribe the manner of indicating the retail prices on the packages. 5.4 The physician samples which are ultimately distributed free and where no sales are involved are also subject to duty and as no MRP is required to be affixed on such packages that they are being subject to assessment in terms of Section 4. 5.5 Rule 2(q) of Standards of Weights and Measures Act defines retail sale which goes bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption but still duty becomes payable as there is removal of goods in terms of Rule 4 of the Central Excise Rules. 7.3 Duty becomes payable on removals whether the goods are subject to duty on specific rate or on ad valorem basis applying valuation in terms of Section 4 and the Valuation Rules made thereunder or cleared adopting valuation in terms of Section 4A. 8. When specific rated items are cleared (as in the case of chewing tobacco) the transaction price becomes totally irrelevant for determining the quantum of duty as there is a clear stipulation that valuation provisions under Section 4 are applicable only in respect of goods subject to duty with reference to their value. The measure of tax being definite, like number, weight, volume, issues like whether sale is made through related person, or whether used captively become irrelevant. The tax becomes payable on the actual quantity removed. 9.1 When goods are subject to duty on ad valorem basis, they are to be assessed in terms of Section 4, the relevant portion of which reads as follows: "Section 4. Valuation of excisable goods for purposes of charging of duty of excise - (1) Where under this Act, the dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount charged. 9.4 In the above situation, the assessee is required to account the entire 125 boxes as manufactured in the daily stock account and at the time of removal show the entire quantity in the invoices and the value shall be the discounted price which happens to be the transaction price, which the assessee has received from the seller. 10. The Parliament, with a view to minimize valuation disputes, enacted Section 4A, which provides for an alternate mode of valuation applicable in respect of commodities specifically notified by the Central Government. The relevant portion of Section 4A reads as follows: "Section 4A. Valuation of excisable goods with reference to retail sale price - (1) 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 Standards of Weights and Measures Act 1976 (60 of 1976) or the Rules made thereunder or under any other law for the time being in force on the package thereof the retail sale price of such goods to which the provisions of sub-section (2) shall apply (2) Where the goods specified under sub-section (1) are excisable goods and are cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price, such altered retail sale price shall be deemed to be retail sale price; (c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates". 10.1 When removal is of goods covered under Section 4A, the transaction price becomes irrelevant both from assessee's the point of view and Departments point of view. What applies to Section 4 valuation need not automatically percolate to valuation under Section 4A. The provisions of Section 4A is of overriding in nature. The non obstante clause in sub-section (2) of Section 4A "Not withstanding anything contained in Section 4" makes this abundantly clear. 10.2 The Central Government specifies the commodity to which Section 4A is to be applied and also specifies the abatement to be given from the MRP to arrive at the value for excise purposes. The MRP minus abatement is taken as the assessable value under Section 4A. If the assessee happens to sell the product at a pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pack and each of the individual items comprising the multi- pack, are clearly visible (e.g. soap, powders, tooth paste etc). Only ten can Explanation 2 (a) to Section 4A apply. (iii) If the individual items have MRPs printed on them but are scored out then the MRP printed on the multi-pack will be taken for purposes of valuation under Section 4A. (iv) If the individual item is supplied free An the multi-pack and has no MRP printed on it, the MRP printed on the multi-pack will be taken for purposes of valuation under Section 4A". 11.3 From the above said circular it could be seen that the individual package contained in the multi-piece packages did not have the MRP. Only the outer package of the multi-piece packages contained MRP and the same was meant to reach the ultimate customer in the said package and with the said MRP. Since the item mentioned as free was contained in the multi-piece pack, and the overall package contained MRP, the assessment is sought to be made on the basis of MRP mentioned in the multi-piece package. 12. The above Circular has been heavily relied upon in reaching the decision in the case of Surya Food and Agro Ltd. v. C.C.E., Noida reported in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Food and Agro Ltd. v. CCE, Noida [2003 (156) E.L.T. 488 (Tri.-Del.)], holding that free supplies are not includible in the assessable value under Sec. 4A of Central Excise Act (MRP) is squarely applicable. Following the ratio thereof we set aside the impugned order and allow the appeal." 13.2 On the basis of the letters addressed by the assessee to the department throughout the entire period in dispute, the Tribunal held that that one coil was supplied free with every 12 coils. Based on the above finding of fact that the coils were supplied free as in the case of Surya Food and Agro Ltd. the Tribunal took the view that no duty was chargeable. The above decision has been rendered on the ground that the ratio of the case of Surya Food and Agro Ltd. was squarely applicable to the said case. 13.3 However, there is an observation — "The contention of the appellants that in the case of a free supply there is no sale and therefore the provisions of Sec. 4A are not attracted, is well found." 14.1 The above observation, in our considered opinion is not legally correct. It gives the impression that if there is a free supply and if there is no sale, then no duty becomes chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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