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TMI Blog2017 (3) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeared that : (a) the respondents were supplying their excisable final product, namely paints, mainly to M/s.BHEL, M/s.Southern Railways and M/s.BIDASS Industrial Service Association; (b) the respondents had made such clearances to BHEL on individual purchase based on tender order, according to their specifications; (c) similar clearances had been effected to BIDASS on contract and purchase order basis ; (d) for the supplies made to BHEL, the containers were stenciled 'BHEL USE ONLY' ; (e) for the supplies made to BIDASS, the containers were stenciled 'BHEL APPROVED' ; (f) the respondent had never sold the excisable goods in the retail market but for a small quantity excisable goods; (g) Members of BIDASS Industrial Service Association were the Ancillary units of M/s.BHEL and that BIDASS supplied those paints only to the said units; (h) therefore, assessment under Section 4A of the Act on MRP price did not appear to available to the respondents in respect of supply of excisable goods made to BHEL, BIDASS etc. which were manufactured exclusively for the use by those industries and where no MRP was affixed as evident from the distinctive markings the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods were sold to BIDASS. This fact brought out in the show cause notice has not been disputed by the assessee. Assessee have not placed on record any evidence to show that the paints in question were sold to any retail consumer. The evidence produced by the assessee before Commissioner (Appeals) showed only a few sales. (b) when the goods are sold to industrial consumers there is no requirement under Standards of Weights and Measure (Packaged Commodities) Rules 1977 that M.R.P should be indicated on the packages as per Rule 34 (a) of these Rules. (c) when there is no legal liability to indicate M.R.P on the packages, provisions of Section 4A will not apply even if the assessee voluntarily indicate MRP on that packages. The working of Section 4A and Board's Circular 625/16/2002-Cx dated 28.2.2002 makes this position clear. (d) When MRP is adopted as basis for valuation under Section 4A, abatement as notified in Notification No.09/2000-CE (NT) dated 01.03.2000 is to be deducted from M.R.P. This abatement is worked out taking into account expenses and profit margins at different levels of trade upto retail level. When the price is declared for sale at the first wholesale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, whereon any goods retail sales price is required to be declared on the package thereof, under the provisions of Standards of Weights and Measures Act, 1976 (Legal Meteorology Act, 2009 w.e.f. 8.4.2001), the valuation of such excisable goods shall be deemed to be the retail sale price declared on the goods, less any amount of abatement that may have been prescribed by Notification. At the same time, the Standards of Weights and Measures Act (Packaged Commodities) Rules 1977 provide exemptions and exceptions where such MRP is not required to be affixed on the packages. It is therefore clear that when particular excisable goods are legally required to affix MRP, their valuation for calculating excise duty liability will be governed by provisions of Section 4A of CEA, 1944. However, if the excisable goods fall within the ambit of exemptions/exceptions from affixation of MRP, their valuation will necessarily fall out of the purview of Section 4A and instead, their valuation will be governed by Section 4 ibid. 9. Thus, the issue that comes up for decision in this appeal is whether the paints supplied by the respondent would require mandatory affixation of MRP or whether they are exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the contracts. M/s. BIDASS have also confirmed that they supplied the said paints only to their members who were ancillary units of BHEL. 12. It therefore transpires that the sales of paints effected by the respondent to BHEL or to BIDASS were only for the purpose of exclusive use of BHEL or their ancillary units and not for any further retail sale. It is not the case that BHEL or BIDASS were acting as wholesalers or traders of the respondent or that the former were further selling the paints obtained from the respondent to retail market. Viewed in this light, it becomes evident that the paints so sold by the respondent to BHEL or to other ancillary unit through BIDASS, have only been obtained by the latter as original equipment (OE) purchases and accordingly, clearances of paints to these entities would necessarily attain the colour of packages/commodity which have been specifically packed for the exclusive use of BHEL and/or, their ancillary units. In the cross-objections, appellant has placed reliance on the decision of the Hon'ble Apex Court in the case of Collector of Central Excise Vs. Ballarpur Industries Ltd. 1989 (43) ELT 804 (S.C.), to substantiate their contention th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the end-product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus." It is thus amply clear that while the Hon'ble Apex Court did go into the essentiality of the ingredients for the chemical processes culminating in the emergence of the desired end product, the Hon'ble Court also clarified that the relevant test is not the presence of the said ingredients in the end product, but the dependence of the end product for its essential presence at the delivery end of the process. By the respondent's own admission, the paints are used by BHEL or their ancillary units for anti erosion treatment etc. on the products manufactured by them. They are verily inputs for painting over the finished goods to protect against erosion. This being so, the paints supplied by the respondent will fall within the ambit of raw material, since without their application, the delivery end of the process would not be able to be effected by BHEL. The paints go into the making of the end product without which the presence of the end product is rendered impossible. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities have confirmed the demands raised on the appellant on the ground that they have wrongly adopted MRP based assessment under the provisions of Section 4A of Central Excise Act, 1944. It is noted from the records that the products "Glues and adhesives" were falling under Chapter 35 of the Central Excise Tariff Act, 1985; but the packing of the products manufactured by the appellant were indicating that they were supplied to industrial consumers and hence they were not covered by the provisions of Standards of Weight and Measurement Act, 1976. The factual finding of the first appellate authority are as under:- "As per Section 4A(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 & Measurement Act, 1976 (60 of 1976) or the rules made thereunder 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 sub-section (2) shall apply. As per Rule 34 of the Standards of Weight & Measurement Act, 1977 the provisions of marking MRP are not applicable to products especiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately after the MRP assessment under Section 4A of the Act came into force w.e.f. 01-09-1997. It is also not known whether while issuing those letters, the said Superintendent had been informed by the respondent, who is otherwise functioning under the self-removal procedure, of the method and manner of supplies effected to BHEL/BIDASS, especially with regard to the markings "FOR BHEL USE ONLY" etc. made on the packages or the fact that the paints so supplied to BHEL/BIDASS were exclusively consumed by the latter in the manufacturing process of BHEL products. In any case, even if the respondent claims to have been misled by such advice, that cannot be used as a legal excuse for non-payment of applicable duty liability. Two wrongs cannot make a right. At the most, the fact of the respondent having been in receipt of such misleading advice can only be a mitigating factor in considering the propriety and /or quantum of penalty proposed in the SCN under Rule 25 of the Central Excise Rules, 2001/2002 read with Section 11AC of the Act. 15. In view of the above, the departmental appeal succeeds and is therefore allowed by setting aside the impugned order to the extent of restoring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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