MRP-based excise valuation applies to goods requiring retail price declaration, even when cleared for free distribution.

Goods statutorily required to carry an MRP declaration remain assessable under section 4A of the Central Excise Act on the basis of retail sale price, even if a particular clearance is made for free distribution and not for direct retail sale. The statutory scheme turns on the nature of the packaged goods and the MRP requirement, not on the channel of clearance; Rule 34 of the Packaged Commodities Rules did not exclude the goods, and the contrary circular was held inapplicable on its facts. A bona fide interpretative dispute and absence of mala fides meant penalty was not warranted, while duty was upheld subject to limited recomputation after admissible deductions.

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Issues: (i) Whether the goods supplied under contract for free distribution with Pepsi were liable to be assessed under section 4A of the Central Excise Act, 1944 on the basis of the maximum retail price, or under section 4 on the contract price; (ii) Whether penalty was exigible.

Issue (i): Whether the goods supplied under contract for free distribution with Pepsi were liable to be assessed under section 4A of the Central Excise Act, 1944 on the basis of the maximum retail price, or under section 4 on the contract price.

Analysis: Section 4A applies where the goods are required, under the standards and weights regime, to declare retail sale price on the package. The goods in question were held to be covered by that regime and not exempted by Rule 34 of the 1977 Packaged Commodities Rules. The fact that the packages were supplied for free distribution did not take them outside the statutory scheme, because the section turns on the nature of the goods and the requirement of MRP declaration, not on whether a particular clearance is made for retail sale. The definitions of retail package, retail sale, and retail sale price also supported the conclusion that distribution through another consumer-facing channel remained within the statutory concept. The Board circular relied upon by the appellant was held inapplicable on its facts.

Conclusion: The goods were correctly assessable under section 4A on the basis of MRP, not under section 4 on the contract price. The matter was, however, remanded only for re-computation of duty after examining admissible deductions.

Issue (ii): Whether penalty was exigible.

Analysis: The duty dispute was found to be a bona fide interpretative controversy. The assessee had declared the contract price and cleared the goods in the knowledge of the Revenue, and no mala fides were found.

Conclusion: Penalty was not warranted and was set aside.

Final Conclusion: The duty demand under section 4A was upheld in principle, the question of admissible deductions was sent back for limited re-calculation, and the penalty was deleted.

Ratio Decidendi: Where excisable goods are statutorily required to carry MRP declaration, section 4A applies to those goods notwithstanding that a particular clearance is made for free distribution or not for direct retail sale.

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