2014 (7) TMI 575 - AT - Central Excise

Tribunal rules duty correctly paid, government entity not 'Institutional Consumer'

The Tribunal ruled in favor of the appellant, holding that the duty was correctly paid based on the value determined under section 4A. The government ... Method of valuation - assessee paid the Duty on MRP minus abatement - retail sale or not - revenue demanded the duty on the basis of transaction value u/s 4 - Held that:- In terms of Rule 2A(b) of the SWM Rules, the provision of Chapter II of these Rules would not apply to the packaged commodities meant for 'Industrial Consumer' or 'Institutional Consumer'. In terms of explanation to this Rule, 'Institutional Consumers'' means those consumers who buy packaged commodities directly from manufacturers/packers for service industry like transportation including airways, railways or any other similar service industry and 'Industrial Consumers' means those consumers who buy packaged commodities directly from manufacturers/packers for using the same in their industry for production etc. Since M/s. ELCOT are neither institutional consumer nor industrial consumer, in respect of sale of CTVs by the appellant to them, MRP was required to be declared in term of SWM Rules and accordingly, the Provisions of Section 4A would be applicable. The Appellant have paid duty on this basis only i.e. on the value determined under section 4A. - Impugned order not sustainable - Decided in favour of assessee. Issues:Interpretation of the term 'Institutional Consumer' under Rule 2A(b) of the SWM Rules for Central Excise Duty on Color Television sets supplied to a government undertaking for free distribution.Analysis:The appeal involved a dispute regarding the duty liability on the supply of Color Television sets to a government undertaking for free distribution. The appellant contended that duty was correctly paid based on the assessable value determined under section 4A of the Central Excise Act, considering Maximum Retail Price (MRP) minus abatement. The Department argued that the government undertaking should be classified as an 'Institutional Consumer,' exempting the requirement to declare MRP. The Commissioner's finding that the government undertaking qualifies as an 'Institutional Consumer' was challenged.The Tribunal considered the definitions of 'Institutional Consumer' and 'Industrial Consumer' under Rule 2A(b) of the SWM Rules. It was noted that 'Institutional Consumers' are those purchasing commodities for service industries like transportation, while 'Industrial Consumers' purchase for production in their industries. The Department claimed that the government undertaking, acting on behalf of the state government for free distribution, should be deemed an 'Institutional Consumer.' However, the Tribunal disagreed, stating that the distribution of TV sets for free does not constitute a service industry activity as defined. Additionally, as the TV sets were not intended for use in the undertaking's factory for production, they could not be classified as 'Industrial Consumers.'Consequently, the Tribunal ruled in favor of the appellant, concluding that the duty was correctly paid based on the value determined under section 4A. As the government undertaking did not qualify as an 'Institutional Consumer' or an 'Industrial Consumer,' the requirement to declare MRP under the SWM Rules applied. The impugned order demanding differential duty was set aside, and the appeal was allowed.