Appeals Dismissed, Directors Penalized, Biscuit Supply Ruled Non-Eligible

The tribunal dismissed the appeals, upholding the demand for duty, penalties on the directors, and the decision that the biscuits supplied to MCD were not eligible for assessment under Section 4A. The judgment emphasized the importance of compliance with SWM (PC) Rules and transparency in pricing to prevent duty evasion.

---

---

Issues: (i) Whether biscuits supplied to the Municipal Corporation under a contractual scheme for free distribution were assessable under Section 4A of the Central Excise Act, 1944 on the basis of the printed MRP, or under Section 4 of that Act; (ii) whether the demand of duty, penalty and personal penalties were sustainable on the ground of suppression and intent to evade duty.

Issue (i): Whether biscuits supplied to the Municipal Corporation under a contractual scheme for free distribution were assessable under Section 4A of the Central Excise Act, 1944 on the basis of the printed MRP, or under Section 4 of that Act

Analysis: The supplies were made to the Municipal Corporation under a specific contract for a public welfare scheme, and the packages themselves described the goods as meant for Municipal Corporation supply. The packages were in sizes, some of which did not conform to the requirements under the Packaged Commodities Rules. The printed figure of Rs. 2 was not a true retail sale price within the meaning of the rules because it reflected the contract price, took account of free supply of wheat by the Corporation, and was not a price at which the goods were sold to the ultimate consumer in an arm's-length retail market. On that footing, the goods were treated as supplied to an institutional buyer, and the printed price could not attract valuation under Section 4A.

Conclusion: The goods were not eligible for assessment under Section 4A and were rightly assessable under Section 4.

Issue (ii): Whether the demand of duty, penalty and personal penalties were sustainable on the ground of suppression and intent to evade duty

Analysis: The assessee did not disclose the material fact that wheat was being supplied free by the Municipal Corporation, yet projected the printed figure as the correct MRP across different pack weights. The conduct showed a deliberate attempt to use an artificial MRP to secure assessment under Section 4A and avoid duty. The same conduct justified the finding of suppression and the inference of mens rea on the part of the company and its officers, thereby supporting the duty demand, confiscation liability and personal penalties.

Conclusion: The demand, interest and penalties were sustainable.

Final Conclusion: The appeals failed on merits, and the adjudication that the clearances were not assessable under the MRP-based provision was upheld together with the consequential duty and penal liabilities.

Ratio Decidendi: A printed price is not MRP for the purpose of Section 4A if it is not a genuine retail sale price under the Packaged Commodities Rules and is only a contract price for supplies to an institutional buyer; in such a case assessment falls under Section 4, and deliberate use of such a price may establish suppression and intent to evade duty.

---