MRP-based duty on imported set top boxes depends on retail sale packaging and Legal Metrology requirements, not mere import status.

MRP-based countervailing duty under the proviso to Section 3(2) of the Customs Tariff Act, 1975 read with Section 4A of the Central Excise Act, 1944 applies only when the package is one on which the Legal Metrology law requires retail sale price declaration and the goods are covered by the relevant Section 4A notification. For imported set top boxes supplied as customer premises equipment for DTH services, where title remained with the supplier, the boxes were marked not for retail sale, and the packages were specially packed for service use, the retail sale price requirement did not arise. Replacement units actually sold to subscribers, however, involved a sale element and could be assessed on MRP basis.

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Issues: Whether imported set top boxes, supplied as customer premises equipment for DTH services and not intended for retail sale, were required to bear retail sale price so as to attract countervailing duty on MRP basis under the proviso to Section 3(2) of the Customs Tariff Act, 1975 read with Section 4A of the Central Excise Act, 1944; and whether the exception applied to set top boxes actually sold as replacement units.

Analysis: The liability to assess CVD on retail sale price basis arises only when two conditions coexist: the imported article is one for which the Legal Metrology law requires declaration of retail sale price on the package, and the article is covered by the notification under Section 4A of the Central Excise Act, 1944. The governing definition of sale had to be taken from the Legal Metrology Act, 2009 and the Packaged Commodities Rules, 2011, not from the wider definition under the Central Sales Tax Act, 1956. On the facts, the set top boxes were supplied under agreements showing that title remained with the appellants, were shown as capital assets, and there was no transfer of property, hire-purchase, or instalment sale. The packages were marked as not meant for retail sale and were specially packed for servicing the DTH industry. In that setting, the packages were not retail packages intended for sale to the ultimate consumer, so the requirement to declare MRP did not arise. The decision was supported by the statutory scheme and the principle that the nature of the transaction must be tested under the controlling legislation applicable to the duty levy. The demand on MRP basis therefore could not stand for the ordinary imported set top boxes. However, where replacement set top boxes were actually sold to subscribers for a price, an element of sale existed and MRP-based assessment was permissible for those units.

Conclusion: The imported set top boxes, except those actually sold as replacement units, were not liable to CVD on retail sale price basis under Section 4A of the Central Excise Act, 1944 read with the proviso to Section 3(2) of the Customs Tariff Act, 1975.

Ratio Decidendi: MRP-based customs valuation under the proviso to Section 3(2) of the Customs Tariff Act, 1975 applies only where the Legal Metrology law requires declaration of retail sale price on a package intended for retail sale; if the goods are not sold and are not retail packages, assessment under Section 4A is not attracted.

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