Tribunal rules in favor of appellants on excise duty assessment for goods with crossed MRP

The tribunal ruled in favor of the appellants in a case involving the assessment of goods supplied in bulk with MRP printed and crossed as "free, not for sale" and shampoo packed in pouches with net content less than 10 ml. The tribunal held that both categories of goods should be assessed under Section 4 of the Central Excise Act, rejecting the department's contention to assess them under Section 4A. The demand for differential duty and penalty imposed on the appellants was set aside, and the appeal was allowed.

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Issues Involved:
1. Assessment of goods supplied in bulk with MRP printed and crossed and marked "free, not for sale".
2. Assessment of shampoo packed in pouches/sachets with net content less than 10 ml.

Detailed Analysis:

Issue 1: Assessment of Goods Supplied in Bulk with MRP Printed and Crossed and Marked "Free, Not for Sale"

The appellants were engaged in the manufacture of Shampoo and Face Cream and supplied these goods in bulk to "EMAMI" with MRP printed and crossed and marked "free, not for sale". The department contended that these goods should be assessed under Section 4A of the Central Excise Act based on MRP. However, the appellants valued these goods under Section 4 of the Central Excise Act.

The Controller of Legal Metrology clarified that there was no legal bar in making a declaration as "Free not for sale" for goods supplied free of cost and that there was no need to indicate MRP on such products under the Standards of Weights and Measures Act, 1976, and the related rules. Despite this, the adjudicating authority relied on the Tribunal's decision in the Nestle India Ltd. case, which was subsequently set aside by the Supreme Court. The apex court ruled that unless there is an element of sale, Rule 6(1)(f) of the Standards of Weights and Measures (Packaged Commodity) Rules would not be attracted, and such packages would not be governed under Section 4A but under Section 4 of the Central Excise Act.

The tribunal concluded that the goods supplied in bulk to "EMAMI" with MRP printed and crossed and marked "free, not for sale" should be assessed under Section 4 of the Central Excise Act, in line with the Supreme Court's judgment and the clarification from the Controller of Legal Metrology.

Issue 2: Assessment of Shampoo Packed in Pouches/Sachets with Net Content Less than 10 ml

For the second category of goods, the shampoo packed in pouches/sachets with net content less than 10 ml and supplied to "EMAMI", the adjudicating authority relied on the Madras High Court's judgment in Varnica Herbs Vs. CBE & C. However, the appellants cited the Tribunal's Larger Bench decision in CCE Vs. Urison Cosmetics Ltd., which supported their case.

The tribunal noted that the shampoo in question is a cosmetic item covered by Sl. No. 25 of the Table in the V Schedule to the Standards of Weights and Measures (Packaged Commodity) Rules, which requires such goods to be sold by weight or volume. The tribunal found that the decision in Varnica Herbs was rendered per incuriam without considering the relevant legal provisions. The Larger Bench in Urison Cosmetics held that such goods should be assessed under Section 4 of the Central Excise Act.

The tribunal concluded that the shampoo packed in pouches/sachets with net content less than 10 ml should also be assessed under Section 4 of the Central Excise Act, as these goods were sold by measure (volume) and were excluded from the applicability of the Standards of Weights and Measures (Packaged Commodity) Rules.

Judgment:

The tribunal set aside the demand of differential duty and the penalty imposed on the appellants. Both categories of goods were held to be assessable under Section 4 of the Central Excise Act, and the appeal was allowed. The operative part of the order was pronounced in open court on 3.9.2007.

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