2017 (3) TMI 1129 - AT - Central Excise

Toothpaste manufacturers win appeal on duty liability for CSD supply with MRPs

The appellate court ruled in favor of the toothpaste manufacturers supplying products to the Canteen Stores Department (CSD), holding that the goods, with ... Method of Valuation - transaction value u/s 4 or MRP based value u/s 4A - toothpastes in tubes branded as ‘Calcium Prudent’ - destined for distribution by the Canteen Stores Department (CSD) - institutional consumer or not - it was contended that goods not required to adhere to Standards of Weights & Measures (Packaged Commodity Rules), 1977, have the ‘retail selling price’ affixed on the packing - Held that: - The Canteen Stores Department (CSD) is wing of the Ministry of Defence. It is a presidential artifice which is assigned to that Ministry in The Government of India (Allocation of Business) Rules, 1961. The organization service officers and staff of the armed forces of the Union and the canteens are locations of storage and display from which the officers and staff procure articles that they require. Though it may have the looks of a shop, it is more of a store. Being an in-house procurement agency, it would not admit to enforcement under the statute relating to legal metrology. A ‘maximum retail price’ is affixed on the impugned package does not, of itself, render the goods liable to comply with the provisions of the law relating to ‘maximum retail price’ - whether that of legal metrology or of levy of excise duty. It is the requirement of compliance with the Standard of Weights & Measures (Packaged Commodity) Rules, 1977 that does. With the exclusion of institutional buyer from the ambit of the Rules, the affixing of retail sale price is not mandated on the impugned goods when cleared - The intent of the appellant is thus, unambiguously, clear, i.e., it is not for retail sale. Consequently, it is the value determined under section 4 of CEA, 1944 that will determine the basis for computation of duty liability - appeal allowed - decided in favor of appellant. Issues:1. Recourse to section 4A of Central Excise Act, 1944 for computing assessable value when goods have 'retail selling price' affixed on the packing.2. Applicability of notification no. 9/2000-CE (NT) and 13/2002-CE (NT) for assessing toothpastes under section 4A.3. Interpretation of circular no. 625/16/2002 - Central Excise regarding pre-packaged goods.4. Determining the liability of goods under section 4A based on the affixed 'maximum retail price'.5. Exclusion of institutional buyers from the Standards of Weights & Measures (Packaged Commodities) Rules, 1977.6. Clarifying the intent of affixing 'maximum retail price' on goods destined for Canteen Stores Department (CSD).Analysis:The judgment delves into the issue of whether goods, with 'retail selling price' affixed on the packing, should be assessed under section 4A of the Central Excise Act, 1944. The case involved toothpaste manufacturers supplying products to Canteen Stores Department (CSD), with the 'maximum retail price' printed on the packaging. The authorities contended that the goods fell under notification nos. 9/2000-CE (NT) and 13/2002-CE (NT), requiring assessment under section 4A. The appellate authorities upheld this view, emphasizing that the goods were not exempted under the Standards of Weights & Measures (Packaged Commodity) Rules, 1977.The judgment further discusses the significance of the 'maximum retail price' affixed on goods and the responsibility for compliance. It clarifies that the intent to cater to the retail market, indicated by the affixed price, determines the applicability of section 4A. The exclusion of institutional buyers from the Rules is highlighted, emphasizing that goods destined for such buyers may not require the 'maximum retail price' affixation for compliance. The judgment scrutinizes the nature of CSD as an entity, determining it as not falling under the legal metrology statutes, thus exempting it from compliance obligations.Moreover, the judgment emphasizes that the affixed 'maximum retail price' alone does not mandate compliance with legal metrology laws or excise duty levy. The exclusion of institutional buyers from the Rules implies that the goods cleared for CSD, procured through bidding processes, are not intended for retail sale. Therefore, the value determined under section 4 of the Central Excise Act, 1944 governs the duty liability computation. Consequently, the impugned orders were set aside, and the appeals were allowed based on the detailed analysis and interpretation of relevant legal provisions and precedents.