2007 (11) TMI 206 - AT - Central Excise

Tribunal rules on excise duty for loose paint sales, overturning penalty and upholding Commissioner's decision.

The Tribunal held that goods sold in loose condition (100 liters and 200 liters of paints) should be assessed under Section 4 of the Central Excise Act, ... Appellants contended that the sale of paint in loose in quantities of 100 ltrs or 200 ltrs are not intended for retail sale and therefore does not fall under the purview of the Standard of Weights and Measure (Packaged Commodities) Rules - Commissioner (A) after detailed consideration noticed that Section 4A(2) is not applicable when the goods are sold in loose conditions as they do not fall under SWMPCR - question of MRP doesn’t arise so rule 4 is applicable – order of comm.(A) is justified Issues Involved1. Applicability of Section 4A of the Central Excise Act, 1944 to goods sold in loose condition.2. Correctness of the valuation method adopted by the Deputy Commissioner.3. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.Issue-Wise Detailed Analysis1. Applicability of Section 4A of the Central Excise Act, 1944 to Goods Sold in Loose ConditionThe primary issue was whether the goods sold in loose condition (100 liters and 200 liters of paints) should be assessed under Section 4A of the Central Excise Act, 1944. The Deputy Commissioner had demanded differential duty based on the assumption that these goods were covered under Section 4A, which pertains to goods requiring a declared retail sale price under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.The Commissioner (A) found that Section 4A(2) is inapplicable when goods are sold in loose conditions. The Commissioner noted that the provisions of Chapter II of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 apply explicitly to packages intended for retail sale only. Rule 3 of Chapter II specifies that the provisions apply to packages intended for retail sale, which was not the case for the goods sold in loose condition.The Tribunal upheld the Commissioner (A)'s findings, emphasizing that Section 4A would apply only when goods are sold in package form, as clarified by the Supreme Court in Jayanthi Processing (P) Ltd. v. CCE and Others. The Tribunal concluded that the goods sold in loose form do not fall under Section 4A and should be assessed under Section 4 of the Central Excise Act, 1944.2. Correctness of the Valuation Method Adopted by the Deputy CommissionerThe Deputy Commissioner had categorized the clearances into three types: (i) clearances to dealers for sale to consumers, (ii) clearances in packed condition to contractors, and (iii) clearances in loose condition. The Deputy Commissioner had assessed the value of these clearances under Section 4A, leading to a differential duty demand.The appellants contended that the sale of goods in loose quantities (100 liters and 200 liters) are not intended for retail sale and therefore do not fall under the said Act/Rules. They argued that it is not necessary to mark MRP on such packages, as these are intended for bulk purchase by customers or dealers who sell in retail to other consumers in loose condition.The Commissioner (A) agreed with the appellants, finding that the sale of 100 liters/200 liters in barrels in loose condition cannot be treated as retail packaged sale. This was supported by the CBEC Circular No. 625/16/2002-CE, which clarified that goods not required to declare the retail sale price should be assessed under Section 4 of the Central Excise Act, 1944.The Tribunal upheld this view, noting that the goods sold in loose condition should be assessed based on transaction value under Section 4, and not under Section 4A.3. Imposition of Penalty under Rule 173Q of the Central Excise Rules, 1944The Deputy Commissioner had also imposed a penalty of Rs. 50,000 under Rule 173Q for under-valuation of goods. The appellants argued that the clearances were made in compliance with the declarations filed under Rule 173C(2A) and were within the knowledge of the Department.The Commissioner (A) found the imposition of penalty to be unwarranted, as the goods sold in loose condition should not have been assessed under Section 4A. Consequently, the penalty under Rule 173Q was also set aside.The Tribunal concurred with the Commissioner (A), stating that since the goods should be assessed under Section 4 and not Section 4A, the imposition of penalty was untenable.ConclusionThe Tribunal concluded that the goods sold in loose condition (100 liters and 200 liters of paints) should be assessed under Section 4 of the Central Excise Act, 1944, and not under Section 4A. The differential duty demand and penalty imposed by the Deputy Commissioner were found to be incorrect. The appeal by the Revenue was rejected, and the order of the Commissioner (A) was upheld as legal and proper.