Section 4A valuation for packaged goods upheld where a government undertaking was not treated as an institutional consumer.

Table top wet grinders supplied to a State civil supplies corporation for free distribution were held to remain assessable under Section 4A, because a government undertaking making such procurement was not an "institutional consumer" under the pre-amended Legal Metrology (Packaged Commodities) Rules, 2011, and mere absence of retail sale price marking did not by itself shift valuation to Section 4. The demand based on Section 4 valuation was therefore unsustainable for the main period. Duty paid with interest on the December 2012 clearance of 1,000 grinders during investigation was appropriated. No separate sustaining finding was recorded on the extended period, as no differential duty survived and the audit material was not properly introduced.

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Issues: (i) whether table top wet grinders cleared to the Tamil Nadu Civil Supplies Corporation were assessable under Section 4A or Section 4 of the Central Excise Act, 1944; (ii) whether the clearance of 1000 table top wet grinders in December 2012 without payment of duty was sustainable; (iii) whether the extended period for issuance of the show cause notice was invocable.

Issue (i): whether table top wet grinders cleared to the Tamil Nadu Civil Supplies Corporation were assessable under Section 4A or Section 4 of the Central Excise Act, 1944.

Analysis: For the pre-amendment period, Rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011 excluded packages meant for institutional consumers, but the definition of institutional consumer covered service institutions such as transport, airways, railways, hotels and hospitals. A Government undertaking procuring goods for free distribution was not a service institution. The post-amendment definition broadened the rule, but the demand notice did not invoke the amended legal basis for the relevant period. Mere absence of retail sale price marking did not, by itself, take otherwise covered goods outside Section 4A.

Conclusion: The goods were correctly assessed under Section 4A and the duty demand founded on Section 4 valuation was not sustainable.

Issue (ii): whether the clearance of 1000 table top wet grinders in December 2012 without payment of duty was sustainable.

Analysis: Duty had in fact been paid during investigation on the said clearance together with interest, and the valuation basis remained Section 4A for the reasons accepted on the main issue. The amount paid was therefore appropriately appropriated.

Conclusion: The clearance was not interfered with and the appropriation of the amount paid during investigation was upheld.

Issue (iii): whether the extended period for issuance of the show cause notice was invocable.

Analysis: In view of the conclusion that no differential duty was payable for the entire period, the extended period question lost significance. The relied-upon audit material was also not properly introduced in the appellate record and was found unreliable.

Conclusion: No separate finding sustaining the extended period was recorded.

Final Conclusion: The demand and penalty based on valuation under Section 4 were set aside for the main period, while the amount already paid on the December 2012 clearance was maintained, resulting in a partial relief to the assessee.

Ratio Decidendi: A Government undertaking procuring packaged goods for free distribution is not an institutional consumer under the pre-amended Legal Metrology (Packaged Commodities) Rules, 2011, and a demand for valuation under Section 4 cannot be sustained without a clear legal basis in the show cause notice for the applicable period.

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