2023 (5) TMI 385 - AT - Central Excise

Tribunal rules on excise duty for small confectionery, rejects revenue's appeal and allows assessee's appeal

Makson Pharmaceuticals (i) Pvt Ltd Versus C.C.E. & S.T. -Bhavnagar (Vice-Versa)

The tribunal dismissed the revenue's appeal, ruling that sugar confectionery weighing less than 10 grams should be assessed under Section 4 and not ... Method of Valuation - sugar confectionary weighing less than 10 grams individually wrapped and sold in poly bag/pet jars of 500 grams/1kg - to be assessed for excise duty on MRP basis under Section 4A as contended by the department or to be assessed on transaction value under Section 4 of Central Excise Act, 1944 as claimed by the assessee? - invocation of Section 11D of Central Excise Act, 1944 where the duty charged under Section 4A in the invoice is returned to the customer by way of issuing credit notes upon payment of excise duty under Section 4 shown in the ER-1 return - applicability of amendment dated 13.01.2007 in Rule 2(j) of the SWM (PC) Rules, 1977 - HELD THAT:- The issue is squarely covered by the decision of the tribunal in their own case in SWAN SWEETS PVT. LTD. VERSUS COMMISSIONER OF C. EX., RAJKOT [2006 (1) TMI 269 - CESTAT, MUMBAI] which was upheld by the Hon’ble Supreme Court reported at COMMISSIONER OF CENTRAL EXCISE, RAJKOT VERSUS M/S MAKSON CONFECTIONERY PVT. LTD. [2010 (9) TMI 10 - SUPREME COURT]. As per the said judgment, the wholesale pack of 500 gm or 1 kg is not a retail pack therefore, the MRP of wholesale pack cannot be taken for the valuation in terms of Section 4A whereas, the individual confectionary which is less than 10 gm should be considered and as per Rule 34 of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 (SWM Rules) i.e. exemption from affixing the retail sale price on the goods of less than 10 gms, the valuation under Section 4A is not correct. In view of the Rule 34 (b), which was prevailing throughout the period involved in the present case, there is a clear provision that in case of the product of less than 10 grams, there is no requirement for affixing retail sale price - Since in the earlier decision of the Hon’ble Supreme Court it was categorically held that for the purpose of assessment, individual confectionary has to be taken and not the wholesale pack. The individual confectionary is undisputedly below the weight of less than 10 gram and in terms of Rule 34(b) of SWM (PC) Rules, 1977 there is no requirement for affixing the retail sale price. The said product cannot be taken under the ambit of Section 4A of Central Excise Act, 1944. Confirmation of demand by the adjudicating authority under Section 11D - HELD THAT:- From the plain reading of the above Section 11D, it is clear that the provision of section 11D shall apply only in case where the assessee collects the duty and does not deposit to the government - In the present case, though the appellant have shown the duty in the invoice but at the same time by issuance of the credit note to the customer, said amount was not collected. Moreover, the duty was paid under protest and thereafter credit note was issued. With this fact, it cannot be said that the assessee has collected any duty and the same was not deposited to the government exchequer. In view of this fact only, it is viewed that there is no application of Section 11D in the facts of the present case therefore, the demand confirmed under Section 11D cannot be sustained. Appeal of assessee allowed. Issues Involved:1. Whether sugar confectionery weighing less than 10 grams individually wrapped and sold in poly bags/pet jars of 500 grams/1 kg is liable to be assessed for excise duty on MRP basis under Section 4A or on transaction value under Section 4 of the Central Excise Act, 1944.2. Whether Section 11D of the Central Excise Act, 1944 can be invoked when the duty charged under Section 4A in the invoice is returned to the customer by way of issuing credit notes upon payment of excise duty under Section 4.Summary:Issue 1: Assessment of Excise Duty on Sugar ConfectioneryThe department appealed against the decision to drop proceedings for a total duty of Rs. 5,19,87,168/- under 15 show cause notices for the period from January 2006 to December 2009. The department contended that the valuation should be based on the MRP of wholesale packs under Section 4A, while the assessee argued for assessment under Section 4 based on transaction value, citing Rule 34 of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 (SWM Rules). The adjudicating authority, referencing a prior tribunal judgment upheld by the Supreme Court, ruled that individual confectionaries weighing less than 10 grams do not require MRP and should not be assessed under Section 4A. The tribunal dismissed the revenue's appeal, stating that the amendment to Rule 2(j) of SWM (PC) Rules, 1977 did not affect the principle that individual confectionaries below 10 grams do not require MRP, hence Section 4A does not apply.Issue 2: Invocation of Section 11DThe assessee appealed against the confirmation of a demand of Rs. 16,79,841/- under Section 11D, arguing that although invoices showed duty under Section 4A, credit notes were issued to customers for the differential duty, meaning the amount was not collected. The tribunal found that Section 11D applies only when duty is collected but not deposited with the government. Since the duty was shown in invoices but credit notes were issued, the amount was not collected, and thus Section 11D was not applicable. The tribunal allowed the assessee's appeal, stating that the demand under Section 11D could not be sustained.Conclusion:The tribunal dismissed the revenue's appeal (E/1273/2011) and allowed the assessee's appeal (E/1234/2011), ruling that the confectionery should be assessed under Section 4 and not Section 4A, and Section 11D was not applicable since the differential duty was not collected from customers.