Tribunal Rules Footwear for Armed Forces to Be Assessed Under Section 4A; Penalty of Rs.25 Lakhs Set Aside.

The Tribunal determined that the footwear supplied to armed forces and paramilitary forces should be assessed under Section 4A of the Central Excise Act, 1944, due to the retail sales price being embossed on the products. Consequently, the Tribunal set aside the Department's order, ruling that the demand was unsustainable. Additionally, the penalty of Rs.25 lakhs imposed on the Secretary of the appellant firm was also set aside. The appeals filed by the appellants were allowed, granting them consequential relief in accordance with the law.

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Issues involved:
The dispute in the present appeal is regarding the applicability of Section 4 or Section 4A of the Central Excise Act, 1944 for determining the assessable value of footwear supplied in bulk to armed forces and paramilitary forces. The main issue revolves around whether the goods supplied to institutional buyers are subject to the provisions of Legal Metrology (Package Commodities) Rules, 2011, and thus assessed under Section 4, or if they should be assessed under Section 4A based on the embossed retail sales price (RSP) on the footwear.

Details of the Judgment:

Issue 1: Applicability of Section 4 or Section 4A of the Central Excise Act, 1944
The appellant, a manufacturer and trader of various items including shoes, was alleged to have supplied footwear to Defence/paramilitary forces without payment of appropriate Central Excise duty. The Department contended that the benefit of a specific notification was not available to the appellant as the goods were not intended for retail sale. The Department argued that the appellant incorrectly determined the value for payment of Central Excise duty under Section 4A, which was not applicable as sales to defence/paramilitary forces were considered sales to institutions for their own use and not for retail sale. However, the appellant argued that the RSP was marked on the shoes, indicating compliance with the relevant notification, and that the demand was time-barred. The Tribunal, following the decision of the Hon'ble Supreme Court in a similar case, held that since the RSP was embossed on the footwear supplied to armed forces and paramilitary forces, the assessment should be under the provisions of Section 4A of the Central Excise Act, 1944.

Issue 2: Penalty Imposed on the Secretary
The Tribunal found that since the demand against the main appellant was deemed unsustainable, the penalty of Rs.25 lakhs imposed on the Secretary of the appellant firm could not be justified. Therefore, the penalty was set aside.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals filed by the appellants with consequential relief, in accordance with the law.

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