2003 (10) TMI 140 - AT - Central Excise

Telecom Equipment Taxation: Tribunal Decides on MRP-Based Assessment, Remits for Further Review, No Penalties Imposed.

The Tribunal, by majority, determined that telephone instruments supplied to DOT/MTNL should be assessed under Section 4A of the Central Excise Act, 1944, ... Valuation (Central Excise) - Manufacturers of Telephone Instruments - MRP based assessment - Difference of opinion between the two Members of the Bench - third Member Order - Whether clearances of telephone instruments to DOT/MTNL should be assessed under Section 4A of the Central Excise Act, 1944 and appeal deserves to be allowed accordingly as per Member (Technical). HELD THAT:- [Per : C.N.B. Nair, Member (T)] - Issue raised is about the Central Excise valuation of telephone instruments sold to DOT under a contract by a manufacturer i.e., whether value should be fixed u/s 4 or Section 4A of the Central Excise Act, 1944. The submission on behalf of the appellant manufacturer is that there is no provision u/s 4 or 4A of the Central Excise Act that clearances of telephone instruments to DOT/MTNL would be excluded from the provisions of Section 4A and that they would be valued u/s 4. It is pointed out that Section 4A applies to valuation of 'specified goods' and for valuation u/s, who the buyer is, is entirely irrelevant. Third Member Order - It is clear that a manufacturer is exempt from the provisions of rules only if the packages satisfy the above requirement. Not otherwise. In the instant case, Revenue has no case that the telephone instruments sold to DOT were cleared as indicated in the above rule. Instead, they were packed and cleared like any other instruments in consumer packing with MRP marked. The sale and purchase were also not on an understanding between the parties that the transaction is exempt under Rule 34 since it was to service an industry. Section 4A contains no exception in respect of specified goods based on category of buyer. Therefore, unless packages themselves are exempt under Packaged Commodities Rules, their assessment will have to be u/s 4A. That the goods are sold in bulk under a contract cannot be the criterion. If such a view is taken, most consigments will go out of Section 4A, because sale to first tier of trade of goods covered by Packaged Commodities Rules take place in wholesale quantities. Further, there is no requirement under Section 4A or under Packaged Commodities Rules that goods covered by this provision should actually be sold in retail. The definition of 'Retail Sale' under Rule 2 specifically covers 'distribution disposal' other than through sale also. The amplitude and coverage of the Packaged Commodities Rules extend to goods packed for disposal other than through sale also. Section 4A's scope is the same as the scope of goods covered by Standards of Weights and Measures Act, 1976 or Rules made thereunder. The non-obstante clause in sub-section (2) of Section 4A ('notwithstanding anything contained in Section 4') makes it abundantly clear. The decision of this Tribunal in Jayanti Food Processing Pvt. Ltd.[2002 (1) TMI 104 - CEGAT, COURT NO. I, NEW DELHI] is also to the effect that if packages in question are not excluded under Rule 34, the goods would be liable to valuation in terms of Section 4A. Thus, I am of the opinion that, since consignments in question were cleared to DOT in terms of the requirements under Standards of Weights and Measures Act and Packaged Commodities Rules, they were required to be valued u/s 4A and not u/s 4. And the appeals are required to be allowed. Registry to place the appeals before Division Bench. FINAL ORDER - By majority it is held that clearances of telephone instruments of DOT/MTNL should be assessed u/s 4A and not u/s 4 of the Central Excise Act, 1944 and appeals are allowed accordingly. Issues Involved:1. Applicability of Section 4A of the Central Excise Act, 1944 for valuation of telephone instruments supplied to DOT/MTNL.2. Validity of the abatement claimed by the assessee.3. Imposition of penalties under Rule 173Q and Section 11AC of the Central Excise Act, 1944.Summary:1. Applicability of Section 4A of the Central Excise Act, 1944:The primary issue was whether the clearance of telephone instruments to DOT/MTNL should be assessed under Section 4A or Section 4 of the Central Excise Act, 1944. The assessee argued that the abatement was availed on the Maximum Retail Price (MRP) declared on the package, not on the contract price. The Department contended that the assessments should be made under Section 4, as there was no retail sale involved. The Tribunal found that the instructions in the Board's Circular No. 625/16/2002, dated 28-2-2002, were in conflict with the provisions of Section 4A, which mandates assessment based on MRP. The Tribunal concluded that the assessments should be made under Section 4A, as the telephones were notified under this section and there was no exemption from the requirement of MRP printing.2. Validity of the Abatement Claimed:The Tribunal noted that the charge in the notices and as recorded by the Commissioner (Appeals) was regarding the claim of abatement of 40% from the Contract Price, which, if true, was not permissible. The abatement, as notified, is permissible from the MRP declared. The matter was remitted back to the original authority to verify the actual quantum of abatement permissible from MRP and thereafter determine the short levy of duty if any.3. Imposition of Penalties:The Tribunal found no case or cause to invoke penal liabilities under Section 11AC, as the Commissioner had held that it was essentially a question of interpretation of law as to whether Section 4 or Section 4A would be applicable. The Tribunal concurred with the Commissioner and did not uphold the Revenue's appeal on the need to restore the penalty under Section 11AC. The imposition of penalties under Rules 173Q and 210 was also not called for, as the Commissioner (Appeals) had not provided specific and valid reasons for the same.Separate Judgment by Member (J):Member (J) disagreed with the conclusion of Member (T) regarding the applicability of Section 4A for the clearance of telephone instruments to DOT/MTNL. He referred to the Board's Circular No. 625/16/2002-CX., dated 28-02-2002, which clarified that the valuation of telephone instruments supplied in bulk to the telephone department should be done as per Section 4 of the Central Excise Act, 1944. He proposed to refer the case to a Larger Bench to resolve the issue.Final Order:By majority, it was held that clearances of telephone instruments to DOT/MTNL should be assessed under Section 4A and not under Section 4 of the Central Excise Act, 1944. The appeals were allowed accordingly.