2025 (3) TMI 277 - AT - Customs

Imported goods marked 'not for retail sale' and sold to industrial consumers exempt from MRP-based assessment under Section 4A

M/s. Kluber Lubrication India Pvt. Ltd., Shri. Vijay Kumar Suhjani, General Manager (Finance), M/s. Kluber Lubrication India Pvt. Ltd., SMT. Meherunnisa, Accounts Officer, M/s. Kluber Lubrication India Pvt. Ltd., Shri. Nitish Hegde, Finance Executive, M/s. Kluber Lubrication India Pvt. Ltd. Versus Commissioner of Customs, Bangalore

CESTAT Bangalore held that imported goods declared as 'not for retail sale' and sold exclusively to industrial consumers are exempt from MRP/RSP-based ... Determination of applicability of MRP/RSP based assessment of imported goods cleared to/meant for industrial consumers as declared by the appellant in their Bills of Entry as “NOT FOR RETAIL SALE” - Extended period of limitation - penalty. HELD THAT:- It is clear from the evidences on record that all the goods were cleared/sold to industrial consumers directly or through their distributors/stockists by the appellant. Since, all the imported goods in dispute were cleared to industrial consumers only, revision of RSP declared at the time of import will also have no significance.; hence, the demand on this count cannot be sustained. This Tribunal in the case of Hi-Tech Computers [2024 (4) TMI 1234 - CESTAT BANGALORE] following the judgment of this Tribunal in the case of Starlite Components Ltd. [2013 (4) TMI 624 - CESTAT, MUMBAI] in similar circumstances held that the goods imported and cleared to industrial consumers cannot be assessed to CVD under Section 4A of the Central Excise Act, 1944. The claim of the appellant is that in most of the cases, they have cleared the imported goods on payment of SAD; however, in few/stray cases even though, they have not paid SAD at the time of its import but later cleared on payment of applicable Sales Tax on sale of such goods, hence the demand on this count also not sustainable. Extended period of limitation - penalty - HELD THAT:- From the records, since it is not clear as the extent of imported goods cleared on payment of SAD at the time of import and the procedure followed later under the said N/N.102/2007, the matter is remanded to the adjudicating authority to examine the demand relating to SAD. The appellant all along has been clearing the goods declaring in the respective Bills of Entry that the goods are not meant for retail sale and in fact no evidence brought on record indicating that the goods are ultimately not sold to industrial consumers. Therefore, invocation of extended period of limitation cannot be sustained. Also, on the same ground, penalty imposed on the company as well as on other appellants cannot be sustained. Therefore, the demand attributable to differential additional duty (CVD) applying MRP/RSP based assessment cannot be sustained. Conclusion - i) Goods declared as 'not for retail sale' and sold to industrial consumers are exempt from MRP/RSP-based assessment under Section 4A of the Central Excise Act, 1944. ii) The Legal Metrology (Packaged Commodities) Rules, 2011, do not apply to goods sold to industrial consumers, even if through distributors, as these are not retail sales. iii) The demand for SAD requires further examination, and the matter is remanded to the adjudicating authority for this purpose. iv) The invocation of the extended period of limitation and penalties is unsustainable due to the lack of evidence of suppression of facts. Appeal allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the imported lubricants and lubricating preparations are subject to MRP/RSP-based assessment under Section 4A of the Central Excise Act, 1944, or if they qualify for exemption as goods 'not for retail sale' intended for industrial consumers.Whether the appellant's declaration of 'not for retail sale' in the Bills of Entry is sufficient to exempt them from affixing RSP under the Legal Metrology (Packaged Commodities) Rules, 2011.Whether the penalties and demands, including those for Special Additional Duty (SAD), imposed on the appellant are justified under the circumstances.Whether the invocation of the extended period of limitation and the imposition of penalties are sustainable.Whether the amendments to the definition of 'industrial consumer' and 'institutional consumer' have retrospective effect.ISSUE-WISE DETAILED ANALYSIS1. Applicability of MRP/RSP-based AssessmentThe legal framework involves Section 4A of the Central Excise Act, 1944, which mandates MRP-based assessment for certain goods. The appellant argued that the goods were not for retail sale and thus not subject to this assessment. The Court examined precedents, including the Karnataka High Court's decision in EWAC Alloys Ltd., which supports the appellant's position that goods not intended for retail sale to ultimate consumers do not require RSP declaration.The Court found that the appellant's declaration in the Bills of Entry as 'not for retail sale' was consistent with their sales to industrial consumers, either directly or through distributors. Therefore, the goods should not be assessed under Section 4A.2. Legal Metrology (Packaged Commodities) Rules, 2011The appellant contended that the Legal Metrology Rules exempt goods meant for industrial consumers from RSP requirements. The Court referred to the definitions under the Rules and found that the goods sold to industrial consumers, even through distributors, do not fall under the retail sale category. Thus, the appellant's compliance with the declaration of 'not for retail sale' was upheld.3. Penalties and Demand for SADThe appellant argued that penalties and demands, including for SAD, were unjustified as they complied with relevant declarations and duties. The Court noted that the demand for SAD required verification, as the appellant claimed compliance with sales tax obligations. The matter was remanded for further examination of SAD compliance.4. Extended Period of Limitation and PenaltiesThe Court found no evidence of suppression of facts by the appellant, as they consistently declared the goods as 'not for retail sale.' Consequently, the invocation of the extended period of limitation and the imposition of penalties were deemed unsustainable.5. Retrospective Effect of AmendmentsThe appellant claimed that amendments to the definition of 'industrial consumer' should have retrospective effect. The Court, however, did not find sufficient grounds to accept this argument, aligning with the Revenue's position that such amendments are prospective.SIGNIFICANT HOLDINGSThe Court held that:Goods declared as 'not for retail sale' and sold to industrial consumers are exempt from MRP/RSP-based assessment under Section 4A of the Central Excise Act, 1944.The Legal Metrology (Packaged Commodities) Rules, 2011, do not apply to goods sold to industrial consumers, even if through distributors, as these are not retail sales.The penalties and demands related to the differential additional duty (CVD) are not sustainable.The demand for SAD requires further examination, and the matter is remanded to the adjudicating authority for this purpose.The invocation of the extended period of limitation and penalties is unsustainable due to the lack of evidence of suppression of facts.The Tribunal emphasized the principle that goods intended for industrial use, even if sold through distributors, do not fall under the regulatory scope intended for retail consumer protection. The decision underscores the importance of the declared purpose of goods in determining applicable duties and compliance requirements.