Section 4A Does Not Apply to Packaged Drinking Water Under Notification 49/2008, Appeals Allowed

The CESTAT Bangalore upheld the precedent set by the Chennai Bench in a similar case involving packaged drinking water, concluding that Section 4A does not apply to drinking water under the relevant notifications. The tribunal found that the classification under Notification 49/2008 clearly distinguishes mineral water and aerated water from other goods, excluding drinking water from the scope of MRP-based assessment. Consequently, the impugned order against the appellant's unit was set aside, and the appeals were allowed.

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1. ISSUES:

1. Whether the MRP based assessment Notifications Nos. 02/2006-CE(NT), 14/2008-CE(NT), and 49/2008-CE(NT) issued under Section 4A of the Central Excise Act, 1944, are applicable to 'packaged drinking water' classified under Chapter Sub-Heading 22019090.

2. Whether the classification of 'packaged drinking water' as distinct from 'mineral water' affects the applicability of Section 4A valuation provisions and related notifications.

2. RULINGS / HOLDINGS:

1. The MRP based assessment Notifications issued under Section 4A do not apply to 'packaged drinking water' classified under 22019090, as these notifications specify 'mineral water' and not 'packaged drinking water' despite mentioning the same tariff sub-heading.

2. The classification of 'packaged drinking water' as a separate product from 'mineral water' is upheld, supported by BIS certification and differing price points, leading to the conclusion that valuation must be based on transaction value under Section 4 of the Central Excise Act, 1944 rather than deemed value under Section 4A.

3. RATIONALE:

1. The Court applied the statutory framework of Section 4A of the Central Excise Act, 1944, which allows the Central Government to notify goods for valuation on the basis of Retail Sale Price (RSP) or Maximum Retail Price (MRP) under the SWM (P&C) Rules, 1977 or Legal Metrology Act, 2011.

2. The Notifications in question specify 'mineral water' but do not expressly include 'packaged drinking water', creating ambiguity which must be resolved in favor of the assessee as per established principles of taxation law that "an ambiguity in a taxation provision is to be interpreted in favour of assessee."

3. The Court relied on precedent emphasizing that "subject goods is not to be taxed, unless the words of the statute unambiguously impose a tax," rejecting the Department's view that the inclusion of tariff sub-heading 22019090 implies inclusion of packaged drinking water within mineral water for MRP valuation.

4. The Court further noted amendments in subsequent notifications distinguishing 'mineral water' from 'drinking water', reinforcing that 'packaged drinking water' was never intended to be subject to valuation under Section 4A.

5. The decision aligns with a recent Tribunal ruling on a related unit, which after thorough analysis of classification, notifications, Board circulars, and BIS certifications, held that the valuation of packaged drinking water must be on transaction value under Section 4, not on MRP basis under Section 4A.

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