2025 (12) TMI 707 - AT - Central Excise

Cement in 50 kg bags to builders covered by Rule 2A, assessed u/s 4A, exemption upheld

The Tribunal held that clearances of cement in 50 kg bags to builders and developers are covered by Rule 2A of the Standards of Weights and Measures ... Method of valuation/assessment of goods - Section 4A or Section 4 of the Central Excise Act, 1944 - SCN was issued to the appellant on the basis of observation of the audit for the clearance of cement in 50 Kg bags to builders/developers who are not institutional buyers/industrial consumers - HELD THAT:- This issue has been settled by this Tribunal in a series of cases in Sanghi Industries Ltd. [2017 (5) TMI 1191 - CESTAT AHMEDABAD] and this Tribunal in similar facts and circumstances of the case held that 'The sales made to various categories of buyers are covered u/R 2A of SWM Rules, 1977 and such goods are eligible for the benefit of N/N. 4/2006-CE'. A similar view has been expressed by the Hon’ble Karnataka High Court in the case of Mysore Cements Ltd. [2010 (8) TMI 246 - KARNATAKA HIGH COURT]. There are no merit in the impugned order, consequently, the same is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether clearances of cement in 50 kg bags to builders/constructors, marked 'Not for Sale' and without MRP, are to be assessed under Section 4 or Section 4A of the Central Excise Act, 1944. 1.2 Whether such clearances to builders/constructors qualify as sales to 'industrial/institutional consumers' under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 so as to be eligible for the concessional rate of duty under Sl. No. 1C of Notification No. 4/2006-CE. 1.3 Whether denial of the benefit of Notification No. 4/2006-CE on the ground that the goods were in 'packaged form' is legally sustainable in light of the statutory scheme and binding precedents. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Assessment under Section 4 vs. Section 4A for cement cleared to builders Interpretation and reasoning: 2.1.1 The show cause notice proceeded on the basis that cement cleared in 50 kg bags to builders/developers, alleged to be non-institutional/non-industrial consumers, should be assessed under Section 4A (MRP-based) instead of Section 4 of the Central Excise Act, 1944. 2.1.2 The Tribunal noted that the cement was cleared in 50 kg bags with the specific declaration 'Not for Resale' and that the goods were meant for consumption by the buyers for their own use and not for retail sale. 2.1.3 Relying on prior Tribunal decisions, particularly the detailed reasoning extracted from Sanghi Industries Ltd., the Tribunal accepted that, where the Packaged Commodities Rules do not require declaration of retail sale price on packages sold to industrial/institutional consumers, such goods are to be treated as if cleared in other than packaged form for the purpose of Notification No. 4/2006-CE and assessment is under Section 4. 2.1.4 The cited precedents (including Ambuja Cement Ltd., Grasim Industries Ltd., Heidelberg Cement (India) Ltd., UltraTech Cement Ltd., Prism Cement Ltd., and Mysore Cements Ltd.) consistently held that cement cleared in 50 kg bags, without MRP and marked 'Not for Resale', directly to industrial/institutional consumers is not subject to Section 4A valuation and is to be assessed under Section 4. Conclusions: 2.1.5 Clearances of cement in 50 kg bags to builders/constructors, without MRP and bearing 'Not for Sale/Not for Resale', are not liable to MRP-based assessment under Section 4A; they are to be assessed under Section 4 of the Central Excise Act, 1944. 2.2 Status of builders/constructors as 'industrial/institutional consumers' and eligibility to Notification No. 4/2006-CE (Sl. No. 1C) Legal framework (as discussed): 2.2.1 Rule 2A of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, with its Explanation, defines and delineates 'industrial' and 'institutional' consumers and governs when declaration of retail sale price is not required. 2.2.2 Sl. No. 1C of Notification No. 4/2006-CE prescribes a concessional rate of duty for cement 'other than those cleared in packaged form', with a proviso that where retail sale price is not required to be declared under the Packaged Commodities Rules and is thus not declared, duty shall be determined as in the case of goods cleared in other than packaged form, at the concessional rate. Interpretation and reasoning: 2.2.3 The Tribunal, by extensively quoting and following the reasoning in Sanghi Industries Ltd., accepted that cement cleared in 50 kg bags, with 'Not for Resale' marking, directly to bulk buyers for their own use, falls within the ambit of industrial/institutional consumption as per Rule 2A of the Packaged Commodities Rules. 2.2.4 Builders, developers, contractors, construction firms, manufacturers of finished goods, and captive consumption were specifically recognised in Sanghi Industries Ltd. (and earlier cases) as qualifying categories, for which the benefit of Notification No. 4/2006-CE had been allowed. The Tribunal in the present case agreed with that view and found the factual situation similar. 2.2.5 The underlying reasoning, as adopted by the Tribunal from prior decisions, is that construction activity is a 'service activity' and that entities engaged in such activity, when purchasing cement directly from manufacturers for their own use, fall within 'service institutions' and thus 'institutional consumers' under Rule 2A. Sales to such buyers are not 'retail sale' within Rule 2(q) of the Packaged Commodities Rules. 2.2.6 It was also noted, through the adopted precedents, that the Central Board of Excise and Customs had clarified that goods sold to 'industrial/institutional consumers' as defined under the Packaged Commodities Rules do not require retail sale price declaration and are covered under Sl. No. 1B/1C of Notification No. 4/2006-CE. 2.2.7 On this basis, the Tribunal held that the sales made to builders/constructors in the present case are covered under Rule 2A of the Packaged Commodities Rules and thus satisfy the conditions of Sl. No. 1C of Notification No. 4/2006-CE. Conclusions: 2.2.8 Builders/constructors purchasing cement in 50 kg bags directly from the manufacturer, for their own use in construction, are to be treated as 'institutional' or 'industrial' consumers under Rule 2A of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. 2.2.9 Clearances of cement in such circumstances are eligible for the concessional rate of duty under Sl. No. 1C of Notification No. 4/2006-CE, notwithstanding that the cement is supplied in 50 kg bags, provided MRP is not required to be and is not declared. 2.3 Effect of 'packaged form' objection and sustainability of the appellate order Interpretation and reasoning: 2.3.1 The appellate authority had denied the benefit of Notification No. 4/2006-CE on the ground that concessional rate under Sl. No. 1C is not applicable to goods cleared in 'packaged form'. 2.3.2 The Tribunal, following Sanghi Industries Ltd. and the line of decisions cited therein (including Ambuja Cement Ltd., Shree Cement Ltd., Prism Cement Ltd., Grasim Industries Ltd., Heidelberg Cement (India) Ltd., UltraTech Cement Ltd., and Mysore Cements Ltd.), accepted that where retail sale price is not required to be declared under the Packaged Commodities Rules and is not declared, such clearances are to be treated 'as if cleared in other than packaged form' for the purposes of Sl. No. 1C of Notification No. 4/2006-CE. 2.3.3 The Tribunal thereby rejected the reasoning that the mere fact of supply in bags (packaged form) to industrial/institutional consumers could, by itself, disqualify the assessee from the benefit of Sl. No. 1C, when the statutory proviso and Board's clarification treat such goods as equivalent to 'other than packaged form'. 2.3.4 The Tribunal concluded that, in view of the binding precedents and consistent judicial interpretation, the impugned appellate order could not be sustained. Conclusions: 2.3.5 The objection that cement supplied in 50 kg bags to builders/constructors is in 'packaged form' does not, by itself, bar the benefit of Sl. No. 1C of Notification No. 4/2006-CE when retail sale price is not required to be and is not declared. 2.3.6 The impugned appellate order denying the concessional rate on this ground is unsustainable in law and stands set aside; the assessee's appeal is allowed with consequential relief as per law.