MRP Provisions applicability

[JSW CEMENTLIMITED]

Vide notification dated 14.05.2015, the Ministry of consumer Affairs, Food and Public Distribution has substituted the definition of Industrial Consumer and Institutional Consumer as under

bb) Industrial consumers means those consumers who buy packaged commodities directly from the manufacturer or from an Importer or from wholesale dealer for use by that industry and package shall have a declaration 'Not for Retail Sale'

bc) Institutional Consumers means institution who hires or avails of facilities or service in connection with transport, hotel, hospital or other organization which buys packaged commodities directly from a Manufacturer or from an importer or from wholesale dealer for use by that institution and the package shall have declaration 'Not for Retail Sale'

Rule 3(b) of Legal Metrology (packaged Commodities) Rules 2011 provides that provisions of LMA are not applicable in the case of Packaged commodities are meant for Industrial/Institutional Sales.

The proviso to Sl.No.52 of Notification No.12/2012-CE dated 17.03.2012 says that

'Provided that where the retail sale price of the goods are not required to be declared under the Legal Metrology (Packaged Commodities) Rules,2011and thus not declared, the duty shall be determined as in the case of goods cleared in other than packaged form'

With the above provision, in my opinion, if goods are sold to wholesale dealers who are specifically catering to the purchase needs of Institutional/Industrial Consumer, duty can be discharged @12.5% on transaction value as the goods are meant for industrial consumer only.

I would invite all the expert to give their valued opinion on the above issue as to whether goods can be sold to Wholesale dealer who are dealing with only industry by availing concessional rate of duty provided in Sl.No.52, first proviso of notification no.12/2012-CE dated 17.03.2012

[Rajagopalan Ranganathan]

Sir,

If you put the words "Not for Retail Sale" on the goods supplied then as mentioned by you they are assessable under Section 4 (a) of Central Excise Act, 1944, that is, on the basis of transaction value.

[JSW CEMENTLIMITED]

Sir, you mean section 4(a) or Section 4?

[YAGAY andSUN]

Please tell us name and Tariff Heading of the goods which you want to remove from your factory premises to a wholeseller and its weight or qty per item.

[JSW CEMENTLIMITED]

It's cement. And as per LM qty per bag is 50 kg

[YAGAY andSUN]

Article by CA Satbir Singh

B1- Hyderabad Zone- Assessment and Valuation-Non-adoption of Section 4A-Valuationof Goods-Clearances made to Depots by Cement Manufacturers:-

Issue:

Cement in packaged form has been notified under Section 4A of the Central Excise Act, 1944 with effect from 17.3.2012. The assessee affixes a label on the bags removed to its depots clearly stating, “meant for industrial/institutional consumer”. An audit objection has been raised in this zone for non-adoption of retail sale price based valuation on the clearances made to depots by a cement manufacturer, subsequently sold to industrial/institutional consumers. However, the assessee is clearing such consignments of cement in bags to their depots on the basis of value arrived as per Section 4 of the Central Excise Act, 1944, on the ground that the depot is nothing but an extended arm of the factory and when goods are sold to the industrial/institutional buyer, provisions of Section 4A do not apply.

Relevant legal provisions:

Rule 3 of Legal Metrology (Packaged Commodities) Rules, 2011 states that the provisions of these rules shall not apply to industrial or institutional consumers, who buy packaged commodities directly from the manufacturer for use by that institution or industry. As per Rule 4 of Legal Metrology (Packaged Commodities) Rules, 2011, “no person shall pre-pack or cause or permit to be pre-packed any commodity for sale, distribution or delivery unless the package in which the commodity is pre-packed bears thereon or on a label securely affixed thereto, such declarations as are required to be made under these rules”. However, explanation to Rule 4 of Legal Metrology (Packaged Commodities) Rules, 2011 states that the existence of packages without the declaration of the retail sale price in the manufacturer’s premises shall not be construed as violation of these rules and it shall be ensured that all the packages leaving the premises of manufacturer for their destination shall have declaration of retail sale price on them.

Discussion & Decision

It was brought to the notice of the conference that the issue had been agitated before the appellate forum by some of the Commissionerates. After discussion conference concluded that depot is a place of removal of the manufacturer under section 4(3)(c)(iii) of the Central Excise Act, 1944 from where cement is sold to the institutional/industrial buyers who are not covered under Rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011. It was also noted that definition of ‘Industrial Consumer’ and ‘Institutional consumer’ has been substituted by Legal Metrology (Packaged Commodities) (Amendment) Rules, 2015 in terms of notification dated 14.05.2015, issued by the Ministry of Consumer Affairs, Food & Public Distribution.The revised definition includes the consumer who buys packaged commodities directly from the manufacturer or from an importer or from whole sale

dealer.The conference was of the view that the valuation of goods in respect of clearances to industrial consumers even from the depot will be made under Section 4 of the Central Excise Act, 1944 and not under Section 4A of the Act ibid. The conclusion was reached in view of the fact that in case of institutional buyers purchasing goods, depot is only an extended arm of the manufacturer, being a place of removal. The issue is also covered in the Hon’ble Supreme Court judgment in case of M/s Sony India Ltd. [2004 (5) TMI 69 - SUPREME COURT OF INDIA].

[KASTURI SETHI]

Dear Sirs (M/s - js W Cement Ltd.),

I support the views of M/s.YAGAY AND SUN, Sirs. They have worked hard to trace out the relevant matter. It was not easy to trace out. However, with the help of their reply, I have been able to trace out authority. Just for knowledge sake, Authority is Board's .Instruction F. No. 96/85/2015-CX.I, dated 7-12-2015. Para No.B1 refers.

[Rajagopalan Ranganathan]

Sir,

It is sub-section (a) of Section 4.

AI Summary

Industrial consumer exemption allows transaction-value valuation where goods bear 'Not for Retail Sale' and serve industrial use. Packaged cement destined for industrial or institutional consumers and labelled 'Not for Retail Sale' falls within the Legal Metrology exemption, and clearances from depots (as places of removal) intended for such consumers may be valued on transaction value under Section 4 rather than by retail-sale-price valuation.