MRP based valuation

PJ/CASE LAW/2015-16/2670

MRP based valuation

Case-NITCO TILES VersusCOMMISSIONER OF CENTRAL EXCISE, RAIGAD

Citation-2015 (315) E.L.T. 296 (Tri. - Mumbai)

Brief Facts-The brief facts of the case are that the appellant is a manufacturer of ceramic tiles and clearing the same to their depots. The appellant sold this tile to dealer who in turn sells to ultimate consumer. The appellant also sell tiles to buyers such as Real Estate Developers, Construction Co., Cooperative Housing Societies, Commercial Complexes, Educational Institutions & Hostels, Hotels, Hospitals, Interior Designers, etc. The product manufactured by the appellant is ceramic tiles is required to pay duty as per Section 4A of the Central Excise Act, 1944 i.e. MRP less abatement. The appellant is discharging the duty liability as per Section 4A but the Revenue is of the view that as these tiles have been cleared to Industrial or Institutional consumers, they are not required to discharge Central Excise duty as per Section 4A as clearance to these Institutional or Industrial Consumer is exempt to affix MRP as per Rule 2A of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Therefore, the appellants are required to pay duty on transaction value i.e. as per Section 4 of Central Excise Act, 1944. Accordingly, impugned proceedings were initiated against the appellant and duty demand along with interest and penalty have been confirmed against them by way of the impugned order which is in challenge before us.

Appelants Contention-The ld. counsel appearing on behalf of the appellant submits that the goods are manufactured by them in regular process and are intended for retail sale and packed accordingly. Although the appellants are receiving orders for bulk supply but the goods supplied in bulk have also been manufactured as those which were intended for retail sale. As per the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, they are required to affix MRP and other details on the said packages, therefore, they are paying duty as per Section 4A of the Central Excise Act, 1944. As per Rule 2A of the Packaged Commodities Rules, the Rules have given exemption for the commodity meant for industrial/institutional consumers. These goods were already manufactured and intended for retail sale, and all packages are treated alike. Therefore, they have correctly discharged their duty and the goods cleared in bulk does not mean that they are meant for industrial/institutional consumers and not required to affix MRP. Only in cases where packages are marked “Marked for use by industrial/institutional consumers, duty is discharged on transaction value. But it is not the case here. He further submits that a similar situation came up in the case of H&R Johnson (India) Ltd. vide Order Nos. A/330-332/14/EB/C-II, dated 2-5-2014 [2014 (306)E.L.T.645 (Tribunal)], this Tribunal held that the assessee has rightly discharged the duty as per Section 4A of the Central Excise Act, 1944. Therefore, he submits that they have correctly discharged the duty liability and impugned order is required to be set aside.

Respondents Contention-On the other hand, ld. AR opposed the contention of the ld. counsel and submits that as per Rule 2A of the Packaged Commodities Rules, the package commodity meant for industrial consumers or institutional consumers are not required to affix MRP. Therefore duty is to be discharged on transaction value. In this case, the bulk supplies have been made by the appellant directly to the industrial/institutional consumers. In that case, the appellant were not required to affix MRP. Consequently, duty was required to be discharged under Section 4 of the Central Excise Act, 1944. Therefore, impugned order is to be upheld.

Reasoning Of Judgement-The tribunal have examined the purchase orders and corresponding invoices for the supplies by the appellant and find that in almost all the cases, supplies have been made within a period of one week of the obtaining of the purchase order. As the manufacturing of tiles by the appellant is a continuous process, therefore, these goods are meant for retail sale. Accordingly, the appellant has affixed MRP on each package of the tiles, even if the quantity supplied is in bulk but it is clearly indicated in the purchase order that the goods have to be supplied in boxes of 15 tiles which means that supplies are retail packs on which MRP is printed. As there is no time gap between the receipt of the purchase order and effected supply, which would also prove that supplies are made out of the quantity already manufactured by the appellant, packed and kept ready for sale. A similar situation came up in the case of H&R Johnson (India) Ltd. (supra), wherein this Tribunal has observed as under :-
“5. Tribunal have carefully considered the submissions made by both the sides. Tribunal have also perused the sample purchase orders placed by some of the institutional buyers. From these documents, it is seen that the goods are required to be supplied in standard packages consisting fixed number of specified tiles. These packages are the same in respect of retail sale also and on these packages the appellant has declared the MRP. In other words, there is no difference in respect of packages of tiles sold to retail consumers or to the so called institutional buyers and all of them are in standard packages, having MRP declared on them. It is also not in dispute that, on the packages, the appellant has not made any declaration that “the packages are not meant for retail sale or the packages are meant for use by any specified industry”. In the absence of such markings on the packages, it cannot be said that the goods supplied were not in retail packages. In their letter dated 23-2-2012 the Dy. Controller of Legal Metrology, Maharashtra has clarified that according to Rule 3 Packaged Commodity Rules, 2011 the provision regarding mandatory declaration on retail packages are not applicable to the packages meant and marked as industrial/institutional consumers. Similarly, the Assistant Controller of Legal Metrology, Government of Karnataka, vide letter dated 24/02/2012 has clarified that institutional/industrial package does not bear the MRP marking but will have marking as meant for ‘industrial/institutional consumer’ and not meant for retail sale. Similarly, Controller of Legal Metrology, Government of Gujarat has clarified that the only packages which bear clear markings ‘meant for industrial consumer or meant for institutional consumer’ are excluded from the provisions of Packaged Commodity Rules and such packages should have a further marking that they are ‘not meant for retail sale’. From these clarifications, which have been issued by the authorities implementing the Legal Metrology (Packaged Commodities) Rules, 2011, it is absolutely clear that the supplies made by the appellant to the various institutional buyers are not excluded from the declaration of MRP under the Packaged Commodities Rules. The tribunal could not disregard these clarifications given by the competent authorities in the matter.
Tribunal further observe that the Hon’ble Apex Court in the case of Jayanti Food Processing (P) Ltd. v. Commissioner of Central Excise, Rajasthan (supra), had clearly held that to come under the purview of Section 4A, the following conditions should be satisfied :
(i)         The goods should be excisable goods;
(ii)        They should be such as are solid in the package;
(iii)       There should be requirement in the SWM Act or the Rules made thereunder or any other law to declare the price of such goods relating to their retail price on the package;
(iv)       The Central Government must have specified such goods by notification in the Official Gazette; and
(v)        The valuation of such goods would be as per the declared retail sale price on the packages less the amount of abatement.
In the said decision, the Hon‘ble Apex Court further held that the material consideration for assessment under Section 4A is not the nature of sale but such sale should be in a package and there should be a requirement in the SWM Act or the Rules made thereunder for displaying MRP on such packages.
In the present case, the above stipulations are completely satisfied. This decision of the Hon’ble Supreme Court was also followed by the Tribunal in the case of Sagar Cements Ltd. (supra) where there was a bulk supply of cement in retail packages on which MRP was declared. This Tribunal held that such bulk supply would also come under the purview of Section 4A and the duty liability has to be discharged under the said provision. The said decision was also affirmed by the Hon’ble Apex Court. In ITEL Industries Pvt. Ltd. v. Commissioner of Central Excise [2004 (163)E.L.T.219] case, telephones were supplied in bulk for exclusive use of the Department of Telecom; this Tribunal held that duty liability discharged under Section 4A is correct as there was no exemption from packaging indicating special use by any industry.
In view of the above, the tribunal are of the considered view that, in the present case also, the same ratio would apply. Accordingly, tribunal hold that the discharge of duty liability tiles supplied in retail packages to real estate developers/developers, etc. has to be made under Section 4A of the Central Excise Act, 1944. Therefore the impugned demands are not sustainable in law and accordingly, tribunal set aside the same.
Thus, the appeals are allowed with consequential relief, if any, in accordance with law.”
The tribunal find that as the goods were already manufactured and intended for retail sale, therefore, they have correctly discharged the duty and the goods cleared in bulk does not mean that they are meant for industrial/institutional consumers. It should be meant for industrial/institutional consumers under the Standards of Weights & Measures Rules to pay duty under Section 4 of the Central Excise Act, 1944.
Therefore, tribunal hold that the appellant has rightly discharged their duty liability. Accordingly, impugned order is set aside. Appeal is allowed with consequential relief, if any.

Decision-Appeal allowed with consequential relief

Comment-The core of the case is that as the assessee is the manufacture of ceramic tiles which are intended for retail sale but the same is supplied in bulk i.e.in boxes of 15 tiles as per the purchase order received, this doesn’t mean that the goods are supplied to industrial and institutional consumers and not required to affix MRPas per Rule 2A of the Packaged Commodities Rulesor required to pay duty under Sec 4of the Central Excise Act, 1944. In other words, there is no difference in respect of packages of tiles sold to retail consumers or to the so called institutional buyers and all of them are in standard packages, having MRP declared on them therefore the assessee is correctly discharging duty under Section 4A of the Central Excise Act, 1944

Prepared By-Neelam Jain

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PJ/CASE LAW/2015-16/2670

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