Valuation of Goods - Applicability of Section 4 or Section 4A of CEA, 1944

PJ/Case Law/2011-12/1146

Case: Polar Industries Ltd v/s Commissioner of C. Ex, Kolkata-I

Citation: 2011 (266) ELT 211 (Tri-Del)

Issue: - The MRP based valuation is inapplicable in case wholesale supply as no MRP is printed but it is applicable to retail supply. The issue is remanded to see whether the supply is wholesale supply or retail supply.

Brief Facts: -Appellants are manufacturers of electric fans. They agreed for supply of such fans to different departments of the Government during the period from March, 2002 to October 2003 at the rate agreed upon with the DGS & D. Accordingly, electric fans were supplied during the said period. Department alleged that the assessment of the said fans is to be done under Section 4 of the Central Excise Act, 1944 as the fans were sold in bulk by the appellant.

Accordingly, demand was confirmed by the Adjudicating Authority and was upheld by the Commissioner (Appeal) and hence, appellant is before the Tribunal.

Appellant’s Contention: - Appellant contended that considering the provisions of Section 4 and Section 4A as well as the provisions of Standard of Weights and Measures Act, 1976 readwith The Standards of Weights and Measures (Packages Commodities) Rules, 1977, the supply by of the goods by them was essentially retail basis and the contract with the DGS&D was a rate contract and not a contract for supply on wholesale basis and therefore, the provisions of Section 4A were clearly applicable for the assessment of the goods.

Referring to the judgment given in Jayanti Food Processing (P) Ltd v/s CCE, Rajasthan [2007 (215) ELT 327 (SC)] it was submitted that it was clearly held therein that the nature of sale is not relevant and what is relevant for the purpose of deciding the applicability of Section 4A are the criteria’s laid down by the Supreme Court therein. It was submitted that the position was clear from Circular dated 28.02.2002. It was submitted that they were required to print the MRP on the package of ceiling fans in terms of SWMA and once such requirement is established the assessment of goods has necessarily to be under Section 4A. The supply made by the appellant on the basis of rates by DGS&D on the basis of rate contract cannot be considered to be bulk sale.

It was submitted that the finding of the authority based on Circular dated 28.02.2002 that the goods were not meant for retails sale was incorrect. The fact that the goods which required MRP to be printed were not actually sold at the price shown on the packages is immaterial as in cases where there is obligation for manufacturer to print a MRP on the packages with only exception as specified under Rule 34 of the said Rules and in facts and circumstances of the case, the same was not attracted. It was further submitted that this position has also been accepted by the department in another case of the appellants themselves and that is apparent from the order of the Deputy Commissioner, Noida passed on 28.02.2005 in relation to the period from 01.09.2001 to 31.12.2003.

Reliance was also placed on the judgments given in the cases of Purisons Engineers Pvt Ltd v/s CCE, Delhi-II [2004 (164) ELT 417 (Tri-Del)], CAS Engineers Pvt Ltd v/s CCE, Delhi-I [2004 (173) ELT 507 (Tri-Del)].

Respondent’s contention:- Revenue submitted that the supply of goods was not on retail basid but on wholesale basis in as much as that the supply was for a fixed period and at the rate agreed upon under the contract with DGS&D. Such was supply cannot be construed as retail sale but has to be considered as bulk sale. Reliance was placed on CCE, Chennai-II v/s Australian Foods Ltd [2009 (242) ELT 504 (Mad)] andCCE, Raipur v/s Aero Agro Chemicals Inds Pvt Ltd [2007 (217) ELT 396 (Tri-Del)]. And it was submitted that the decision in Jayanti Food Processing (P) Ltd would apply in cases where facts disclosed applicability of Standard of Weights and Measures Act, 1976 and The Standards of Weights and Measures (Packages Commodities) Rules, 1977 and in particular Chapter 2 of the said Rule to the transaction and not otherwise. Since the supply of goods was not on retail basis but on bulk basis in the sense it was for a period spread over number of months at a fixed rate agreed under the contract, the same has to be considered as bulk supply.

Reasoning of Judgment: - The Tribunal perused the judgment of the Apex Court in Jayanti Food Processing (P) Ltdand held that the said judgment disclosed that in order to take resort t Section 4A for the purpose of valuation of goods and assessment of duty all the five factors must be present which are as under:

The goods should be excisable goods;
They should be such as are sold in the package;
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;
The Central Government must have specified such goods by notification in the official Gazette; and
The valuation of such goods would be as per the declared retail sale price on the packages less amount of abatement.

It was held that in fact it is Chapter 2 of the Rules which require such declaration. Rule 2A of the said Chapter provided that the provisions of the said Chapter shall apply to all pre-packed commodities except in respect of grains and pulses containing quantity more than 15 kg. Rule 3 provided that the provisions of the said chapter shall apply to packages intended for retail sale and expression “package”, wherever it occurred in the said chapter should be construed accordingly.

The Tribunal considered the definitions of expression retail sale as given in Rule 2 (q), retail package as given in Section 2 (p), retail sale price under Section 2(r) and wholesale package under Section 2 (x). Rule 34 providing Exemption in respect of certain packages was also perused.

The Tribunal thus held that in cases where the provisions of Chapter 2 of the said Rules are attracted the question of invoking Section4 of the said Act cannot arise. In that case, the valuation and assessment has to be in terms of Section 4A. However, in cases where the provisions of chapter 2 and in particular in relation to the requirement of declaration of MRP on the packages has to be in terms of Section 4. At the same time, in terms of the provisions of law, the wholesale package need not necessarily contain the retail packages without any MRP being printed. On the contrary if the said definition is read, it specifically refers to the retail packages also. It specifies that when number of retail packages are brought together and they are supplied it would result in sale of wholesale package.

In the present case, it was held that the bulk supply which is not defined in the Act or in the Rules, in the common parlance is understood that whenever it is bulk supply it refers to wholesale supply.

It was held that before deciding that a sale is a bulk sale or retail sale, the Adjudicating Authority is required to analyze the materials on record to arrive at a finding that whether the nature of supply discloses to be of wholesale nature or retail one. As the Lower Authorities have not undertaken the said exercise, the impugned orders are set aside and matter is remanded for fresh consideration.

Decision:- Appeal disposed of accordingly.

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PJ/Case Law/2011-12/1146

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