Whether MRP of product given as free along with main product be also includible in the assessable value of final product under MRP based assessment?

PJ/Case Law/2013-14/1942

Case:- JYOTHI LABORATORIES LTD. Vs COMMISSIONER OF CENTRAL EXCISE, SALEM

Citation:- 2013 (295) E.L.T. 314 (Tri. – Chennai)

Brief facts:- In this case the appellants were manufacturers of detergent powder known as “Ujala Bright Wash” in their factory at Salem, which product was excisable on the basis of value determined under Section 4A of the Central Excise Act. They also manufacture a product known as “Ujala Supreme” for whitening of clothes which product was exempted from excise duty. This product was manufactured in other factories of the appellant-company. They had a marketing scheme under which one bottle of Ujala Supreme was given free along with one detergent powder. Revenue entertained a belief that the MRP of Ujala Supreme should be added to the MRP of the detergent powder and then assessed as per the provisions of Section 4A of the Act. Accordingly, show-cause notice had been issued and after adjudication a demand of Rs. 62,405/- had been confirmed for the period from April 2009 to September 2009. The demand got confirmed in first appeal also. Hence the present appeal.

Appellant’s contentions:- The counsel for the applicant submitted that ‘Ujala Supreme’ was not manufactured in the factory where assessment was taking place. The goods given free were not packed along with the detergent powder and if at all they were packed, the maximum price at which the goods were sold was the price of detergent powder which alone could form the basis for arriving at the excisable value and therefore the entire approach of Revenue to add the MRP of the two products to arrive at the assessable value was wrong.

Respondent’s contentions:- Opposing the prayer, the learned AR for Revenue relied on a decision of the Tribunal in the case of CCE, Belapur v. Nandan Petrochem Ltd. - 2009 (245)E.L.T.731.

Reasoning of judgment:- The Bench had considered submissions of both sides and found that in the case relied upon by the Revenue was not in respect of products which were assessed to duty under Section 4 of the Act whereas in this case the assessment was under Section 4A. Further, in that case the two products were packed together whereas in the present case there is no such finding. Since the products were not packed together they did not see any merit in the case of Revenue which would justify calling for pre-deposit. Therefore, the Bench granted waiver of pre-deposit of the dues arising out of the impugned order and stay its collection during the pendency of the appeal.

Decision:- Stay granted.

Comment:-The gist of this case is that if a product sold as free along with the main product that is assessable to excise duty under MRP based valuation, then the MRP of the free product need not be added to the assessable value of the final product when the final product and the free product are not packed together.

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PJ/Case Law/2013-14/1942

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