2016 (3) TMI 475 - AT - Central Excise

MRP based valuation - removal of goods without packing - Eligibility for abatement - short payment of excise duty while clearing spare parts to their own unit in the Domestic Tariff Area - MRP-based assessment - assessee computed additional duty on maximum Retail Price adjusted for abatement and did not pay Special Additional Duty at 4% - refund of special additional duty exists for availment upon production of proof of such trade - Held that - It is not the packaging that determines the applicability of mandate of affixing the retail sale price but the product itself. Consequences of non-conforming packaging are not escapement from the mandate but the enforcement of penal detriment. The reasoning in the impugned order that bulk packaging will render the tractor parts outside the pale of retail selling price is flawed as the primary responsibility under Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 is to penalize non-compliance and to determine the retail selling price as per the Rules instead of opting for an opportunity to collect more duty through an inapplicable provision. Being parts of tractors, the goods cannot but find their way through commercial channels to an end-consumer who is an individual. The form of packing cannot alter this reality. By and large, manufacturers do not sell directly to retailers; they, too, with such an interpretation of applicability of retail selling price prescription could claim that their packing is intended only for the intermediaries in the channel. That would run counter to the avowed objective of the law relating to affixing of details on retail packing. The channel is, therefore, not relevant and only the product is. Upon sales of such notified products to institutions who are the deemed final consumers, escapement from maximum retail price assessment even if the goods do have such labeling is an option. This facilitation is a consequence of such institutions absorbing the product as an input for the service rendered by them to the final consumers or for manufacture of a final product. Tractor parts are not amenable to sale in such manner. It is the produce of the appellant that will alone satisfy the consumer need. The produce of the appellant cannot be cleared in any manner other than in accordance with the prescriptions in the Packaged Commodity Rules, 2007. No evidence has been put forth that it has been cleared otherwise by the appellant. The assessment by the appellant is, therefore, not liable to be faulted. The appellant is, thereby, eligible for the abatement. The computation and payment of duty by the appellant has been appropriate and in accordance with law. No action for recovery of any further amount lies. - Decided in favour of assessee

Issues Involved:
1. Liability to pay Special Additional Duty (SAD) on goods cleared by an Export Oriented Unit (EOU) to the Domestic Tariff Area (DTA).
2. Applicability of Maximum Retail Price (MRP) based assessment under Section 4A of the Central Excise Act, 1944 for goods cleared by the EOU.
3. Entitlement to exemption under Notification No. 23/2003-CE dated 31st March 2003.
4. Invocation of the extended period for demand.

Issue-wise Detailed Analysis:

1. Liability to Pay Special Additional Duty (SAD):
The appellant, an Export Oriented Unit (EOU), faced a demand for Special Additional Duty (SAD) at 4% on goods cleared to their own unit in the Domestic Tariff Area (DTA). The Tribunal observed that the SAD is levied to countervail VAT charged by state governments on domestic sales. However, the appellant argued that the goods sold to dealers were subject to VAT under the Maharashtra VAT Act, 2002, and hence, they should be exempt from SAD as per Notification No. 23/2003-CE dated 31st March 2003. The Tribunal found that the appellant had established that parts of tractors were not exempt under the Maharashtra VAT Act, 2002, and there was no statutory requirement to furnish evidence of VAT liability discharge to claim the exemption. Therefore, the demand for SAD was deemed excessive and untenable.

2. Applicability of MRP-Based Assessment Under Section 4A:
The appellant contended that the goods cleared were subject to MRP-based assessment under Section 4A of the Central Excise Act, 1944, which includes automobile parts. The Revenue argued that since the goods were cleared in bulk and not in retail packing, they were not required to conform to MRP labeling requirements. The Tribunal noted that the product itself, not the packaging, determines the applicability of the mandate to affix the 'retail sale price.' The Tribunal concluded that the appellant's goods, being parts of tractors, were required to be assessed under Section 4A, and the assessment by the appellant was not liable to be faulted.

3. Entitlement to Exemption Under Notification No. 23/2003-CE:
The Tribunal examined the appellant's claim for exemption under Notification No. 23/2003-CE, which allows exemption from SAD for goods cleared by EOUs to the local market, subject to the condition that the goods are not exempt from state VAT levies. The Tribunal found that the appellant's goods were subject to VAT and thus eligible for the exemption. The Tribunal emphasized that the competent authority for VAT collection is the state government, and it is not within the Central Excise authorities' responsibility to ascertain compliance or predicate the grant of exemption on such compliance.

4. Invocation of the Extended Period for Demand:
The Tribunal considered the Revenue's attempt to invoke the extended period for demand based on the appellant's alleged deliberate resistance to the legal requirement of transaction value. The Tribunal referenced the decision in Alembic Ltd v Commissioner of Central Excise, Vadodara-II, which held that the extended period could not be invoked in cases of revenue neutrality. The Tribunal found that the appellant's computation and payment of duty were appropriate and in accordance with the law, and no action for recovery of any further amount was warranted.

Conclusion:
The Tribunal set aside the impugned orders, concluding that the appellant was eligible for the abatement, and the computation and payment of duty by the appellant were appropriate and in accordance with the law. The demand for SAD was found to be in excess of jurisdiction and untenable, and the appellant's assessment under Section 4A was upheld. The Tribunal pronounced the judgment in court, setting aside the orders of the lower authorities.

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