2024 (2) TMI 498 - AT - Central Excise

100% EOU - method of valuation - applicability of section 4A of the Central Excise Act (CEA) 1944 - removal (of instant coffee) to institution or not - clearance of excisable goods only in bulk/pouches or tins to their C F agents who in turn sell the same in bulk to institutions for consumption or for use in other products - time limitation - intent to evade - HELD THAT - This is a case where depending on the nature of packet size the applicability of Sec 4A would have to be determined. If the sale is to the institution directly Sec 4A would not be applicable. However when the sale is through C F agent the question is whether it could be covered within the ambit of Sec 4A or otherwise. From the submissions made it is obvious that C F agents were only acting as freight and forwarder and the goods were all along meant for institutional buyers only. Therefore this transaction could be considered in the nature of institutional sale in terms of explanation to the Rules. There is nothing contrary on record to prove that these goods were not meant for institutional buyers or there was any resale by such buyers. Therefore the goods would be covered under the exemption. Similarly for packet sizes of less than 10gm also Sec 4A would not be applicable. For small packets cleared in bulk in a packed condition the Appellants have relied on the judgment of COMMISSIONER OF CENTRAL EXCISE RAJKOT VERSUS M/S MAKSON CONFECTIONERY PVT. LTD. 2010 (9) TMI 10 - SUPREME COURT whereby the Hon ble Supreme Court upheld the decision of the Tribunal holding that a package containing about 100 or more individual pieces of an article like clairs brand chocolate each weighing 5.5gm would qualify for exemption under Rule 34 of Standards of Weights Measures (Packaged Commodities) Rules. Therefore relying on this ratio even if the instant coffee of pouches less than 10gm were cleared in bulk and not meant for retail sale it would be exempted under Rule 34 and therefore will not attract Sec 4A of Central Excise Act 1944. Time Limitation - no intent to evade - HELD THAT - The element of intention to evade is clearly missing. It is evidently a case of interpretation where they were under the impression that despite having C F agents involved in transaction to the institutional buyers they were still not covered within the ambit of Sec 4A. Therefore in the facts of the case the department has not been able to establish the grounds for which extended period can be invoked. There was no requirement for the Appellants to follow Sec 4A for determining the duty for the payment of Central Excise Duty on the goods cleared to DTA - the Impugned Order set aside - appeal allowed.

Summary

Issues Involved:
1. Applicability of Section 4A of the Central Excise Act for valuation of excisable goods.
2. Determination of duty liability for clearances to Domestic Tariff Area (DTA).
3. Invocation of extended period of limitation under Section 11A(1) of the Central Excise Act.
4. Imposition of penalty under Section 11AC of the Central Excise Act.

Summary:

1. Applicability of Section 4A of the Central Excise Act for valuation of excisable goods:
The core issue was whether Section 4A of the Central Excise Act was applicable to the clearances effected by the Appellant. The Tribunal noted that instant coffee is a specified good covered within the ambit of Section 4A, which provides for valuation with reference to the Retail Sale Price (RSP). The Tribunal observed that the provisions of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977, are not applicable to packaged commodities meant for industrial or institutional consumers. The Tribunal concluded that goods sold to institutional consumers directly or through C&F agents for consumption and not for resale would not attract Section 4A.

2. Determination of duty liability for clearances to Domestic Tariff Area (DTA):
The Appellant argued that they cleared goods in bulk to C&F agents for institutional consumers, and thus Section 4A should not apply. The Tribunal accepted the Appellant's explanation that C&F agents were merely forwarding agents and the goods were meant for institutional buyers. The Tribunal also held that packages containing less than 10gm of instant coffee are exempt under Rule 34 of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977, and thus do not attract Section 4A.

3. Invocation of extended period of limitation under Section 11A(1) of the Central Excise Act:
The Tribunal found that the Appellant had made their practice known to the department and followed an earlier CESTAT judgment in their own case. Therefore, the Tribunal concluded that there was no intention to evade duty, and the department could not establish grounds for invoking the extended period of limitation.

4. Imposition of penalty under Section 11AC of the Central Excise Act:
Given the Tribunal's findings that there was no intent to evade duty and the Appellant's practice was based on a previous judgment, the imposition of a penalty under Section 11AC was not justified.

Conclusion:
The Tribunal allowed the Appeal, set aside the Impugned Order, and held that the Appellant is entitled to consequential benefits in accordance with the law. The Appeal was pronounced in the Open Court on 08.02.2024.