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2024 (4) TMI 1267 - AT - Central ExciseMethod of valuation - goods supplied by the appellant to Maruti Suzuki Ltd. packed in individual packets with Maximum Retail Price (MRP) printed on them - to be valued u/s 4A of the Central Excise Act 1944 or u/s 4? - scope of industrial consumer - HELD THAT - The change in the definition of industrial consumer under the Legal Metrology Rules makes it mandatory for the goods to be marked not for retail sale to qualify as sales to industrial consumers . Thus for instance if supplies are made to an automobile company they could be used in the manufacture of automobiles or could be sold as spares by the automobile manufacturer. The amended definition clearly distinguishes between the two and if the goods are marked not for retail sale and sold to the manufacturers they qualify as sale to industrial consumers and not otherwise. Conclusion - Since the appellant cleared the goods in individual packets with MRP stickers even though they were sold to Maruti Suzuki they did not qualify as sales to industrial consumers . Therefore Section 4A was correctly applied by the Assistant Commissioner in the OIO and the Commissioner (Appeals) in the impugned order. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
- Whether the goods supplied by the appellant to Maruti Suzuki Ltd., packed in individual packets with Maximum Retail Price (MRP) printed on them, are liable to be assessed under Section 4A of the Central Excise Act, 1944 or under Section 4; - Whether Section 4A of the Central Excise Act applies only to goods which are mandated under the Legal Metrology Act, 2009 and its Rules to declare retail sale price on the package; - Whether the supplies made to Maruti Suzuki Ltd. qualify as sales to 'industrial consumers' exempted from the application of Legal Metrology Rules and consequently from Section 4A of the Central Excise Act; - The effect of the amendment in the definition of 'industrial consumer' under the Legal Metrology Rules, 2011, effective from 14.5.2015, on the applicability of Section 4A to the goods supplied by the appellant; - Whether the absence of the declaration "not for retail sale" on the packages supplied to Maruti Suzuki Ltd. affects the applicability of Section 4A and the valuation of excise duty. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Section 4A vs. Section 4 of the Central Excise Act for duty assessment The appellant manufactures motor vehicle parts and supplies them to Maruti Suzuki Ltd. The parts are chargeable to excise duty under Section 4A except when supplied to industrial or institutional consumers. The appellant assessed and paid duty under Section 4, while the department contended that Section 4A applied because the goods were packed in individual packets with MRP printed. The legal framework involves Section 4A of the Central Excise Act, which applies to goods where the retail sale price is required to be declared on the package under the Legal Metrology Act or Rules. The department issued Show Cause Notices demanding differential duty under Section 4A and imposed penalties under Rule 25 of the Central Excise Rules, 2002. The appellant argued that since the goods were supplied to an industrial consumer (Maruti Suzuki), Section 4A should not apply, and duty under Section 4 was correct. The department argued that the presence of MRP and absence of "not for retail sale" declaration meant Section 4A applied. The Tribunal noted that the goods were individually packed with MRP printed, which is a key factor triggering Section 4A. The presence of MRP indicates applicability of valuation under Section 4A, as the goods are deemed to be sold by retail. Issue 2: Interpretation of 'industrial consumer' under the Legal Metrology Rules and its impact on applicability of Section 4A The appellant relied on Rule 3(b) of the Legal Metrology Rules, 2011, which exempts packaged commodities meant for industrial consumers or institutional consumers from the provisions requiring declaration of retail sale price. The appellant contended Maruti Suzuki qualifies as an 'industrial consumer' and thus the exemption applies. However, the department pointed out that the definition of 'industrial consumer' was amended effective 14.5.2015 to require that the package bear the declaration "not for retail sale" for the exemption to apply. The amended definition states: "industrial consumer" means the industrial consumer who buys packaged commodities directly from the manufacturer or from an importer or from wholesale dealer for use by that industry and package shall have declaration "not for retail sale" for use by that industry." The Tribunal analyzed this amendment and observed that the presence of MRP and absence of "not for retail sale" declaration on the packages supplied to Maruti Suzuki indicate that the goods do not qualify as sales to 'industrial consumers' under the amended Legal Metrology Rules. The Tribunal reasoned that the amendment distinguishes between goods sold to manufacturers for use in production (which must be marked "not for retail sale") and goods that may be sold as spares or for retail sale. Since the appellant's goods had MRP and no such declaration, they fall within the scope of Section 4A. Issue 3: Application of amended Legal Metrology Rules and Section 4A to facts The Tribunal applied the amended definition of 'industrial consumer' and found that the appellant's goods, being individually packed with MRP and lacking "not for retail sale" declaration, do not qualify for exemption under Rule 3(b). Consequently, the valuation under Section 4A is appropriate. The Tribunal rejected the appellant's argument that Maruti Suzuki is an industrial consumer exempt from Legal Metrology Rules and Section 4A. The presence of MRP and absence of the required declaration on the packages were determinative factors. The Tribunal also considered the competing arguments: while the appellant relied on the pre-amendment definition and the nature of the consumer, the department relied on the amended definition and packaging requirements. The Tribunal gave effect to the amended Legal Metrology Rules as the governing legal framework. 3. SIGNIFICANT HOLDINGS "The change in the definition of 'industrial consumer' under the Legal Metrology Rules makes it mandatory for the goods to be marked 'not for retail sale' to qualify as 'sales to industrial consumers'." "Since the appellant cleared the goods in individual packets with MRP stickers even though they were sold to Maruti Suzuki, they did not qualify as sales to 'industrial consumers'. Therefore, Section 4A was correctly applied." Core principles established include:
Final determinations:
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