2006 (1) TMI 34 - AT - Central Excise

Central Excise Section 4A would be applicable in case of goods notified under said section and printed with MRP irrespective of fact that they are meant for free distribution Penalty not imposable as no mala fide intention of assessee

Summary

Issues:
1. Valuation of "Cinthol Lime Fresh" and "Cinthol Scent Fresh" toilet soaps for excise duty assessment.
2. Applicability of Section 4A of the Central Excise Act for goods supplied as free gifts.
3. Interpretation of provisions of law regarding excise duty assessment based on MRP.

Issue 1: The dispute in the appeal concerns the valuation of "Cinthol Lime Fresh" and "Cinthol Scent Fresh" toilet soaps for excise duty assessment. The assessee argues that the valuation should follow Section 4 of the Central Excise Act, while the revenue contends that since the soaps fall under Section 4A, they should be assessed based on MRP after abatement. The goods were provided free with other products and not for retail sale to end customers.

Issue 2: The original adjudicating authority upheld the duty assessment under Section 4A and imposed penalties, but the Commissioner (Appeals) accepted the assessee's position. The Commissioner noted that since the MRP was struck out and the packaging indicated the soaps were free with other products, Section 4A did not apply. The Commissioner emphasized that Section 4A applies when goods are sold under MRP as per Weights and Measures Act requirements.

Issue 3: The Appellate Tribunal referred to precedents involving similar situations. In the case of Nestle India Ltd., the Tribunal ruled that goods specified under Section 4A with printed MRP must be assessed based on MRP, even if provided as free gifts. Another case involving BPL Telecom (P) Ltd. established that goods under Section 4A must be assessed by MRP, regardless of actual price or wholesale distribution. The Tribunal emphasized that the method of sale, whether wholesale or retail, does not affect valuation under Section 4A.

The Tribunal overturned the Commissioner's decision, reinstating the duty demand of Rs. 16,49,487. Regarding penalties, the Tribunal cited the Nestle India Ltd. case, stating that no malafide intention was found, leading to the penalty of Rs. 3 lakhs imposed on the respondents being set aside. The judgment highlighted the importance of interpreting excise duty provisions in good faith and concluded the appeal on 27.1.2006.