2025 (5) TMI 1014 - AT - Central Excise

Entitlement to claim the benefit of Entry No. 1A of Notification No. 4/2007-CE dated 1.3.2007 for cement cleared in packaged form to institutional/industrial consumers despite affixation of retail sale price (RSP) on the packages - liability to pay duty under Entry No. 1C of the said notification which applies to cement cleared in unpackaged form for sales to non-trade parties (industrial/institutional buyers) - HELD THAT - As apparent from Entry No. 1A the following conditions are required to be met with. (i) All goods (cement herein) is to be cleared in packaged form. (ii) The retail price is not exceeding Rs.190 per 50 kg bag or not exceeding Rs. 3800 per tonne in which case duty at the rate of 350 per tone is to be paid. (iii) The retail price is exceeding 190 per 50 kg but is not exceeding Rs. 250 per kg. Similarly the price is not exceeding Rs.5, 000/- per tonne in which case duty at the rate of 12% of retail sale price is to be paid. The another clarity as is apparent from the said notification is that the notification as amended during the relevant period is silent about any distinction between trade (consumer) and non-trade (industrial/institutional buyers) parties as has been raised in the impugned show cause notice. From these admitted facts it stands clear that once the appellant was not selling goods to the ultimate consumer but to DGS D who had to supply it further to the actual consumers it becomes clear from the Explanation (2) of the Notification No. 4/2007 that irrespective the cement was cleared in packaged form RSP was not required on those bags. As already observed above there was otherwise no bar of fixing RSP on the packaged goods not meant for direct consumers - Once it is an admitted fact that the goods were cleared in packaged form we do not see any reason for applicability of S.No. 1C of Notification No. 4/2007 which talks about the rate of duty on the goods which are cleared in unpackaged form. The entire show cause notice and even the Order-in-Original is held to be mere presumptive of the fact that once the goods are cleared in packaged form the clearance cannot be the institutional/industrial clearance. It is a retail clearance where retail price has to be mandatorily fixed and duty has to be paid based on the retail price - it was Entry no. 1A which is applicable to the given set of facts specifically in light of the admitted fact that the goods were cleared in packaged form. Conclusion - Since the appellant has cleared cement in packaged form i.e. in the bags of 50 kg each with RSP printing thereupon to the institute DSD G the appellant is held entitled for the benefit of Entry No. 1A of the said N/N. 4/20027 dated 1.3.2007. Appeal allowed.

The core legal questions considered by the Tribunal in these appeals are:

(i) Whether the appellants were entitled to claim the benefit of Entry No. 1A of Notification No. 4/2007-CE dated 1.3.2007 for cement cleared in packaged form to institutional/industrial consumers, despite affixation of retail sale price (RSP) on the packages.

(ii) Whether the appellants were liable to pay duty under Entry No. 1C of the said notification, which applies to cement cleared in unpackaged form, for sales to non-trade parties (industrial/institutional buyers).

(iii) The legal effect and relevance of affixing RSP on cement packages cleared to institutional consumers, especially in light of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (PC Rules) and their amendments.

(iv) Whether the extended period of limitation and imposition of penalty and interest were justified in the facts and circumstances of the case.

Issue-wise Detailed Analysis

1. Applicability of Entry No. 1A versus Entry No. 1C of Notification No. 4/2007-CE

Legal Framework and Precedents: The notification prescribes different rates of excise duty on cement based on whether it is cleared in packaged or unpackaged form. Entry No. 1A applies to all cement goods cleared in packaged form (whether or not from mini cement plants), with rates dependent on declared retail sale price. Entry No. 1C applies to cement cleared in unpackaged form. The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 define "retail package" and specify when RSP declaration is mandatory or exempted, including exemptions for packages meant for industrial or institutional consumers.

Several judicial decisions were cited by the appellants supporting the proposition that if RSP is affixed on goods cleared in packaged form, duty under Entry 1A is payable, regardless of whether the ultimate buyer is an industrial or institutional consumer. These include decisions where it was held that once RSP is declared, assessment under Section 4A of the Central Excise Act applies, and subsequent sale to industrial consumers does not alter the duty liability. The department relied on various precedents emphasizing the distinction between trade and non-trade sales and the applicability of different entries based on whether RSP was declared or required.

Court's Interpretation and Reasoning: The Tribunal examined the notification's language and the PC Rules. It observed that the notification does not distinguish between trade and non-trade parties for applicability of Entries 1A or 1C; the sole criterion is whether the cement is cleared in packaged or unpackaged form. The PC Rules exempt industrial/institutional consumers from mandatory RSP declaration, but do not prohibit affixing RSP on goods sold to such consumers. The Tribunal found that the appellants cleared cement in packaged form (50 kg bags) with RSP affixed, including sales to institutional consumers such as government agencies (DGS&D). The Tribunal held that affixation of RSP on packaged goods destined for institutional consumers does not convert the clearance into retail sale, nor does it mandate payment of duty under Entry 1C (unpackaged clearance). Instead, Entry 1A applies as the goods were cleared in packaged form.

Key Evidence and Findings: The admitted facts included clearance of cement in packaged form to DGS&D, with RSP declared on the packages. The Tribunal noted that DGS&D is a government agency supplying to end-users, not the ultimate consumer itself, but this did not affect the classification of the clearance as packaged. The notification's Explanation 2 and provisos were interpreted to clarify that the presence or absence of RSP declaration does not solely determine the applicable entry; the physical form of clearance (packaged or unpackaged) is determinative.

Application of Law to Facts: Applying the notification and PC Rules, the Tribunal concluded that since the cement was cleared in packaged form with RSP affixed, Entry 1A was correctly invoked by the appellants. The department's contention that Entry 1C should apply because the sale was to institutional consumers from depots/dumps was rejected as contrary to the statutory scheme.

Treatment of Competing Arguments: The department's reliance on distinctions between trade and non-trade sales and on cases where RSP was not affixed was addressed by emphasizing the amended notification's silence on such distinctions and the permissibility of affixing RSP on institutional sales. The appellants' reliance on Board clarifications and judicial precedents supporting the applicability of Entry 1A was accepted.

Conclusion: The Tribunal held that the appellants were entitled to the benefit of Entry 1A for cement cleared in packaged form, including to institutional consumers, and that the demand based on Entry 1C was unsustainable.

2. Effect of Affixing Retail Sale Price on Cement Cleared to Institutional Consumers

Legal Framework: The PC Rules define "retail package" and exempt packages meant for industrial/institutional consumers from mandatory RSP declaration. The notification's Explanation clarifies that where RSP is not required but declared, the duty is to be determined as if the goods were cleared in packaged form with RSP.

Court's Reasoning: The Tribunal noted that while RSP is not mandatory on packages sold to institutional consumers, there is no prohibition against affixing it. Therefore, affixation of RSP on packages cleared to institutional consumers does not alter the nature of the clearance. The Tribunal emphasized that the physical form of clearance (packaged or unpackaged) governs the applicable duty entry, not the presence or absence of RSP alone.

Application to Facts: The cement was cleared in 50 kg bags with RSP affixed, including to DGS&D and other institutional buyers. The Tribunal held that this did not convert the clearance into retail sale, nor did it shift the duty liability to Entry 1C.

Conclusion: Affixing RSP on packaged cement cleared to institutional consumers is permissible and does not affect the applicability of Entry 1A.

3. Limitation, Penalty, and Interest

Legal Framework and Precedents: The appellants contended that the extended period of limitation was not invokable as there was no suppression or fraud. Consequently, penalty and interest were not leviable. Judicial decisions cited supported the proposition that absence of suppression or willful misstatement bars extended limitation and penalty.

Court's Reasoning: Since the demand itself was held unsustainable on merits, the Tribunal found no justification for invoking extended limitation or imposing penalty and interest.

Conclusion: The demand was time-barred, penalty was not imposable, and interest was not payable.

Significant Holdings

"The notification as amended during the relevant period, is silent about any distinction between trade (consumer) and non-trade (industrial/institutional buyers) parties as has been raised in the impugned show cause notice."

"The goods sold to industry/institute do not need to have RSP but if RSP is printed, there is no statutory bar prohibiting the same."

"Mere affixation of RSP is not sufficient to hold that the clearance was not the institutional/industrial sale."

"Once the goods are cleared in packaged form, we do not see any reason for applicability of S.No. 1C of Notification No. 4/2007 which talks about the rate of duty on the goods which are cleared in unpackaged form."

"Since the appellant has cleared cement in packaged form i.e. in the bags of 50 kg each with RSP printing thereupon to the institute DGS&D, the appellant is held entitled for the benefit of Entry No. 1A of the said Notification No. 4/2007 dated 1.3.2007."

"The entire show cause notice and even the Order-in-Original is held to be mere presumptive of the fact that once the goods are cleared in packaged form the clearance cannot be the institutional/industrial clearance."

"The extended period of limitation is not invokable and entire demand is time barred as there is no suppression on part of the appellants. For the same reasons, penalty is not imposable and interest is not payable."

In final determination, the Tribunal set aside the impugned Order-in-Original and allowed the appeals, holding that the appellants were entitled to pay duty under Entry 1A of Notification No. 4/2007-CE for cement cleared in packaged form to institutional consumers, notwithstanding the affixation of RSP, and that the demand under Entry 1C was unsustainable. Penalty and interest were also set aside on limitation and merit grounds.

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