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2025 (4) TMI 3 - AT - Central ExciseMethod of valuation - Section 4A or Section 4 of the Central Excise Act 1944? - switchgears manufactured by Appellant - invocation of extended period of limitation under proviso to Section 11A of CEA - Levy of Interest under Section 11AB and Penalty under Rule 25 read with Section 11AC. Method of valuation - HELD THAT - It was held by Hon ble Karnataka High court in the case of Ewac Alloys Ltd 2011 (9) TMI 688 - KARNATAKA HIGH COURT that even if the goods meant for industrial use are displayed at retail counters and sold they are not chargeable to duty on the Basis of MRP - Tribunal in the case of Legrand (India) Pvt Ltd 2014 (2) TMI 407 - CESTAT MUMBAI held that goods meant for industrial use though packaged for ease of transportation can not be assessed to duty under Section 4A. As far as the Appellant s goods are intended for industrial use and declaration to that effect is available on the packages a fact which is not contradicted by Revenue there is no infirmity in the Appellant s assessing the same under Section 4 of Central Excise Act 1944. Revenue has not made out any case for assessment under Section 4A despite the fact that they are sold through retail outlets/dealers/ stockists. Further it is the argument of the appellant that even in cases where MRP was not declared revenue had no mechanism to determine the same before the enactment of Central Excise valuation Rules w.e.f. 1.3.2008. Extended period of limitation - HELD THAT - There is considerable force in the submission of the appellants. The appellants are regular assesses and were filing returns regularly. Since they have declared the classification of the products under CETH 8536 department could have caused necessary verification and issue the Show Cause Notice in time. Revenue had no reason to wait for the anti-evasion team to visit the Appellant s premises and find out what they have been declaring regularly - the department cannot hide the fact of non-scrutiny of the returns in even time and take shelter under the argument that the appellants were in the regime of self-assessment and allege suppression etc with intent to evade payment of duty without adducing any evidence. The appellants were very much on the dash board of the department and audit was being conducted regularly. Failure of the jurisdictional officers and audit teams to detect anomaly if any cannot be mitigated by alleging suppression on the part of the appellant. In view of the facts and circumstances of the case the extended period cannot be invoked. Interest - penalty - HELD THAT - Since the duty is not payable the demand of interest and penalty cannot be sustained. Conclusion - i) Goods intended for industrial use bearing a declaration to that effect are not subject to MRP-based valuation under Section 4A of the Central Excise Act. ii) The extended period of limitation under Section 11A is not applicable when the appellant has disclosed all relevant information and there is no suppression of facts. iii) Penalties under Section 11AC and demands for interest are not sustainable when the primary duty demand is not upheld. Appeal allowed.
The core legal issues considered by the Tribunal in this appeal are:
(i) Whether the switchgears manufactured by the appellant are liable to valuation under Section 4A of the Central Excise Act, 1944 on the basis of Maximum Retail Price (MRP), as held in the impugned order, or under Section 4 of the Central Excise Act, 1944, as contended by the appellant. (ii) Whether the extended period of limitation under the proviso to Section 11A of the Central Excise Act is invokable, and whether interest under Section 11AB and penalty under Rule 25 read with Section 11AC are leviable in the present facts. Issue-wise detailed analysis: 1. Applicability of Valuation under Section 4A on MRP basis versus Section 4 on transaction value basis: The appellant manufactures switchgears classified under Heading 8536 of the Central Excise Tariff Act, 1985, used as inputs in electrical machinery for industrial use. The goods are packed singly in cartons bearing a conspicuous declaration that they are "specially packed for exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry for industrial use only and not intended to be displayed for sale at a retailer outlet." The appellant did not print any MRP or Retail Sale Price (RSP) on the packages and discharged excise duty on transaction value under Section 4 of the Excise Act, relying on their understanding that the goods were not covered under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 ("PC Rules"). The Revenue initiated investigation and issued a Show Cause Notice demanding differential duty on MRP basis under Section 4A, relying on notifications and the PC Rules, alleging that the goods were sold through dealers and displayed at retail outlets, thus attracting the provisions of Section 4A. The appellant contended that:
In support, the appellant relied on several precedents including Controls & Switchgears Contractors Ltd., EWAC Alloys Ltd., Ocean Ceramics Ltd., Acer India Pvt. Ltd., Legrand (India) Pvt. Ltd., ABB Ltd., and others, which held that goods meant for industrial use, even if packaged, are not liable to valuation on MRP basis under Section 4A, especially when the RSP is not declared and prior to the 2008 Rules. The Revenue argued that:
The Tribunal examined the relevant legal provisions, including Section 4A of the Central Excise Act, 1944, which mandates valuation on retail sale price when goods are required to declare MRP under the SWM Act or rules made thereunder. The Tribunal also analyzed the definitions under the PC Rules, including the meaning of "retail package," "retail sale," and the exemptions under Rule 34 and Rule 2A. The Tribunal noted the distinction between industrial/institutional consumers purchasing directly from manufacturers (exempted under Rule 2A) and retail consumers purchasing from dealers. The Tribunal relied on the Karnataka High Court decision in EWAC Alloys Ltd., which held that goods meant for industrial use, even if displayed at retail counters, are not liable to valuation on MRP basis. The Tribunal also highlighted that the legislative intent of the PC Rules is to protect individual consumers and not industrial or institutional consumers. The Tribunal further observed that the goods in question bore clear declarations of exclusive industrial use, were technical products unsuitable for household use, and were sold based on technical specifications. The Tribunal found no infirmity in the appellant's valuation under Section 4 rather than Section 4A. Regarding the absence of declared RSP prior to 01.03.2008, the Tribunal relied on the Larger Bench decision in Ocean Ceramics Ltd., which held that the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008, cannot be given retrospective effect and that no alternative mechanism existed to determine RSP before that date. Thus, valuation on MRP basis prior to 01.03.2008 was impermissible. The Tribunal also noted the CBEC Circular No. 625/16/2002-CX dated 28.02.2002, which directs excise authorities to seek clarification from the SWM authorities in case of doubt about applicability of the SWM Act or PC Rules, which was not done. 2. Invocability of extended period of limitation, interest and penalty: The appellant argued that:
The Revenue contended that the appellant suppressed facts by clearing goods without marking MRP and selling through dealers, justifying invocation of extended period and penalty. The Tribunal found merit in the appellant's submissions, observing that the appellant was a regular assessee filing returns and disclosing classification. The department had ample opportunity to verify and raise objections earlier but did not do so, instead relying on anti-evasion intelligence. The Tribunal held that mere difference of opinion or interpretation does not amount to suppression. The Tribunal concluded that the extended period could not be invoked, and consequently, interest and penalty demands could not be sustained. Significant holdings and core principles established: "It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which date the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force." "The protection under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 is confined only to individual consumers or groups of individuals purchasing packaged commodities from retail dealers. Industrial or institutional consumers are excluded from the definition of 'ultimate consumer' and thus goods meant for industrial use, even if sold through dealers, are not liable to valuation on MRP basis under Section 4A." "Failure of the department to detect any anomaly during regular audits and returns filed by the appellant disclosing classification and valuation on transaction value basis negates any allegation of suppression or intent to evade duty, thereby precluding invocation of extended period of limitation under Section 11A." "In case of doubt regarding applicability of the Standards of Weights and Measures Act or the Packaged Commodities Rules, the excise authorities must seek clarification from the competent authorities administering those laws, and cannot unilaterally impose demands." Final determinations:
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