By TIOL News Service

MUMBAI, MAR 08, 2017: THE appellant manufactures toothpastes in tubes branded as 'Calcium Prudent' - of 18 gm in boxes containing 576 tubes and of 200 gm in boxes containing 72 tubes - and 'Oral-B Mild Mint' - of 100 gm in boxes containing 72 tubes - for their customer, M/s Gillette Diversified Operations Ltd. who, in turn, supplies these to Canteen Stores Department (CSD) of Ministry of Defence, Government of India. That these tubes, as well as the inner cartons, have the 'maximum retail price' printed on them is not in doubt.

The lower authorities have held that the goods cleared by appellant are not exempted under rule 34 of Standards of Weights & Measures (Packaged Commodity) Rules, 1977 and that CBEC Circular no. 625/16/2002-CX dated 28th February 2002 is intended to apply only to bulk purchases that are procured by the Canteen Stores Department (CSD) which the impugned goods are not.

Differential duty demands computed by application of section 4A of the CEA, 1944 were confirmed and upheld.

The appellant is before the CESTAT and submits that the Circular (supra) applies to their clearances and that supplies to Canteen Stores Department (CSD) are not required to carry 'maximum retail price' on their inner cartons.

The Bench inter alia observed -

+ The Canteen Stores Department (CSD) is wing of the Ministry of Defence. … The organization service officers and staff of the armed forces of the Union and the canteens are locations of storage and display from which the officers and staff procure articles that they require. Though it may have the looks of a shop, it is more of a store. Being an in-house procurement agency, it would not admit to enforcement under the statute relating to legal metrology. Its avowed aim is to make goods available to its restricted clientele at prices below the maximum retail price - with that objective, it is not required to conform to the legal metrology statutes.

+ An institutional consumer, by implication of the definition of the said expression, is undoubtedly a point of sale to customer; the customer, however, is clearly distinguishable as a recipient of service provided by such institutional consumer. So it is with the Canteen Stores Department. Goods procured in bulk are supplied to the members of the armed forces of the Union. The goods are procured through a competitive bidding process with prices fixed for a specified period. That procurement price has naught to do with the 'maximum retail price' even if affixed on the goods for reasons other than statutory compliance.

+ That a 'maximum retail price' is affixed on the impugned package does not, of itself, render the goods liable to comply with the provisions of the law relating to 'maximum retail price' - whether that of legal metrology or of levy of excise duty. It is the requirement of compliance with the Standard of Weights & Measures (Packaged Commodity) Rules, 1977 that does. With the exclusion of institutional buyer from the ambit of the Rules, the affixing of retail sale price is not mandated on the impugned goods when cleared. It is seen that the clearance is effected to M/s Gillette Diversified Operations Ltd who has successfully bid for supply of the impugned goods to the Canteen Stores Department (CSD) and at a price that is determined by the bidding process without there being any evidence that such price is the same as the affixed 'maximum retail price'. The intent of the appellant is thus, unambiguously, clear, i.e., it is not for retail sale. Consequently, it is the value determined under section 4 of Central Excise Act, 1944 that will determine the basis for computation of duty liability.

Setting aside the impugned orders, the Appeals were allowed.

(See 2017-TIOL-736-CESTAT-MUM)