CX - TNCSC is neither Institutional consumer nor Service institution - Mixies & Electric Rice cookers supplied to TNCSC for free distribution to women beneficiaries have been rightly assessed to duty on RSP u/s 4A: CESTAT
By TIOL News Service
CHENNAI, DEC 08, 2014: THE appellants are manufacturers of Mixies and Table Top Wet Grinders falling under Chapter 85094010 of the CETA, 1985 which are notified u/s 4A of CEA, 1944.
The appellant procured orders from the Tamil Nadu Civil Supplies Corporation (TNCSC) for implementing the scheme of free distribution of Mixies and Table Top Wet Grinders to the beneficiaries of the families holding Rice Cards announced by the Govt. of Tamil Nadu.
The appellant secured order for supply of 3,00,000 nos. of domestic Electric Food Mixer at the rate of Rs.1165/- + VAT per piece and 8,00,000 nos. of Table Top Wet Grinders @ Rs.3045 per piece inclusive of all taxes, unloading charges etc. In pursuance of orders from TNCSC, the appellants have supplied the above goods and paid Excise Duty as per Section 4A after availing abatement of 35% from the RSP in terms of Notification No.49/2008-CE (NT).
SCN came to be issued demanding differential CE duty alleging that valuation should have been adopted u/s 4 of the CEA, 1944 on the ground that the goods were supplied to "institutional consumers".
The CCE, Chennai-III confirmed the demand of Rs.75,40,848/- and held that Domestic Electric Food Processor and Table Top Wet Grinders are not intended for sale in retail but for free distribution and also held that TNCSC is an "institutional consumer" and also imposed penalty.
A demand of Rs.1.06 crores on similar grounds (the goods are Electric Table Fans & Electric Rice Cookers, Tariff Item 84145190 and 85166000) is also confirmed against another appellant who too is in appeal before the CESTAT.
The appellants inter alia submitted that as per Rule 3 of Legal Metrology (Packaged Commodities) Rules, 2011, "institutional consumer" means " the institutional consumer like transportation, Airways, Railways, Hotels, Hospitals or any other service institutions who buy packaged commodities directly from the manufacturer for use by that institution ".
Inasmuch as Tamil Nadu Civil Supplies Corporation (TNCSC), a government of Tamil Nadu undertaking, is not an Institutional Consumer as the goods are not consumed by TNCSC or the TN Government but supplied to eligible beneficiaries, the ultimate consumers, therefore, the findings of the adjudicating authority that TNCSC is a ‘service institution' is erroneous. It is further submitted that the appellants have cleared the goods as per LMR Rules, duly packaged and MRP affixed and the goods were sold to TNCSC and, therefore, Section 4A would be rightly applicable; that TNCSC in turn supplied the goods to poorer sections for free is not the relevant criteria to decide the applicability of Section 4A.
A plethora of case laws were also cited to justify the assessment made by the appellant in terms of s.4A of the CEA, 1944.
The AR justified the orders of the adjudicating authority and also embellished his arguments with support of case laws.
Noting that the Tribunal in the case of PG Electroplast Ltd. 2014-TIOL-861-CESTAT-DEL had discussed an identical issue, the Bench observed -
++ The Tribunal has clearly held that the M/s.ELCOT procured Colour Television sets for Government of Tamil Nadu for free distribution of the CTVs among the poor sections of people of Tamil Nadu on behalf of Govt of Tamil Nadu cannot be called as a "service industry" as it is not a commercial activity. Similarly, in the present case, TNCSC carried out procurement of Mixies, Table Top Wet Grinders, Electric Table Fans and Electric Rice Cookers for free distribution to the women beneficiaries, who are holding family cards eligible for drawal of rice on behalf of Tamil Nadu Government. The TNCSC is an undertaking of the Government of Tamil Nadu similar to M/s.ELCOT. M/s.ELCOT had been entrusted by Govt. of Tamil Nadu for procurement of colour T.V sets and in the present case, TNCSC has been entrusted to procure Mixes, Table Top Wet Grinders, Electric Fans & Electric Rice Cookers. Therefore, the ratio of the above decision of the Tribunal in the case of PG Electroplast (supra) clearly applies to this case.
The case laws cited by the AR were held to be inapplicable to the facts of the case and distinguishable.
Extracting paragraphs 32 & 33 of the Supreme Court decision in M/s.Jayanti Foods Processing Pvt. Ltd. in respect of Civil Appeal Nos.2150-2151 of 2004 - 2007-TIOL-150-SC-CX where it is held that merely because the goods are supplied in bulk to DOT, MTNL and BSNL, the goods cannot be assessed under Section 4; that the nature of sale is not important and what is important is the requirement of printing of MRP on the packages, the CESTAT held that the Apex Court's decision clearly applies to the facts of the present case, wherein the goods were sold by the appellant to TNCSC and there is consideration of sale and the goods are covered under Section 4A of the Central Excise Act.
Holding that the appellants have rightly cleared the impugned goods on payment of Central Excise duty as per RSP in terms of Section 4A of CEA, 1944 read with Notification No.49/08-CE(NT), the orders passed by the adjudicating authority confirming duty demands were set aside and the appeals were allowed with consequential reliefs.
(See 2014-TIOL-2466-CESTAT-MAD)
