By TIOL News Service

KOLKATA, OCT 16, 2015: THE appellants are engaged in the manufacture of Powder Hair Dye (PHD) [CH 3305]. During the relevant period, PHD was packed in sachets weighing 3 grams on which its MRP was declared. The sachets numbering 6/8 were then placed in one mono-pack/carton on which the total MRP of all sachets was also declared/printed. The appellant discharged duty on the PHD by determining its value from the MRP declared on the mono-pack under Section 4A of CEA, 1944 after claiming allowed abatement.

Revenue view is that since each sachet printed with MRP was weighing 3 grams(i.e. less than 10 grams), even though cleared in 6/8 numbers in the mono pack/carton, on which no MRP was required to be affixed under the SWAM Act, 1976 and the Rules framed thereunder, hence, such PHD was liable to be assessed u/s 4 and not u/s 4A of CEA,44.

The period involved in respect of the two demand notices on the above ground is April, 2007 to March, 2011 and April, 2011 to November, 2011.

On adjudication, the said demand notices were confirmed by the CCE, Siliguri and penalties imposed. Appeals have been filed against these orders before the CESTAT.

There is one more appeal. The appellant filed refund claims on month to month basis [period 2009-10 and July 2010 to September, 2010] in terms of Notification No. 71/03-CE dated 09/9/2003 [area exemption for Sikkim] assessing their goods under Provision of Section 4A of CEA, 1944 and the refund claims were sanctioned to them till March, 2009. These orders were reviewed on similar grounds and the Commissioner (Appeals)decided the issue in favour of the Revenue, resulting into the present appeals by the Appellant.

Before the CESTAT the appellant submitted thus -

+ Since the mono cartons satisfies the definition of 'retail package' and there is a statutory requirement for the appellant to comply with the PC Rules,1977 to affix MRP on it, therefore, the Mono cartons/packs which were sold through retail sale for consumption, accordingly to be assessed under section 4A of CEA, 1944.

+ The mono carton/pack was retail package and intended for retail sale only was also evident from a scheme introduced by the appellant for a particular period. Under the said scheme it was informed to the consumers by printing the text on the mono pack indicating that a soap valued at Rs.10/- was offered free with the purchase of the mono pack.

+ Unless it is shown by the Department that the mono packs/cartons is a wholesale package and not a retail package, the assessment cannot be done under Section 4 of CEA,1944.

+ At the time of clearance from the factory, the mono carton contains 6/8 sachets of PHD weighing 03 grams each, hence the total weight of PHD in the mono cartoon/packs was 18 grams/ 24 grams respectively. Since the total weight of PHD in the mono pack was more than 10 grams, hence, it would fall outside the exclusion clause contained under Rule 26(a) or 34(b) of PC Rules,2011 or PC Rules,1977, respectively and consequently they were required to declare the MRP on the mono packs.

+ in Appeal No. (E-70200/13) - in computing the demand two major errors have occurred viz. value was determined by assuming MRP as the assessable value under Section 4 of CEA,1944 for certain period and for the remaining period, the sale price was considered, which was inclusive of entry tax @ 1% and the excise duty; that the valuation has to be carried out in accordance with Section 4(1)(b) read with Rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000.

+ in relation to appeal No. (E-76111/14), the depot sale price, which was cum duty price, ought to have been adopted for the purpose of determination of assessable value. However, the Department has wrongly multiplied the MRP by a factor (100/65) to arrive at the assessable value under Sec.4.

+ in relation to Appeal No. (E/179182/2012), the Department did not issue any notice to re-assess the goods under Section 4 and the manner of working out the differential duty is not ascertainable.

The AR justified the impugned orders by submitting that each sachet weighed 3 grams and there was no marking on the mono packs to the effect that the sachets packed thereunder would be sold together and not individually; the mono pack was not sold or packed in a manner by which it would preclude the possibility of selling individual sachets in retail to the consumer; in the absence of any such warning on the pack to the effect that the said sachets are not to be sold in retail, the argument of the appellant is not acceptable. Furthermore, the definition of 'multiple piece packing' under Rule 2(j) of PCR, 1977 has been deleted by Notification No. 425E dated 17/07/2006; there was no requirement of affixing MRP on multi-piece packages yet the same had been done with the sole intention and purpose to fall within the purview of s.4A of CEA, 1944; the package weighing less than 10 grams had been exempted from the provisions of the said Rules; the appellant has affixed MRP on individual sachets despite there being no legal requirement to do so with the sole intention of selling individual pieces and not the multi-piece pack i.e mono pack/cartons as such.

Furthermore, the appellant had commenced determining duty on the PHD adopting valuation u/s 4 of CEA, 1944 w.e.f. 2015 which fact was ascertained from the respective Commissionerate and found to be correct.

The Bench inter alia observed -

+ It cannot be ruled out that both sachets and mono pack are capable of being sold in retail, a situation fairly accepted by the Appellant. But, the Appellant insisted on their plea that it was not their intention to sell the sachets in retail but the mono pack. Needless to mention that the provisions of Section 4A would be applicable only when there is a legal requirement of printing/affixing the MRP on the package of the notified goods under the Standards of Weights and Measures Act, 1976 or Legal Metrology Act, 2009. In the present case, the Commissioner has recorded a finding that it is the intention of the appellant to sell the sachets in retail sale and not the mono pack.

+ We find that neither the appellant nor the Revenue collected any information/opinion on the said issue from the appropriate authority i.e. Legal Metrology Department of the State to the effect that whether the appellant would be required to affix the MRP on the sachets or on the multi piece packages or on both under the aforesaid Acts and the Rules made thereunder.

+ We find in Appeal No.( E/70200/13), the adjudicating authority has adopted average selling price whereas in appeal No. (E/76111/14), the adjudicating authority has adopted the abated value i.e. after deducting 35% from the declared MRP as the basis for determination of value under Section 4 of CEA, 1944. In our opinion, both the methods are incorrect inasmuch as since the goods were not sold from the factory but sold from the depots, therefore, Section 4(1)(b)read with Rule 7 of the Central Excise Valuation Rules, 2000 are relevant for determination of the assessable value.

+ Other issues involved are kept open as the same could not be decided without adjudication of the core issue, that is, whether the goods are liable to be assessed under Section 4 or Section 4A of CEA, 1944.

The impugnedOrders were set aside and the matters were remanded to the adjudicating authority.

(See 2015-TIOL-2224-CESTAT-KOL)