Custom, Excise & Service Tax Tribunal
M/S.Castrol India Ltd vs Cce-Kol-Vi on 26 March, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.Ex.Ap.427/10
(Arising out of Order-in-Original No.7/CE/Commr/Kol-VI/2010 dated 10.03.2010 passed by the Commissioner of Central Excise, Kolkata-VI.)
FOR APPROVAL AND SIGNATURE
HONBLE DR. D.M.MISRA, MEMBER(JUDICIAL)
HONBLE DR.I.P.LAL, MEMBER(TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s.Castrol India Ltd.
Applicant (s)/Appellant (s)
Vs.
CCE-KOL-VI
Respondent (s)
Appearance:
Shri D. Arvind, C.A. for the Appellant(s) Shri S.Sharma, Commr.(A.R.) for the Revenue CORAM:
Honble Dr. D.M.Misra, Member(Judicial) Honble Dr.I.P.Lal, Member(Technical) Date of Hearing :- 26.03.2015 Date of Pronouncement :- 26.03.2015 ORDER NO.FO/A/75381/2015 Per Dr. D.M.Misra.
1. This is an Appeal filed against the Order-in-Original No.7/CE/Commr/Kol-VI/2010 dated 10.03.2010 passed by the Commissioner of Central Excise, Kolkata-VI.
2. The appellant are engaged in the manufacture of excisable goods, interalia, lubricating oil falling under chapter 27 of CETA, 1985 and are subjected to ad valorem rate of duty. The products manufactured by the appellant are notified under The Standards of Weights & Measures Act, 1976 & Rules made thereunder, hence, the said goods are subjected to assessment for valuation under Section 4A of Central Excise Act, 1944.
3. The appellant during the relevant period i.e. 01.4.1998 to 31.3.2008 cleared unit quantity of goods in their normal pack affixing the MRP; as well as with some additional quantity, in another pack, called as bonus/promo pack, against the same MRP. For example, the packs containing of 4.5 ltrs. of Lub. oil cleared at an MRP and lubricating oil with 5 ltrs. Pack, called as bonus/promo pack cleared with the same MRP. Revenue issued show cause notices to the appellant alleging that since the additional quantity of lubricating oil cleared in the bonus/promo pack had not suffered duty, accordingly duty was recoverable on the said additional quantity of Lub. Oil cleared in the same pack. On adjudication, differential excise duty of Rs.1,30,14,474/- had been confirmed and penalty of equal amount was imposed under Section 11AC of Central Excise Act, 1944, along with direction for recovery of interest under Section 11AB of Central Excise Act, 1944. Hence, the present appeal.
4. Shri D.Arvind, ld.C.A. for the appellant submits that during the relevant period their product was notified under The Standards Weights and Measures Act read with the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 hence, they discharged excise duty, on the assessable value, as per Section 4A of Central Excise Act, 1944. He submits that during lean period, in addition to the quantity in a standard pack, they also include certain extra quantity, declaring the same MRP, on the packages, so as to capture the market. It is his submission that extra quantity was not cleared under a different packing, but in the same pack declaring the same MRP on the packings, denoting it as bonus packs. Citing an example, he submits that a regular pack if contains 5 ltrs. of lub. oil affixed with a MRP of say Rs.500/- and for promoting sale of this product, in the same pack, with the same MRP of Rs.500/-, 5.5 ltr was sold ,instead of 5 ltr.. Similarly, sometimes they offer a reduction in the MRP containing the same quantity. For example, the pack of 1 ltr. of product, affixed with a MRP say Rs.100/- then the promotional packs of the same product pack of 1 ltr. are offered at Rs.70/-, with an offer of Rs.30/-, as reduction from regular price. This promotional packs were affixed with MRP of Rs.100/- on respective packages, was struck, and in its place MRP of Rs.70/- was affixed, at which the same were available to the customers. It is his submission that this promotional packs are not at all different from the regular packs and both are governed by the provisions of Standards Weights and Measures Act and rules made thereunder, hence, the MRP affixed on these packs should be the basis for determination of value under Sec.4A. The excise duty is paid on this promotional packs, considering the MRP affixed on it after availing the abatement, allowed under the relevant Notification, as the assessable value. It is his submission that the additional quantity contained in the packs are cleared on payment of duty and it is incorrect to allege that this additional quantity was cleared without payment of duty. It is his submission that as per Section 4A of Central Excise Act, 1944 the MRP printed on the pack, is the only relevant factor and not the quantity that were contained in the packs. It is his submission that the additional quantity cleared along with the normal quantity in the same pack would not attract duty on pro-rata basis as confirmed by the ld.Commissioner. In support he has referred to the decision of this Tribunal in the case Calcutta Chemicals Ltd. vs. CCE, Kol-V 2008 (229) ELT 117(Tri.Kol), Surya Food and Agro Ltd. vs. CCE, Noida 2003 (156) ELT 488(Tri.-Del.), CCE, Bangalore-III vs. Himalaya Adrat Co. 2009 (243) ELT 101(Tri.-Bangalore).
5. Further he has submitted that the decision of the Larger Bench in the case of Indica Laboratories Pvt.Ltd. vs. CCE, Ahmedabad 2007 (213) ELT 20(Tri.LB) is not applicable to the facts of the present case, inasmuch in that case the appellants are manufacturer of P & P Medicines falling under chapter 3003 of CETA and were indicating the MRP on the packages in terms of the provisions contained in Drugs (Price Control) Order, 1955 (DPCO). The appellant cleared 25 boxes free along with 100 boxes and the boxes which are allowed free also contained the MRP printed on each box as the same were required to be printed as required under DPCO. It is his submission that in the present case the additional quantity are not cleared in separate packs affixed with MRP, therefore, the said judgement is not applicable to the facts of the present case.
6. Per contra, the ld.A.R.(Commissioner) for the Revenue submitted that the additional quantity cleared in the promo packs had not suffered duty, inasmuch as, when a comparison is made between the bonus/promo packs and the normal pack, even though at the same MRP printed on both, but, the price at which unit quantity of Lub. oil was made available to the customers, was different. It is his submission that therefore the MRP arrived at and affixed on the packages of bonus/promo pack is not the true/correct MRP, hence the ld. adjudicating authority has rightly re-determined the MRP under Section 4A, taking into consideration the additional quantity cleared in the bonus/promo pack. Referring to the Larger Bench decision in Indica Laboratories Pvt.Ltd.s case the ld.A.R. for the Revenue, he has submitted that the levy of excise duty is not dependent on the sale of the goods; duty is chargeable on its removal and in the present case the additional quantity of lubricating oils removed in the promo pack are definitely chargeable to duty and since the product is notified under The Standards Weights and Measures Act, hence its value is calculated on the basis of MRP declared for the unit quantity of the product in the normal packs, less the abatement as per the applicable Notification.
7. Heard both sides and perused the record. The limited issue involved in the present case for determination is: whether the additional quantity of manufactured lub. Oil cleared in the bonus/promo packs during the relevant period i.e. from 01.4.1998 to 31.3.2008, would attract duty on pro-rata basis of the MRP declared on the packs.
8. Needless to elaborate, the levy of excise duty on goods produced or manufactured in India is a Constitutional concept and could be located at entry 84 of List-I to VII Schedule to the Constitution of India. Levy and collection of the Central Excise duty, now known as CENVAT, is administered through Central Excise Act, 1944. The charging section i.e. Section 3 of the Central Excise Act,1944 lays down that there shall be a duty called CENVAT be levied on goods produced and manufactured in India and collected in the manner specified under the Act and Rules made thereunder. The said provision reads as:
SECTION 3. Duties specified in the [[First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985] to be levied. (1) [There shall be levied and collected in such manner as may be prescribed, -
(a) [a duty of excise to be called the Central Value Added Tax (CENVAT)] on all excisable goods [(excluding goods produced or manufactured in special economic zones)] which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);] .
9. The manufactured or produced goods are subjected to excise levy which are broadly measured taking into consideration, its physical properties, namely, weight, volume, length, etc. or the value of the goods. The former one is described as specific rate of duty and the later one is as ad valorem rate of duty. Specific rate of duty is independent of the value, that is the price at which it could be sold; similarly, the value is independent of the physical characteristics of the goods i.e. its volume, weight, length etc.. Both methods are mutually exclusive. In the present case, the lubricating oils are subjected to ad valorem rate of duty. In other wards, it is the value of the goods which is relevant for determination of the quantum of duty applicable to the quantity of goods manufactured and cleared from the factory.
10. Prior to 01.7. 2000 the value of the goods chargeable to ad valorem rate of duty, was determined on the basis of normal whole sale price at which such goods are sold; however, after 01.7. 2000, transaction value has become the basis to ascertain the assessable value. The amended section 4 reads as:
SECTION [4.?Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall -
(a)?in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b)?in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
11. Besides, determination of the value either from the whole sale price or from the transaction value, another method, by adopting the maximum retail sale price as the basis, has been introduced through section 4A of CEA,1944 with effect from 14.5.1997. The said section in the present form reads as:
SECTION [4A. Valuation of excisable goods with reference to retail sale price. (1)?The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the [Legal Metrology Act, 2009 (1 of 2010)] or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
[(4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer -
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. For the purposes of this section, retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale :
Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.
Explanation 2. For the purposes of this section, -
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.]
12. In the present case, the manufactured lubricating oils has been y notified under The Standards of Weights and Measures Act read with relevant Rules, accordingly, the assessable value of the said goods are to be determined as per section 4A of Central Excise Act, 1944. It is not disputed at any stage that the goods manufactured by the appellant are subjected to assessment under section 4A of Central Excise Act, 1944. The only dispute relates to determination of the value of the quantity of lub. Oil contained in the packs and consequently the duty paid by the appellant.
13. The contention of the Revenue is that the appellant had manufactured/cleared additional quantity of lubricating oil in bonus/promo pack, against the same MRP, which is also applicable to normal pack, containing lesser quantity. In other words, the differential quantity between the normal pack and bonus had been cleared without payment of duty.
14. From the impugned Order, we find that in confirming the demand, the ld. Commissioner has advanced a two fold reasoning. He has observed that since the additional quantity is provided in the bonus/promo pack for the purpose of promotion of sales, which is nothing but attributable to advertisement expenses, hence, duty is chargeable on such expenses in view of the judgement of the Honble Supreme Court in the case of UOI & Ors. Vs. Bombay Tyres International Ltd.1983(14)ELT1896(SC). Secondly, the ld. adjudicating authority has observed that the MRP declared by the appellant in their bonus/promo pack is not the correct MRP, hence as per the provisions of section 4A, the same requires to be re-determined and consequently the same is arrived at by applying the pro-rata value to the additional quantity of lub. Oil contained in the said pack.
15. We are unable to persuade ourselves to accept any of the aforesaid reasoning. The first one is fallacious inasmuch as the ld. Commissioner has himself observed that the present goods are notified under section 4A and its assessable value is to be determined under Sec.4A and not under section 4 of the Central Excise Act, 1944; hence, the additional quantity or reduction in price from the declared MRP allowed by the Appellant to promote their business cannot be equated to the principle of law laid down by the Honble Supreme Court in Bombay Tyres Internationals case(supra) on the inclusion or exclusion of certain expenditures in the assessable value, as the said principle was laid down in the context of Sec. 4 of CEA,1944. The second reasoning also devoid of merit in as much as in section 4A, it is laid down that if the MRP is not affixed as per provisions of The Standards of Weights and Measures Act, then the department would proceed to ascertain the correct MRP. In the present case, there is no dispute about the fixation of MRP on the bonus/promo pack and no objection has been raised by the department about the compliance of the requirement of the provisions of The Standards Weights and Measures Act and the Rules made thereunder. The Appellant is at liberty to ascertain its own MRP of the goods depending on the market conditions and required to affix the same on the packing, subject to the condition that in selecting the MRP for determination of value and payment of duty, in the event more than one MRP is fixed on the pack, as prescribed in section 4A of Central Excise Act, 1944, the duty is to discharged on the highest MRP. In the event the MRP is affixed correctly and satisfies the conditions laid down under Sec.4A, then it is not open to the department to dissect the MRP, and to examine its content and arrive at a different MRP for the purpose of determination of assessable value under Sec.4A by applying the principles of valuation laid down for determination of value under Sec. 4 of CEA,1944. Accepting the contention of the revenue, if the pro rata value attributable to the additional quantity cleared as bonus quantity, in the same pack, is added to the MRP affixed on the said bonus pack, then the declared MRP will increase accordingly, which the appellant had not realized from its customers; also no such allegation has been levelled in the notice nor confirmed in the impugned order that the Appellant has collected any amount in addition to the MRP declared. Besides, as an alternative submission, the appellant has categorically claimed, supported by Chartered Accountants Certificate that they did not clear/sale, simultaneously the normal pack as well as bonus pack in the same area affixed with the same MRP.
16. The Revenue mainly relied upon the decision of the Larger Bench of the Tribunal in Indica Laboratories case(supra).On scrutiny of the said decision, we agree with the contention of the appellant that the facts and circumstances of the present case are completely different from the said case.In that case along with 100 boxes of P&P Medicines 25 boxes printed with MRP as per DPCO were also cleared from the factory. Duty was paid on 100 boxes claiming quantity discount on 25 boxes bearing MRP. This was not accepted by the larger Bench of this Tribunal and it has been held that the 25 boxes of P&P Medicines cleared with affixed MRP are exigible to duty. In the present case, the circumstances are totally different. The additional quantity of goods, namely, lubricating oil are contained in the same package and not cleared in separate packing bearing a MRP, therefore, the principle laid down in the said case, in our view, is not applicable to the instant case.
17. On the other hand, we find that this Tribunal in the case of Calcutta Chemicals Ltd. vs. CCE, KOL-V 2008 (229) ELT 117(Tri.Kol.), Surya Food and Agro Ltd. vs. CCE, Noida 2003(156) ELT 488(Tri.-Del.) had more or less expressed a similar view. We also find that the ld. Commissioner of Central Excise for the subsequent period had dropped the demand on the same issue vide Order-in-Original No.05-06/KOL-VI/Joint Commissioner/2012-13 dated 13.09.2012. The ld. Chartered Accountant for the Appellant submits that the said order has been accepted by the department as no Appeal has been preferred against the said order.
In view of above, we do not find merit in the impugned order, consequently, the same is set aside. The Appeal is allowed, with consequential relief, if any, as per law.
(Operative part of the order was pronounced in the open court.)
SD/ SD/
(I.P.LAL) (D.M.MISRA) MEMBER(TECHNICAL) MEMBER(JUDICIAL)
sm
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Appeal No.Ex.Ap.427/10