Custom, Excise & Service Tax Tribunal
Berger Paints India Ltd vs Commissioner Of Central Excise on 26 May, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.E/05/08 (Arising out of Order-in-Original No.12/COMMR/GOA/CX/2007 dated 10/09/2007 passed by Commissioner of Central Excise & Customs, Goa) For approval and signature: Honble Shri. Rakesh Kumar, Member (Technical) Honble Shri. Ashok Jindal, Member (Judicial) ========================================
1. Whether Press Reporters may be allowed to see :No 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 authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :Seen of the Order?
4. Whether Order is to be circulated to the Departmental :Yes authorities?
======================================== Berger Paints India Ltd., Appellant Vs. Commissioner of Central Excise, Respondent Goa Appearance: Shri.Bharat Raichandani, Advocate for appellant Shri.K.M. Mondal, Special Consultant for respondent CORAM: Honble Shri.Rakesh Kumar, Member (Technical) Honble Shri. Ashok Jindal, Member (Judicial) Date of Hearing : 26/05/2011 Date of Decision : /06/2011 ORDER NO Per: Ashok Jindal
1. The appellant M/s.Berger Paints India Ltd., has challenged the order-in-original No. 12/COMMR/GOA/CX/2007 dated 10/09/2007 holding that the duty against the appellant is liable to be determined under Section 4 of the Central Excise Act, 1944. Therefore, confirming the duty demand of Rs.5,27,77,454/- plus Rs.8,94,799/- on account of education cess along with interest and equivalent amount of penalty.
2. The brief facts of the case are that the appellants are the manufacture of paints, varnish and thinners and registered with the Central Excise department discharging their duty liability as per the provisions of Central Excise Rules. During the course of scrutiny of records of the appellants it was found that they had manufactured and cleared the base paints to their various depots for being sold to their dealers in packaged form. The value of the base paints, so manufactured and cleared, had been determined by them under Section 4A of the Central Excise Act, 1944 and in terms of the Notification No.13/2002-CE(NT) dated 01/03/2002 upto 28/02/2006 and under the Notification No.2/2006-CE(NT) dated 01/03/2006 thereafter. It was noticed that at the dealers premises, these base paints were mixed with various shades derived from the colour bank dispensing machine. The bought out colourants were mixed in these base paints to obtain the desired colour and shades. Thus, the base paints manufactured and cleared by the noticee was not sold to or purchased by the ultimate consumer and was meant for supply to the dealers, where it underwent change and perceptible modification by opening of the package and adding and mixing of the desired colourants prior to its delivery to the ultimate consumer.
3. Rule 1 (3) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as the SWM (PC) Rules, 1977 for sake of brevity) is applicable only to commodities in packaged form. Rule 2 (1) thereof defined pre-packed commodity to mean a commodity placed in a package so that pre-determined value of a quantity thereof cannot be altered without the package being opened or undergoing a perceptible modification.
4. Since, in case of the appellants, the base paints manufactured and cleared in the packaged form was opened at the dealers end for addition and mixing of the desired colourants, prior to the delivery to the ultimate customer, it was alleged that the provisions of the SWM (PC) Rules, 1977 would not apply, as the base pains underwent perceptible modification. For the same reason, it was observed that Section 4A of the CEA, 1944 would also, consequently, not apply for determination of such manufactured base paints as there was neither the retail sale of the base paints, as such, to the ultimate consumer, nor the retail sale price conformed to definition thereof given in the explanation 1 there under. In view of thereof, it was alleged that the value of the base paints, so manufactured and cleared by the appellants was to be determined under Section 4 of the CEA, 1944. As the appellant did not determine the value of the base paints manufactured and cleared by them under Section 4 of the CEA, 1944, the appellants had failed to correctly self assess the base paints for payment of appropriate duty of excise thereon in contravention of Rule 4, Rule 6 and Rule 8 of the CER, 2002. It was proposed that this improper and incorrect assessment was done by the noticee with a view to evade the payment of duty which was short paid by them during the relevant period. A show-cause notice was issued, the same was adjudicated, confirming the demand of differential duty along with interest and equivalent amount of penalty. Aggrieved by the said order, the appellants are in appeal before us.
5. Heard both sides.
6. Shri Bharat Raichandani, Ld. Advocate for the appellants appeared before us and submitted that the appellants are having their another unit in Pondicherry and on the identical issue a show-cause notice dated 27/03/2007 was served on the appellants, which was adjudicated by the Commissioner resulting in confirmation of demand as per the show-cause notice, which was appealed against by the appellants before this Tribunal and the Chennai Bench of this Tribunal has set aside the adjudication order (confirming the demands as per the show-cause notice) vide order No.447/448/2009 dated 15/04/2009, which was appealed against by the department and before the Honble apex Court and the Honble apex Court vide order dated 11/01/2010 has dismissed the appeal filed by the department in the facts and circumstances of the case. As the issue is identical which has attained finality by the decision of Chennai Bench of the Tribunal as well as by the Honble apex Court. Therefore, the adjudication order be set aside and appeal to be allowed with consequential relief.
7. Shri K.M. Mondal, Ld. Consultant for the Revenue appeared before us who contended that the facts of this case are not similar to the case before the Chennai Bench of this Tribunal. To differentiate the facts, he drew our attention to para 23 of the impugned order wherein the adjudicating authority has observed that the explanation 2 to Section 4A of the CEA, 1944 provided that in case where on the package of any excisable goods have more than one retail price is declared, the maximum of such retail sale price shall be deemed to be retail sale price. The appellant determined the value of the base paints under Section 4A of the CEA, 1944 for delivery to the ultimate consumer upon mixing of colourants through the computerized automatic dispensing machines. They had more than one retail sale price, the price of the base paints affixed on the tin containers of the base paints and the other being the retail sale price of the final paints at which deliveries were made to the ultimate consumers upon adding of the colourants. These final retail sale prices charged from the ultimate consumers were also determined and displayed at the dealers premises by the appellants in requirement of the condition 2 to the above said order dated 29/07/2002. The said retail price of the final paints was the higher of the two prices determined and affixed by the appellants themselves. By virtue of the Explanation 2 to Section 4A of the CEA, 1944 the appellants was thus, requisited to determine the value of the base paints on the basis of the retail sale price of the final paints upon delivery thereof to the ultimate consumers. Thus, even if the appellants valued the base paints under Section 4A of the CEA, 1944, the manner and the basis of the valuation of the base paints by them was incorrect. Therefore, the facts are distinguishable from the facts of the case dealt by Chennai Bench of this Tribunal. He further relied that as per the Circular No.247/81/96-CX dated 03/10/96 wherein it has been clarified that process of tinting of duty paid base white, etc. paint with duty paid stainer to obtain paint of different shades, does not amounts to manufacture. Therefore, he submitted that the activity undertaken at the premises of the dealers does not amounts to manufacture and the price collected from the ultimate buyers is the exact price on which duty is to be discharged.
8. He further submitted that the base paint is not a pre-packed commodity under the SW & M Act because the package of the base paint is opened at the retail shop for addition of colourants before sale to the ultimate consumer. Therefore, there is neither sale of base paint in pre-packed condition to ultimate consumer nor does the retail sale price conform to the definition given in Explanation 1 to Section 4A of the Act. He further submitted that order dated 24/07/2002 has issued on the basis that for technical reasons, it is not possible for the appellants to pre-packed paint for delivery to the ultimate consumer upon mixing of colourants through the computerized automatic dispensing machines for paint in standard quantities as specified in Schedule III to the SWM Rules 1997. Therefore, the appellants were allowed to pre-pack base material of paints for making paints to be delivered through the said computerized machine, after specifying the certain condition. It does not mean that the appellants goods are covered by the Standard of Weights and Measures (Packaged Commodities) Rules 1977. Therefore, finally he prayed that the facts of this case are distinguishable from the facts of the case decided by the Chennai Bench of this Tribunal, hence, the impugned order is to be upheld. In alternate, he further prayed that in view of the submission made herein above, the matter be referred to the Larger Bench.
9. On careful examination of the submissions made by both sides, the first issue before us is that whether the facts of the matter before the Chennai Bench of this Tribunal and the matter in hand are identical or not. To know the facts, the show-cause notice issued in both the cases are re-produced here in under:-
Ph: 0413 2336995 Fax: 0413-233124 2221999, 2331243 (Commissioner) GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE BEACH ROAD, PONDICHERRY-605 001
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C.NO.V/Ch.32/15/39/2006-Cx.Ad Dt.27.03.2007 SHOW CAUSE NOTICE NO.16/2006 (C) Sub: Central Excise Adoption of value under Section 4A instead of under Section 4 M/s Berger paints India Limited, Pondicherry Demand of differential duty Show cause notice issued.
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1. M/s Berger Paints India Limited, Pandasozhanallur, Pondicherry (hereinafter referred to as Berger) are engaged in the manufacture of both Water and Acrylic based paints and distemper falling under Chapter Sub-heading 3208.90 and 3209.10 of the first schedule to the Central Excise Tariff Act, 1985. One of the products manufactured by Berger is base which is intended to obtain colour range of over 5000 shades by tinting through a system called Berger Colour Bank Dispensing system at the premises of dealers.
2. Whereas it appears that all goods falling under Chapter heading No.3208, 3209 & 3210 are notified as specified goods as per Notification No.13/2002- CE(NT) dated 1.3.2002 (upto 28.2.2006 and Notification No.2/2006- CE(NT) dated 1.3.2006 from 1.3.2006), as subject to assessment under Sec. 4A of the Central Excise Act, 1944 on the basis of RSP (MRP) of the product allowing an abatement of 40%. Berger have cleared the base on payment of duty on the basis of the MRP less abatement @ 40% as allowed by the said Notification(s).
3. Whereas, it appears that the base cleared by Berger is not purchased by the ultimate for consumer as such and it is intended for obtaining the various colour ranges to their dealers. In the dealers premises, on identification of a particular shade by the ultimate consumer, the base in pre-packed form is opened, colorants are added to the base to the quantity required by the computer and the same is tinted. After tinting, the shade of consumers choice is obtained. Thus lid or cap of the package containing base is opened and perceptible modification is made of the content of the package before delivering the same to the consumer.
4. In terms of Rule 1(3) of the Standards of Weights and Measures (Packages Commodities) Rules, 1977 (hereinafter referred to as PC Rules) the Rule is applicable only to commodities in packaged form. In terms of Rule 2(1) of the above said Rules, (1) Pre-packed commodity with its grammatical variations and cognate expressions means a commodity or article or articles which, without the purchaser being present, is placed in a package of whatever nature, so hat the quantity of the product contained therein has a pre-determined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification and the expression package;, wherever it occurs, shall be construed as a package containing a pre-packed commodity.
5. From the above, it appears that the provision of the PC Rules, 1977 are applicable only to pre-packed commodity which has a pre-determined value and such value cannot be altered without the package or lid or cap being opened or undergoing perceptible modification. Inasmuch as the lid/cap of package containing the base manufactured by Berger is opened at the dealers; premises and perceptible modification of the content is made before delivering the package to the ultimate consumer, it appears that the provisions of PC Rules, 1977 does not apply to the impugned base manufactured by Berger.
6. The provisions of Sec. 4A of the Central Excise Act, 1944 is applicable only to the goods in relation to which it is required, under the provisions of Standards of Weights and Measures Act, 1976 or the Rules made thereunder or under any other law for the time being in force, to declare on the packages thereof the retail sale price of such goods. As per explanation 1 thereunder, Retail sale price means the maximum price declared at which the excisable goods in packaged form may be sold to the ultimate consumer.
7. In the instant case, it appears that there is neither sale of Base paint in pre- packed condition to ultimate consumer nor the retail sale price conforms to the definition given in explanation 1 to Section 4A as discussed above. As the provisions of PC Rules, 1977 does not apply to the base manufactured by Berger, it appears that the value of the same cannot be determined Sec. 4A of the Central Excise Act, 1944 and only the provisions of Sec. 4 ibid shall apply for determined of value thereof.
8. Inasmuch as the assessee are manufacturing various varieties/different pack sizes of the base the assessable value under Section 4 has to be determined on the basis of the MRP less Trade discount of 6% allowed to the dealers by Berger and treating the same as inclusive of excise duty. Whereas, Berger have assessed the base under Sec. 4A and have cleared the base on payment of duty on the basis of the MRP less abatement @ 40% resulting in short payment of duty as detailed in the Annexure to this notice.
9. From the foregoing it appears that Berger have contravened the provisions of Rule 8 of Central Excise Rules, 2002 inasmuch as they have not determined the duty correctly by assessing the goods under Section 4A instead of Section 4. Hence, the differential duty is recoverable in terms of Sec.11A(1) of Central Excise Act, 1944 along with interest under Sec. 11AB ibid. Besides Berger are also liable for penal action under Section 11AC of the Central Excise Act, 1944.
10. Now, therefore, M/s Berger Paints (India) Limited, Pondicherry are hereby called upon to show cause to the Commissioner of Central Excise, Goubert Avenue, Pondicherry-605 001, within 30 days from the date of receipt of this notice as to why:
i. the base cleared by them and assessed under Section 4A should not be assessed under Section 4 of the Central Excise Act, 1944.
ii. Differential duty of Rs.9,48,29,097/- and differential Education Cess of Rs.8,39,937/-) (as per Annexure to this notice) should not be demanded from them in respect of clearances made during April 2002 and March 2006, under Sec. 11A of the Central Excise Act, 1944.
iii. Appropriate interest on the said duty amount should not be demanded from them Sec. 4A of the Central Excise Act, 1944.
iv. Penalty should not be imposed on them under Section 11AC of the Central Excise Act, 1944.
11. M/s Berger Paints (India) Limited, Pondicherry are further directed to produce at the time of showing cause all the evidences upon which they intend to rely in support of their defence.
12. If no cause is shown against the action proposed to be taken within the prescribed period or if they do not appear before the adjudicating audthority when the case is posted for hearing, the case will be decided on merits.
13. This notice is issued without prejudice to any other action or any further action that may be taken against them under the Central Excise Act, 1944 or the Rules made thereunder or any other law for the time being in force in India.
Sd/-
[K. SEKAR] Commissioner OFFICE OF THE COMMISSIONER OF CUSTOMS CENTRAL EXCISE & SERVICE TAX, ICE HOUSE, EDC COMPLEX, PATTO PLAZA, PANAJI, GOA SHOW CAUSE-CUM-DEMAND NOTICE Whereas, M/s Berger Paints India Limited, 316/317, Kundaim Industria Estate, Kundaim, Goa (hereinafter referred to as Berger) are engaged in the manufacture of paints & Varnishes and Thinners falling under Chapter Sub-heading 32081090 and 38140010 of the First Schedule to the Central Excise Tariff Act, 1985. One of the products manufactured by Berger is base, which is intended to obtain colour range of over 5000 shades by tinting through a system called Berger Colour Bank Dispensing system at the premises of dealers.
2. Whereas it appears that all goods falling under Chapter heading No.3208, 3209 & 3210 are notified as specified goods as per Notification No.13/2002- CE(NT) dated 01.03.2002 (upto 28.02.2006 and Notification No.2/2006- CE(NT) dated 01.03.2006 from 01.03.2006, as subject to assessment under Sec. 4A of the Central Excise Act, 1944 on the basis of RSP (MRP) of the product allowing an abatement of 40%. Berger have cleared the base on payment of duty on the basis of the MRP less abatement @ 40% as allowed by the said Notifications.
3. Whereas, it appears that the base cleared by Berger is not purchased by the ultimate consumer as such as it is intended for obtaining the various colour ranges to their dealers. In the dealers premises, on identification of a particular shade by the ultimate consumer, the base in pre-packed form is opened. Colorants are added to the base to the quantity required by the computer and the same is tinted. After tinting, the shade of consumers choice is obtained. Thus lid or cap of the package containing base is opened and perceptible modification is made of the content of the package before delivery the same to the consumer.
4. In terms of Rule 1(3) of the Standards of Weights and Measures (Packages Commodities) Rules, 1977 (hereinafter referred to as PC Rules) the Rule is applicable only to commodities in packaged form. In terms of Rule 2(i) of the above said Rules, (1) Pre-packed commodity with its grammatic variation and cognate expression means a commodity or article or articles which, without the purchaser being present is placed in a package of whatever nature, so hat the quantity of the product contained therein has a pre-determined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification and the expression package, wherever it occurs, shall be construed as a package containing a pre-packed commodity.
5. From the above, it appears that the provisions of the PC Rules, 1977 are applicable only pre-packed commodity which has pre-determined value cannot be altered without the package or lid or cap being opened or undergoing perceptible modification. In as much as the lid/cap of package containing the base manufactured by Berger is opened at the dealer, premises and perceptible modification of the content is made before delivering the package to the ultimate consumer, it appears that the provisions of PC Rules, 1977 does not apply to the impugned base manufactured by Berger.
6. The provisions of Sec. 4A of the Central Excise Act, 1944 is applicable only to the goods in relation to which it is required, under the provisions of Standards of Weights and Measures Act, 1976 or the Rules made thereunder or under any other law for the time being in force, to declare on the packages thereof the retail sale price of such goods. As per explanation 1 thereunder, Retail sale price means the maximum price declared at which the excisable goods in packaged form may be sold to the ultimate consumer.
7. In the instant case, it appears that there is neither sale of Base paint in pre-packed condition to ultimate consumer nor the retail sale price conforms to the definition given in explanation 1 to Section 4A as discussed above. As the provisions of PC Rules, 1977 does not apply to the base manufactured by Berger, it appears that the value of the same cannot be determined under Section 4A of the Central Excise Act, 1944 and only the provisions of Section 4 ibid shall apply for determined of value thereof.
8. In as much as the M/s Berger are manufacturing various varieties/different pack sizes of the base, the assessable value under Section 4 has to be determined on the basis of the MRP less Trade discount allowed to be dealers by Berger and treating the same as inclusive of excise duty. Whereas, Berger have assessed the base under Section 4A and have cleared the base on payment of duty on the basis of the MRP less abatement @ 40% resulting in short payment of duty as detailed in the Annexure to this notice.
9. From the foregoing it appears that Berger have contravened the provisions of Rule 8 of Central Excise Rules, 2002 in as much as they have not determined the duty correctly with intent to evade Central Excise duty, by assessing the goods under Section 4A instead of Section 4. Further, the fact that the package of base is opened to add colorants and for tinting thereafter to obtain the required colour at the dealers premises before delivery to the ultimate consumer, has been suppressed from the Department. Hence, the differential duty is recovering in terms of proviso to Section11A of Central Excise Act, 1944 along with interest under Section 11AB ibid. Besides Berger are also liable for penal action under Section 11AC of the Central Excise Act, 1944.
10. Now, therefore, M/s Berger Paints (India) Limited, Kundalm are hereby called upon to show cause to the Commissioner of Customs, Central Excise & Service Tax, Goa, having his office at, ICE House, EDC Complex, Patto Plaze, Panaji, within 30 days from the date of receipt of this notice as to why:
(i) the base cleared by them and assessed under Section 4A should not be assessed under Section 4 of the Central Excise Act, 1944.
(ii) Differential duty of Rs.5,27,77,454/- (Five Crores Twenty Seven Lakhs Seventy Seven Thousand Four Hundred Fifty Four Only) and differential Education Cess of Rs.8,94,799/- (Eight Lakhs Ninety Four Thousand Seven Hundred Ninety Nine Only) as per Annexure to this notice, totally amounting to Rs.5,36,72,253/- (Five Crores Thirty Six Lakhs Seventy Two Thousand Two Hundred Fifty Three Only) should not be demanded and recovered from them in respect of clearances made during April 2002 to March 2007, under the proviso to Section 11A(1) of the Central Excise Act, 1944.
(iii) Appropriate interest on the said duty amount should not be demanded and recovered from them under Section 11AB of the Central Excise Act, 1944.
(iv) Penalty should not be in passed on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002.
11. M/s Berger Paints (India) Limited, Goa, are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence.
12. If no cause is shown against the action proposed to be taken within the prescribed period or if they do not appear before the undersigned when the case is posted for hearing, the case will be decided on merits.
13. This notice is issued without prejudice to any other action or any further action that may be taken against M/s Berger Paints (India) Limited, Kundaim, under the Central Excise Act, 1944 or the Rules made thereunder or any other law for the time being in force in India.
(Shri. Narayan Singh) COMMISSIONER
10. On going through the contents of both the show-cause notices, we find that both the show-cause notices are identical. The only difference in the show-cause notice is is in the matter before us the show-cause notice is issued by the Goa Commissionerate and the matter before the Chennai Bench of this Tribunal the show-cause notice was issued by Pondicherry Commissionerate. The show-cause notice issued by Pondicherry Commissionerate has been dealt by Chennai Bench of this Tribunal and held that the demands as per show-cause notice are not sustainable as the appellants have rightly valued their base paints as per the provisions of Section 4A of the CEA, 1944 and the same has been confirmed by the Honble Apex Court by order dated 11/01/2010.
11. We do not agree with the submissions made by the Ld. Consultant for the Revenue as the observation made by the adjudicating authority are beyond the purview of the show-cause notice. If at all, the view taken by the adjudicating authority are to be considered in that case the show-cause notice is defective. As the issue has been decided on the identical facts in appellants own case by the Chennai Bench of this Tribunal holding that the appellants have correctly valued their final products i.e. base paints as per Section 4A of the CEA, 1944 and we are also of the same view as discussed hereinabove. Therefore, we do not find any reason to refer the matter to the Larger Bench. Hence, after following the decision of the Chennai Benchof this Tribunal in appellants own case, we set aside the impugned order and allow the appeal filed by the appellants with consequential relief.
(Pronounced in Court on .) (Rakesh Kumar) Member (Technical) (Ashok Jindal) Member (Judicial) pj 1 2