Customs, Excise and Gold Tribunal - Bangalore
Bpl Telecom (P) Ltd. vs Cce on 16 September, 2003
Equivalent citations: 2004(92)ECC721, 2004(168)ELT251(TRI-BANG)
JUDGMENT C.N.B. Nair, Member (T)
1. A duty demand of Cover Rs. 33 lakhs has been confirmed under impugned orders. The demand is in respect of telephone instruments sold by the appellants during the period June 2001 to November 2001 to the Department of Telecom/Bharat Sanchar Nigam Limited. At the time of removal of these instruments, the appellants discharged duty liability as arising from their valuation in terms of Section 4A of the Central Excise Act, 1944, i.e. maximum retail price affixed on the goods minus notified percentage of abatement. The impugned order holds that goods were required to be assessed to duty based on their actual sale price in terms of Section 4 of the Central Excise Act. The reason for holding so is that contract sales to DOT/BSNL are not covered by Section 4A of the Central Excise Act. The Order-in-Original dated 7.3.2003 states the disputes as under:
"In the case of assessee's supply to the DOT/BSNL though MRP has been declared on the individual cartons, the same is not the actual maximum retail price but only the contract price and the items are not meant for sale in the open market. The telephone set are supplied to DOT/BSNL on contract price which is much lesser than the normal retail price of such telephone sets sold in the open market. As the sales are effected on a mutually agreed price, to a middle man (DOT/BSNL) as the ultimate customer being the individual subscriber of telephone, such sales do not come under the provisions of MRP, but under Section 4 of the Act and the price cannot be said to be the sole consideration for sale. Hence it appeared that the sale to DOT/BSNL has to be assessed under Section 4 of the Act and the present practice of adopting the contract price with DOT/BSNL as MRP and claiming abatement of 40% on this contract price to arrive at the assessable value is inadmissible as it is in contravention of the provisions of Section 4A ibid. Abatement can be claimed only on the MRP as per Ntfn. No. 9/2000-CE (NT) dated 1.3.2000 and not on the contract price. The amount of duty paid on this account for the clearances made to DOT/BSNL by ineligibly resorting to valuation under Section 4A of the Act for the period from June 1 to Nov 1 appeared to be Rs. 33,16,263."
2. The impugned orders have also noted that the telephone instruments were required to be assessed according to their contract sale price under Section 4A according to Circular No. 625/16/2002-CX dated 28.2.2002 of the Central Board of Excise & Customs.
3. The submission of the appellant is that Section 4A carves out a separate basis for valuation for goods specified under that Section. According to the appellant this is clear from the wording of the Section -- "notwithstanding anything contained in Section 4, such value of specified goods shall be deemed to be the retail sale price declared on such goods less such amount of abatement". The appellant has pointed out that telephone instruments are "specified goods" under Section 4A and the abatement specified is 40%. It is therefore, the appellant's contention that telephone instruments satisfying the requirements under Packaged Commodities Rules i.e. affixing with retail sale price, should be valued in terms of Section 4A and not at the wholesale price as provided in Section 4. During the hearing of the case, learned Counsel for the appellant pointed out that once the goods fell for valuation in terms of Section 4A, actual sale price is wholly irrelevant for the purpose of central excise valuation. Learned Counsel also pointed out that the only exception to this are clearances under Rule 34 of the Packaged Commodities Rules i.e. clearances of specifically packed goods for exclusive use in any industry as a raw material or for purpose of servicing an industry, mine or colliery, such clearances being exempt from the provisions of Packaged Commodities Rules. Learned Counsel for the appellants emphasised that the exception under Rule 34 has no application to the present case since there is no dispute at all that telecom instruments in question had been packed in terms of Packaged Commodities Rules. He pointed out that this is clear from the fact that lower authorities have specifically noted in their orders that "MRP has been declared on the individual cartons".
4. Learned Counsel also pointed out that this issue remains covered in favour of assessees by the decision of the South Regional Bench of this Tribunal at Bangalore in the case of M/s ITEL Industries P. Ltd. in Appeal No. E/701/02 and E/962/02.
5. Learned SDR has reiterated the points made in the impugned orders. He has emphasised that telephone instruments in question are sold at a contract price to DOT/BSNL and they are supplied to telecom subscribers and that these instruments were not for retail sale to consumers. He submitted that to such a case, the provisions of Packaged Commodities Rules and Section 4A have no application.
6. We have perused the records and have considered the submissions made by both sides. The appellant manufactures telecom instruments and sells those instruments to several parties including DOT/BSNL. Telecom instruments are covered by the provisions of Packaged Commodities Rules. A major requirement under this Rule is that maximum retail price should be affixed on the goods in question there is no dispute that the telecom instruments involved in the present dispute were cleared in terms of Packaged Commodities Rules. It is also specifically noted that "MRP has been declared on the individual cartons". Telecom instruments are specified goods under Section 4A of the Central Excise Act also. Section 4A specifically excludes the application of provision of Section 4 of the Central Excise Act to goods specified under Section 4A. In these circumstances, we are of the view that telecom instruments in question fell for valuation under Section 4A. They were so valued and duty paid at the time of their removal from the factory. That they were sold in wholesale to a big customer like DOT/MTNL/BSNL against contract prices is altogether irrelevant for the purpose of their excise valuation. In fact, sale at contract price in wholesale cannot constitute the distinguishing criterion for valuation under Section 4A or Section 4 because it is normal that all goods, irrespective of whether they fall for valuation under Section 4A or Section 4 of the Central Excise Act, enter trade through wholesale sale at agreed prices. It is also no requirement under Packaged Commodities Rules or under Section 4A of the Central Excise Act that goods covered by those provisions should actually be sold in retail. This is made clear by the definition of 'retail sale' under Rule 2 of Packaged Commodities Rules. The definition makes it clear that 'retail sale' includes "distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual". We also find that South Regional Bench of this Tribunal at Bangalore has also taken a view that telephone instruments sold to MTNL/DOT on contract sales are also required to be valued under Section 4A of the Central Excise Act in Appeal No. E/701 and 962/2002 in the case of M/s. ITEL Industries P. Ltd. The majority order in the case reads as under:
"FINAL ORDER
25. By majority it is held that clearances of telephone instruments of DOT/MTNL should be assessed under Section 4A and not under Section 4 of the Central Excise Act, 1944 and appeals are allowed accordingly."
7. In view of what has been stated above, the appeal is allowed with consequential relief, if any, to the appellant.