Customs, Excise and Gold Tribunal - Tamil Nadu
Pond'S Exports Ltd. vs Cce on 20 November, 2007
Equivalent citations: 2008(127)ECC83, 2008(153)ECR83(TRI.-CHENNAI), 2008(223)ELT193(TRI-CHENNAI)
ORDER P. Karthikeyan, Member (T)
1. These five appeals filed by M/s. Pond's Exports Ltd., Pondicherry, (PEL) are directed against a common order No. 409 to 413/03 dated 28.07.03 of the Commissioner (Appeals). The impugned order sustains a total demand of Rs. 27,39,987/- made on the appellants and a total penalty of Rs. 7,10,000/- imposed on them. The impugned order deals with valuation of the clearances of footwear made by PEL during June'98 to March'02, adopting MRP based assessment in terms of Section 4A of the Central Excise Act, 1944 (the Act).
2. PEL manufactures and clears footwear mostly on assessment in terms of Section 4 of the Act. These are cleared in bulk for use by personnel employed in particular industry. The appellants also manufacture footwear for export. Surplus production of such footwear/seconds are cleared in the domestic market. These are sold at the factory gate of the assessee or at the exhibitions organized by it. The footwears carry its retail price printed on the insole. There is also a sticker carrying MRP particulars affixed on the sole of the footwear. Different varieties of foot wear are packed in uniform standard plain paper cartons bearing no label or marking.
3. The lower authorities found that the retail price based assessment was not applicable to such footwear as the same were sold directly by the manufacturer to the consumer and as various instrumentalities that normally exist in the chain linking the manufacturer and the ultimate customer are absent in this case. Moreover, the retail price was not marked on the package but on the footwear. It was held that the footwears were sold not to the ultimate consumer but to the immediate customer. The retail price normally included various items of expenditure on publicity, marketing and transportation etc and are abated. These were not incurred in the case of the impugned goods. Accordingly, it was held that the impugned goods had to be assessed at the normal price in terms of Section 4 of the Act and the lower authorities confirmed differential duty of Rs. 27,39,987/- and imposed penalty of Rs. 7,10,000/-.
4. In the appeal before us, the following grounds are taken by PEL:
i) MRP based assessment could not be denied on the ground that footwear was not sold in a package bearing MRP when the footwears themselves bore MRP on it.
ii) The fact that the shoes manufactured were sold to actual users directly at the factory gate, showrooms or exhibitions organized for that purpose and that there were no other instrumentalities between customers and the manufacturers was no valid ground to deny the MRP based assessment.
iii) There was no allegation that the price realized was in excess of the MRP marked.
iv) It was not essential that the assessee incurred various elements of cost/expenditure in order to follow Section 4A assessment.
v) By marking MRP on the footwear itself and not on the package they had not failed to fulfill any of the requirements under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (SWM-PC Rules). Selling shoes in a plain carton was not a relevant criterion.
5. It was submitted that footwear was notified under Notification No. 20/99-CE dated 28.02.99 and in 7/2000-CE dated 1.3.2000 for the purpose of assessment under Section 4A of the Act. The appellants had affixed retail price on the product at which the goods were sold to ultimate consumer. The retail price included duties, taxes and other expenditure incurred for packing, marketing etc. The retail price marked represented the entire proceeds the appellants realized on sale of the impugned goods.
6. During hearing, we were shown the product in the form in which it is sold ie., the shoes themselves bearing MRP on the insole and packed in plain paper boxes. The Ld. Counsel for PEL argued that footwear was a commodity notified for assessment under Section 4A of the Act. It was also required by the provisions of Standards of Weights and Measures Act (SWM A) and SWM-PC Rules, that the retail price shall be marked on the package. By marking the retail price on the product itself the above requirement of the provisions of SWM-PC Rules and SWM Act was met. There was no requirement that the sale of goods should take place through a chain of intermediaries in order to attract MRP based assessment. There was no dispute that the goods were sold in retail. SWM-PC Rules, required that the declaration in relation to the goods sold on MRP should appear on the principal display panel. This object was more than met by having a lasting label on the insole of the shoes. This price could not be altered and the ultimate customer could not be charged a higher price.
6.1 In support of the claim that the assessment followed was in accordance with law, the ld. Counsel for the appellants relied on the following case law:
i) Jayanti Food Processing Pvt. Ltd. v. CCE 2007 (215) ELT 27 (S.C.)
ii) Mona Electronics v. CCE, Patna 2001 (135) E.L.T. 1293 (Tri. - Kolkata)
iii) Bata India Ltd. v. CCE, Patna 6.2 We have also heard the ld JDR who reiterates the findings in the impugned order.
7. We have carefully studied the case records and the submissions by both sides. The scope and applicability of Section 4A in the context of valuation of excisable goods in terms of Section 4A were analyzed by the Apex Court in Jayanti Food Processing Pvt. Ltd. v. CCE reported in 2007 (215) ELT 27 (S.C.) as follows:
Thus, viewed from the plain language of the Section, where the goods are excisable goods and are packaged and further such packages are required to mention the price thereof under the SWM Act, Rules made thereunder or under any other law and further such goods are specified by the Central Government by notification in the Official Gazette, then the valuation of such goods would be on the basis of the retail sale price of such goods and only to such goods the provisions of Sub-section (2) shall apply whereby it is provided that the value of such goods would be deemed to be such retail price declared on the packages.
8. The Court further went on to state that "the following would be factors to include the goods in Section 4A(1) & (2) of the Act:
i) The goods should be excisable goods;
ii) They should be such as are sold in the package;
iii) There should be requirement in the SWM Act or the Rules made thereunder or any other law to declare the price of such goods relating to their retail price on the package;
iv) The Central Government must have specified such goods by notification in the Official Gazette;
v) The valuation of such goods would be as per the declared retail sale price on the packages less the amount of abatement.
9. In the instant case, the finding that sale by the manufacturer disentitled assessment of impugned goods on MRP basis was reached without any valid basis. We find that the impugned transactions have all the characteristics identified by the Apex Court in the Jayanti Food Processing case (Supra) to be covered by the provisions of Section 4A of the Act. The goods were packed in retail package as defined in Rule 2(p) of SWM-PC Rules. The sale is at the retail price marked on the product. The goods were sold by the manufacturer in retail directly to the consumer. Rule 23(2) of SWM - PC Rules prescribes that no retail dealer or other person including a manufacturer shall sell packaged commodity at a price above the retail price. This provision also shows that excisable goods attracting MRP based assessments can be sold by the manufacturer directly to the customer. We do not think that marking the retail price on the product itself instead of on the package will disqualify the impugned goods for assessment in terms of Section 4A. This requirement is obviously to prevent a retailer from charging a higher price than that fixed by the manufacturer. Not affixing a label showing the MRP on the package and affixing the price fixed on the shoes indelibly the assessee has substantively complied with this requirement. Accordingly, we vacate the impugned order as not sustainable and allow the appeals filed M/s. Pond's Exports Ltd.
(Operative part of the order pronounced in open Court on 20.11.07)