Document Fragment View

Matching Fragments

1. There are two appeals, one filed by the Revenue and the other by the appellant, M/s.Starlite Components Ltd., Nashik against the order-in-appeal No. No.AKP/18/NSK/2012 dated 27/02/2012 passed by Commissioner of Central Excise & Customs (Appeals), Nashik.

2. The facts relevant for consideration of this case are as follows:

2.1 The appellant, M/s.Starlite Components Ltd., Nashik imported Energy Efficient Lighting Fixtures (Portable lamps working on dry battery) Torch of various models under Bill of Entry No.5529072 dated 21/12/2011. The examination of the import consignment carried out by the Customs Officers revealed that the product is fully functional and electrically charged and is in retail packing. As the consignment is intended for retail sale and the goods have been notified under the provisions of the Legal Metrology (Packaged Commodities) Rules, 2011 they directed the appellant to declare the retail sale price on the goods and accordingly, on the insistence of the department, the appellant declared retail sale price ranging from Rs.66/- to Rs.170/- per piece. On inquiry by the department, it was found that the actual RSP of these products were Rs.135/- to Rs.375/- per piece and, therefore, there was under valuation on the part of the importer. A statement of Shri D.D.Joshi, Sr. Executive of the appellant was recorded on 04/01/2012 wherein he stated that the appellants are importing smart glow torches of different sizes from China in bulk. After importation they unpack the imported material and print Bajaj Logo on the torches and insert and staple the card indicating details such as model, power supply, charging time, etc., and affix the label indicating MRP and repack the torches as they have entered into a blanket purchase agreement with M/s.Bajaj Electrical Ltd., and these goods are sold by Bajaj Electrical Ltd., at RSPs ranging from Rs.135/- to Rs.375/- per piece. Accordingly, a show cause notice was issued for revising the assessable value of the impugned goods by taking the RSP from Rs.135/- to Rs.375/- as indicated above and demanding Additional Customs Duty thereon on the basis of the revised value. The show-cause notice also proposed to confiscate of the goods under Section 111 (d) and (m) of the Customs Act, 1962 and imposition of penalty under Section 112 (a) ibid. The case was adjudicated by the jurisdictional Additional Commissioner, who revised the retail sale price as indicated in the show-cause notice and also confiscated the goods with an option to the importer to redeem the same on payment of a fine of Rs.20 lakhs and also imposed a penalty of Rs.10 lakhs on the appellant under Section 112 (a) ibid. The party preferred an appeal before the Commissioner of Customs (Appeals), who found that the differential duty short paid is only Rs.4.56 lakhs and, accordingly, he observed that the penalty of Rs.10 lakhs is harsh and he reduced the penalty from Rs.10 lakhs to Rs.2 lakhs. Both the Revenue and appellants are before us.
4. The Ld. Counsel for the appellant made the following submissions:
4.1 The appellant is registered with the Central Excise department and they are discharging excise duty liability on the imported goods after subjecting them to the process of re-packing, labelling and affixing MRP. These activities are undertaken on behalf of the M/s.Bajaj Electrical Ltd., who purchase the commodities in bulk. Since the goods imported are used in further manufacture and not intended for retail sale they are not required to discharge CVD in terms of the proviso to sub-section (2) of Section 3 of the Customs Tariff Act, 1975. The said provision of law applies only if the goods are intended for retail sale and not when they are used in further manufacture. He further refers to Rule 3 of Legal Metrology (Packaged Commodities) Rules, 2011 wherein it has been provided that the provisions of Chapter 2, which are applicable to the packages intended for retail sale, does not apply to packaged commodities meant for industrial consumers or institutional consumers. As per explanation (ii) to the said Rule, industrial consumer means the consumer who buys packaged commodities directly from the manufacturer for use by that industry. He also produced a copy of the clarification issued by the Directorate General of Foreign Trade vide Policy Circular No.38 (RE-2000)/1997-2002 dated 22/01/2001 wherein it was clarified that the labeling requirements as mentioned in para 4 of the Notification, shall be applicable only on imports of those pre-packaged commodities, which are intended for retail sale. Since import of raw materials, components, bulk imports, etc. would invariably undergo further processing or assembly before they are sold to consumers, these imports shall not invite the application of labeling requirements as per para 4 of the Notification.
8. As regards the appeal of the importer, the declaration of MRP for the purpose of levy of CVD is required only when there is a statutory requirement under the Legal Metrology (Packaged Commodities) Rules, 2011 to declare on the package thereof the retail sale price of such article. Only when the goods are intended for retail sale and are packed in retail packages, the provisions of Legal Metrology (Packaged Commodities) Rules, 2011 would apply. In the case under consideration, from the records of the case, it is absolutely clear that the appellants are importing the impugned goods not for retail sale but for repacking, labelling and branding and selling the same in bulk to M/s.Bajaj Electricals Ltd. Therefore, they are not required to declare MRP in terms of Rule 3 of the said Legal Metrology (Packaged Commodities) Rules, 2011 as they are industrial consumers. This position has been further clarified by DGFT vide notification dated 22/01/2001 wherein it has been clearly stated that import of raw materials, components, bulk imports, etc. would invariably undergo further processing or removal before they are sold to consumer and in respect of these imports, the labelling requirements prescribed under Notification No.44(RE-2000)97-2002 dated 24/11/2000 shall not apply. It is also not in dispute that the goods are specified in Third schedule to the Central Excise Act, 1944 and the activities undertaken by the appellant importer amounts to manufacture under Section 2 (f) of the said Act. In these circumstances, it is clear that the appellants were not required to discharge duty liability of additional Customs duty on the basis of MRP. Accordingly, we set aside the impugned order demanding the differential duty inasmuch as there was no requirement of declaring MRP. As a result, the confiscation of goods under Section 111 (d) and (m) of the Customs Act, 1962 are also not justified. Consequently, the question of payment of redemption fine would not arise and also no penal consequence would follow under Section 112 (a) ibid.