CVD based on retail sale price in case of prepared glues and other prepared adhesives justified

Anabond Limited Vs Commissioner of Customs (Import) (CESTAT Chennai)

CESTAT Chennai held that collection of CVD on basis of retail sale price in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act, 1944 in case of prepared glues and other prepared adhesives justified.

Facts- The appellant had imported various items such as Rust Penetrant, Chain Lubricant, Mega Check Cleaner, Adhesive, Mega Check Penetrant, Paint Remover, out of which the first four items were assessed to CVD on the basis of retail sale price and the balance two items were assessed on the basis of transaction value. With regard to the fourth item, namely, adhesive (Power Bond A1), which was classified under CTH 3506 1000, the assessment of CVD was done on the basis of retail sale price and not on the transaction value.

It appears that subsequently, the appellant ascertained that they were not liable to pay CVD based on retail sale price for the said product falling under CTH 3506 1000. As such, they preferred an appeal before the lower appellate authority, who rejected the appeal of the appellant. Aggrieved by the above, the appellant preferred the above captioned appeal before the forum.

Conclusion- A constructive reading of Chapter Heading 3506 along with the Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 makes it clear that it covers all prepared glues and other prepared adhesives, not elsewhere specified or included, including products that are suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg. To our mind, as the imported goods are classified under CTH 3506 1000, which is not disputed and which covers products put up for retail sale whose net weight does not exceed 1 kg., should be treated as included for the purpose of the impugned Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008  for subjecting the goods to retail sale price based levy.

Taking a stand that the prepared glues and other prepared adhesives, not elsewhere specified or included, are included in the said Notification, as given therein, and would not include the same products put up for retail sale whose net weight is not exceeding 1 kg., is not legally correct.

In view of the above, we do not find any reason to differ with the decision of the lower appellate authority on the issue of including the imported adhesives for the purpose of collection of CVD on the basis of retail sale price in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act, 1944.

FULL TEXT OF THE CESTAT CHENNAI ORDER

M/s. Anabond Limited, Tiruporur, Kancheepuram District, the appellant herein, has filed this appeal against the Order-in-Appeal C.Cus. No. 298/2013 dated 28.02.2013 passed by the Commissioner of Customs (Appeals), Custom House, Chennai, who rejected their appeal holding that the assessment done under CTH 3506 1000 for collection of CVD in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 was in order, wherein the goods were assessed to CVD based on the retail sale price.

2. Facts in brief in this appeal are that the appellant had imported various items such as Rust Penetrant, Chain Lubricant, Mega Check Cleaner, Adhesive, Mega Check Penetrant, Paint Remover, vide Bill-of-Entry No. 607473 dated 25.08.2010, out of which the first four items were assessed to CVD on the basis of retail sale price and the balance two items were assessed on the basis of transaction value. With regard to the fourth item, namely, adhesive (Power Bond A1), which was classified under CTH 3506 1000, the assessment of CVD was done on the basis of retail sale price and not on the transaction value.

3. It appears that subsequently, the appellant ascertained that they were not liable to pay CVD based on retail sale price for the said product falling under CTH 3506 1000. As such, they preferred an appeal before the lower appellate authority, who vide his impugned Order-in-Appeal No. 298/2013 dated 28.02.2013 rejected the appeal of the appellant. Aggrieved by the above Order-in-Appeal, the appellant preferred the above captioned appeal before this forum.

4. It was submitted by the appellant that levy of CVD on import of goods is made in terms of Section 3 of the Customs Tariff Act, 1975 and the first proviso to sub­section (2) of the said Section mandated that in respect of articles notified under sub-section (1) of Section 4A of the Central Excise Act, the retail sale price was required to be declared on the packages of the imported goods, under the Standards of Weights and Measures Act, 1976 or the rules made thereunder or under any law for the time being in force, to declare on the package thereof the retail sale price of such article; and the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement as allowed under sub-section (2) of Section 4A of the Act for the purpose of such levy of CVD.

5. Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under sub-sections (1) and (2) of Section 4A of the Central Excise Act, 1944 notifies the following goods under Chapter Heading 3506 at Sl. No. 43 with an abatement of 35%.

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6. Chapter Heading 3506 of the Customs Tariff reads as follows: –

“Prepared glues and other prepared adhesives, not elsewhere specified or included; products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.”

7.1 According to the appellant, the above heading has two parts in it and accordingly the goods covered under the above heading 3506 are broadly classified into two namely: –

(a) Prepared glues and other prepared adhesives, not elsewhere specified or included;

(b) Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.

7.2 The appellant has submitted that the description of the goods covered under clause (a) above alone is notified at Sl. No. 43 of the aforesaid Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act.

7.3 It is further submitted that the description of the goods covered under clause (b) above are specifically covered under Tariff Item No. 3506 1000. The appellant has declared the classification of the imported adhesive under the said CTH 3506 1000. The lower appellate authority has clearly recorded in paragraph 5 of the impugned order that on merits, there was no dispute regarding the classification or description of the impugned goods, but the dispute is regarding the calculation adopted for the purpose of charging CVD i.e., whether under Section 4 or Section 4A of the Central Excise Act read with Section 3 of the Customs Tariff Act, 1975.

7.4.1 Shri M. Karthikeyan, learned Counsel appearing for the appellant, has advanced the argument that for the purpose of levying CVD on the basis of retail sale price declared on the package, the fundamental requirement is that the goods should be notified under Section 4A(1) of the Central Excise Act; the Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A(1) only notifies goods with the description “Prepared glues and other prepared adhesives, not elsewhere specified or included”, covered under clause (a) above and falling under heading 3506 at Sl. No. 43.

7.4.2 It is his contention that since the imported goods in question fall under clause (b) above and are classified under Tariff Item No. 3506 1000, which is not in dispute, the same are not notified goods under Sl. No. 43 of the Notification No. 49/2008-C.E.(N.T.) and the imported adhesive would not attract levy of CVD based on the retail sale price declared on the package and hence, the goods are required to be assessed only on the basis of the transaction value.

7.5 It has also been submitted that the lower appellate authority has wrongly concluded that the imported adhesives are liable to be assessed to CVD based on the retail sale price declared on the package for the reason that clause (b) above specifically covers only goods put up for retail sale not exceeding net weight of 1 kg. In this regard, it is his submission that the levy of CVD based on retail sale price is not based on the tariff description, but instead, it is based on whether the goods are notified in terms of Section 4A(1) of the Act or not.

7.6 The Learned Advocate further submitted that many entries in the above Notification with four-digit heading notifies “All goods” falling under the said heading and so, according to him, it is not the case in respect of Chapter Heading 3506 wherein a specific description is provided and only such products alone remain notified under the said Notification. It is their submission that the goods falling under Tariff Item No. 3506 1000 are not notified under the above Notification, which was in vogue during the material period and hence, the levy of CVD based on retail sale price is not legally sustainable or correct.

8.1 Learned Authorized Representative Shri R. Rajaraman (Asst. Commissioner), representing the Revenue, reiterated the findings of the lower appellate authority. He has drawn our attention to the Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008, submitting that all the goods classifiable under Chapter Heading 3506 of the Indian Customs Tariff have to be subjected to MRP based levy and that the above Notification was issued primarily to fix a percentage of abatement for various goods subjected to MRP based levy.

8.2 He has contended that the item imported, which is adhesive, is classified as “Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1 kg.”

9. We have heard both the sides and have also perused the heading 3506 of the First Schedule to the Central Excise Tariff Act, 1985, which reads as under: –

10. The dispute involved in this appeal is relating to the applicability of retail sale price based valuation to the imported adhesives which were classified under CTH 3506 1000. It is relevant in this connection to go through the impugned Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008, the relevant portion of which is extracted below: –

“Notification No. 49/2008-C.E. (N.T.), dated 24-12-2008

In exercise of the powers conferred by sub-sections (1) and (2) of section 4A of the Central Excise Act, 1944 (1 of 1944) the Central Government, in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 14/2008-Central Excise (N.T.), dated the 1st March, 2008, published in the Gazette of India Extraordinary, vide number G.S.R. 147(E) of the same date, except as respects things done or omitted to be done before such supersession, hereby specifies the goods mentioned in Column (3) of the Table below and falling under Chapter or heading or sub­heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) mentioned in the corresponding entry in column (2) of the said Table, as the goods to which the provisions of sub-section (2) of said section 4A shall apply, and allows as abatement the percentage of retail sale price mentioned in the corresponding entry in column (4) of the said Table.

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Explanation. – For the purposes of this notification, except for S. No. 30, “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, as the case may be, and the price is the sole consideration for such sale.”

11.1 We find that there is no dispute regarding the classification and description of the impugned goods, but the dispute is only regarding the calculation adopted for the purpose of charging CVD i.e., whether under Section 4 or Section 4A of the Central Excise Act read with Section 3 of the Customs Tariff Act, 1975.

11.2 On a perusal of Sl. No. 43 of the Notification No. 49/2008-C.E.(N.T.), it is seen that the same states Chapter Heading at four-digit level namely, 3506 [Col (2)] and the description reads “Prepared glues and other prepared adhesives, not elsewhere specified or included” [Col. (3)].

11.3 The Learned Advocate appearing for the appellant has argued that the Chapter Heading 3506 of the Indian Customs Tariff has two parts, namely: –

(a) Prepared glues and other prepared adhesives, not elsewhere specified or included;

(b) Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.

and that the goods covered under clause (a) above alone are notified at Sl. No. 43 of the aforesaid Notification.

12. The only issue, therefore, that has to be decided in this appeal is the applicability of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 to the impugned goods i.e., imported adhesives including Power Bond A1 (adhesive).

13.1 A careful reading of the above Notification issued under sub-sections (1) and (2) of Section 4A of the Central Excise Act, 1944 makes it clear that it specifies the goods mentioned in Column (3) of the Table therein and falling under Chapter or heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 mentioned in the corresponding entry in column (2) of the said Table, as the goods to which the provisions of sub- section (2) of said section 4A shall apply, and allows as abatement the percentage of retail sale price mentioned in the corresponding entry in column (4) of the said Table.

13.2 The item that is imported is classifiable under CTH 3506 1000, which covers “Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.”.

13.3 Sub-Sections (1) and (2) of Section 4A of the Central Excise Act, 1944 read as under: –

“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)] 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 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.”

14.1 MRP based valuation is adopted for the purpose of collection of Excise Duty or CVD in respect of imported goods on goods specified under Section 4A of the Central Excise Act, 1944, in relation to goods which are subject to the provisions of the Legal Metrology Act (erstwhile Standards of Weights and Measures Act), where declaring the retail sale price on the package is mandatory.

14.2 There is no doubt that the imported goods are adhesives put up for retail sale in packages not exceeding a net weight of 1 kg. However, the impugned Notification No. 49/2008-C.E.(N.T.) states the classification of the imported goods as: –

“Prepared glues and other prepared adhesives, not elsewhere specified or included”

whereas the relevant Chapter Heading of the Customs Tariff for the imported goods reads as under: –

“Prepared glues and other prepared adhesives, not elsewhere specified or included; products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.”

giving rise to a doubt as to whether the imported products, which are “glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg.”, are notified as specified goods under the impugned Notification or not. The appellant entertained the above doubt since in the impugned Notification, for certain Chapter Headings, at four-digit level, all goods were mentioned, which was not the case for the heading 3506.

14.3 In general, the provisions of the Legal Metrology Act/Standards of Weights and Measures Act or the rules made thereunder are applicable to all the goods, unless exempted, which are put up for retail sale in units / containers / packages. There is no doubt that the items under dispute in the instant appeal are ‘adhesives’ [including Power Bond A1 (adhesive)], put up for retail sale and were having a net weight not exceeding 1 kg.

15. A constructive reading of Chapter Heading 3506 along with the Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 makes it clear that it covers all prepared glues and other prepared adhesives, not elsewhere specified or included, including products that are suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg. To our mind, as the imported goods are classified under CTH 3506 1000, which is not disputed and which covers products put up for retail sale whose net weight does not exceed 1 kg., should be treated as included for the purpose of the impugned Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 for subjecting the goods to retail sale price based levy.

16. Taking a stand that the prepared glues and other prepared adhesives, not elsewhere specified or included, are included in the said Notification, as given therein, and would not include the same products put up for retail sale whose net weight is not exceeding 1 kg., is not legally correct.

17. In view of the above, we do not find any reason to differ with the decision of the lower appellate authority on the issue of including the imported adhesives for the purpose of collection of CVD on the basis of retail sale price in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act, 1944.

18. As such, we hold that the order passed by the lower appellate authority does not call for any interference and the appeal stands dismissed.

(Order pronounced in the open court on 12.06.2023)