Case Law Details
Amar Radio Corporation Vs Commissioner of Customs (CESTAT Bangalore)
CESTAT Bangalore held that import of brushless DC/Axial fans meant for use in electronic industry should be valued at Transaction Value under Section 4 of Central Excise Act and accordingly, demand of Countervailing Duty on the same unsustainable.
Facts- The issue in the present appeal is whether the appellant who had imported brushless DC/Axial fans meant for use in electronic industry for manufacturing electronic equipment like, medical equipment, inverters, control panels, etc., are excisable to Countervailing Duty (CVD) on the transaction value in terms of Section 4 of the Central Excise Act, 1944 (CEA) or under Section 4A of the Central Excise Act.
Conclusion- Held that goods imported by the appellant is falling under the category of goods under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011. However, as per Rule 6 exemption is given to importers who are importing the goods for institutional or industrial consumers. As per the law laid down by Apex Court in the matter of Jayanthi Food processing, valuation under section 4A of CEA, 1944 can be adopted only if there is a requirement under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to declare MRP of such goods on the packaging. Moreover, even after selling the product to various customers over a period of time without affixing MRP, the Authority entrusted under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to ensure compliance of the said provision of law has not raised any objection. Thus, the goods sold by the appellant cannot be considered as goods falling under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to adopt method of valuation as per Section 4A of the CEA, 1944 as held by Adjudication/Appellant Authority.
FULL TEXT OF THE CESTAT BANGALORE ORDER
The issue in the present appeal is whether the appellant who had imported brushless DC/Axial fans meant for use in electronic industry for manufacturing electronic equipment like, medical equipment, inverters, control panels, etc., are excisable to Countervailing Duty (CVD) on the transaction value in terms of Section 4 of the Central Excise Act, 1944 (CEA) or under Section 4A of the Central Excise Act. Appellant had imported such goods by making a declaration in the bills of entry that the goods are for distribution for industrial use and the bills of entry were facilitated by Risk Management System (RMS) without subjecting to assessment and examination in EDI system. The Appellant is a trader and considering that they are not in any manufacturing activities, the respondent commenced investigation regarding the method of valuation adopted while clearing the goods on the ground that the appellant had short paid Countervailing Duty (CVD) by considering the transaction value as per Section 4 of Central Excise Act, 1944 instead of Section 4A of the Central Excise Act, 1944. During investigation, statements were recorded from different persons and the appellant submitted that the goods imported by them are meant for industrial use only. After considering the submissions made by the appellant, Adjudication Authority confirmed the demand of duty by assessing the value of goods under section 4A of Central Excise Act, 1944. Aggrieved by said order, present appeal is filed.
2. When the appeal is taken up for hearing, Learned Counsel for the appellant drew our attention to Rule 2(k) of Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 and as per the said Rules, the definition of retail packaging means packages which are intended for retail sale to the ultimate consumer for the purpose consumption of the commodity contained therein and including the imported package.
3. The Learned Counsel also drew our attention to the following provisions under Rule 2 of Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011;
“(l) “retail sale”, in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer;
(m) “retail sale price” means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and the price shall be printed on the package in the manner given below;
“Maximum or Max. retail price …..Rs…./…inclusive of all taxes or in the form MRP Rs /….incl., of all taxes after taking into account the fraction of less than fifty paise to be rounded off to the preceding rupee and fraction of above 50 paise and up to 95 paise to the rounded off to fifty paise;
(n) “section” means a section of the Act;
(o) “Schedule” means a Schedule appended to these rules;
(P) “standard package” means a package containing the specified quantity of a commodity;
(q) “wholesale dealer” in relation to any commodity in packaged form means a dealer who does not directly sell such commodity to any consumer but distributes or sells such commodity through one or more intermediaries;
(r) “wholesale package” means a package containing.
(i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer; or
(ii) a commodity sold to an intermediary in bulk to
enable such intermediary to sell, distribute or deliver such commodity to the consumer in similar quantities; or
(iii) packages containing ten or more than ten retail
packages provided that the retail packages are labelled as required under the rules.
(s) words and expression used herein and not defined but defined in the Act, shall have the meanings respectively assigned to them in the Act.”
4 The Learned Counsel also drew our attention to Rule 3 of Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011;
“RULE 3. Applicability of the Chapter. – The provisions of this Chapter shall not apply to,-
(a) packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg; and
(b) packaged commodities meant for industrial consumers or institutional consumers.”
5. As per the above provisions of Legal Metrology (Packaged Commodity) Rules, 2011 is not applicable to goods which are meant for industrial consumers or institutional consumer.
6. The Learned Counsel also drew our attention to the finding given by the Adjudication Authority;
“34.2 From the above, it is clear that the relevant notifications specifying the goods and the abatement percentage for the purpose of assessment have been notified by the Central Government after due consideration of the fact that in terms of the provisions of the Legal Metrology Act, 2009 or the Rules made thereunder or under any other law for the time being in force, it is to declare on the package thereof the retail sale price of such goods. As such, it is suffice to say that the goods that are covered by Description and Tariff Heading under the Notification, issued under Section 4A of Central Excise Act, 1944, shall be subject to MRP based assessment with the abatement indicated in the said Notification.
34.3 There is no provision in the Central Excise Act, 1944 or under the said Notification exempting any goods covered under the above said Notification from the MRP based assessment. Thus, the Notification does not give any scope for claiming exemption from MRP based assessment and for examination whether or not the provisions of Legal Metrology Act apply to any specific consignment in as much as the Central Government have notified the goods after due consideration of the fact that the provisions of Legal Metrology Act apply to the goods so specified and the Retail Sale Price is required to be declared on such goods under the provisions of Legal Metrology Act. In this view of the matter, there is no room for exemption from Section 4A assessment once the goods are found to be covered under the Notification issued under Section 4A of Central Excise Act, 1944.
35.1 At the same time it is true that there are some provisions in Legal Metrology Act and the PC Rules made thereunder which exempt application of provisions relating to declaration of Retail Sale Price on the packages based on the status of the consumer, viz., as Industrial Consumer/ Institutional Consumer. Thus, in cases where the goods are specified under the Notification issued under Section 4A of Central Excise Act, 1944 for claiming exemption from MRP based assessment, the assessee/importer has to demonstrate that they are exempt from application of provisions of LMA and LMPC Rules and the erstwhile SWMA and SWPC Rules. The relevant provision, namely, the Rule 3 of the LMPC Rules, 2011, which replaced identical provision in the erstwhile SWMPC Rules.”
7. Learned Counsel further submits that the finding given by the Adjudication Authority is that the appellant had admitted that the goods are sold in retail as well as packing is also fit for retail sale, such finding is factually incorrect. There is no such admission or evidence to conclude that the appellant or any customer who had purchased the goods from appellant had resorted to retail sale. From the very beginning of the investigation, the appellant had consistently submitted that the goods imported are for industrial use and not sold as retailers. Further imported goods cannot be used for any other purpose than industrial use.
8. The Learned Counsel for the appellant also drew our attention to the statements recorded from the manager of the Appellant on 31.12.2012, where to a specific question;
“Q.6. Why do you think that your goods are not liable for MRP based assessment?
Ans. In the year 2005, Deputy Commissioner, ICD has passed an Order No. 42/2005 dated 22.10.2005 ordering that the goods imported by us are not required to be assessed under MRP based assessment for CVD. Accordingly, at the time of custom clearance we have approached with a copy of the above order and asked the assessing officer, the procedure to clear the live shipments, he asked us to give a declaration and asked us not to declare an MRP, based on the contents of the above order. From then onwards we have been giving the declaration which reads as follows on our letter head.”
“Q.27. Do you have anything to add?
Ans. The nature of goods imported by us is such that they are not intended for use by an individual or consumer for self-use. These goods are intended for the use of an industrial manufacturer only for his manufacturing/production of electronic equipment such as inverter, UPS, medical electronic equipment, etc., hence the fans are not re-sold as fans thereafter but become a part of the equipment which is made by that manufacturer. Even in rare cases where some very small qty is sold by us to a reseller even that qty is resold by him to a manufacturer because the nature of the goods is such that these fans are un-usable otherwise. Further the packing of these goods is in bulk as explained in our statement. Further, approx. 99% of our sale is in whole sale and hence we are not retailers. Most of our imports are for specific customers and specific industry.”
9. Learned Counsel also drew our attention to the Order-In- Original No. 42/2005 dated 22.10.2005 issued by the respondent where similar allegations were made and as per the Order-In-Original, Adjudication Authority has issued a detail order and set aside the allegations made against the appellant. While dropping the proceedings, Adjudication Authority held that;
“11. Rule 33 of the Standards of Weights and Measurements (packaged commodities) Rules, 1976 stipulates that all pre-packaged commodities imported into India shall carry the declaration of Retail sale price. Pre-packaged commodity means a commodity, which without the purchaser being present, is placed in a package so that the quantity of goods contained therein, has a pre-determined value and such value cannot be altered without opening the package. In this context, the term ‘package’ is to be construed as package containing such pre-package commodity. Therefore, only when such pre-packed commodities are sold in retail packages, the provisions of Standards of Weights and Measurement Act and Rules attract requiring declaration of retail sale price. Hence, it has to be decided first, whether the packages imported under the above bill of entry was a pre-packed commodity.
12. The importer has stated that fans imported are not individually contained in any package but packed in bulk which is not meant for retail sale but for industrial use. It is confirmed by photographs of the packages and usage of fans in the manufacture of other goods. Packages containing Bulk Supplies for personal as well as industrial use does not warrant MRP to be printed on the packages in as much as they are not meant for retail sale and there is no obligation to indicate the RSP either. Under the circumstances, I hold that the provisions of Rule 33 of Standards of Weights and Measurements (packaged commodities) Rules, 1976 does not apply in the instant case thereby Section 4A of Central Excise Act, 1944 is not applicable.”
10. Respondent accepted the said findings of the Adjudication Authority and the appellant continued the valuation by following the same method thereafter.
11. Learned Counsel also drew our attention to the Notification No. 44 (RE 2000/1997-2002 dated 24.11.2000, where it is specifically mentioned that all such packaged products which are subject to provisions of Standards of Weights and Measures (Packaged commodities) Rules, 1977 when produced/packed/sold in domestic market, shall be subject to compliance of all the provisions of said rules, when imported into India. The compliance of these shall be ensured before the import consignment of such commodities is cleared by Customs for home consumption. As per the above Notification, the provisions are applicable only, if it is sold in domestic market.
12. Learned Counsel also drew our attention to the communication produced by them from the M/s. Bharat Heavy Electricals Limited dated 04.09.2013, wherein the General Manager of Sales certified that they are the regular customers of the appellant and these fans find application in industrial control panels manufactured by BHEL, their sole purpose of using of such fans is to cool electronic modules and components used inside the equipment and no domestic use for these products. Similarly, the Indian Institute of Science also certified that these fans are purely meant for industrial use and cannot be used for personal use.
13. Learned counsel further submits that the issue is no more res-integra, the issue is squarely covered by the decision of the Hon’ble Supreme Court in the matter of Jayanti Food Processing Pvt Ltd Vs. CC C.Ex., Rajasthan reported in 2007 (215) E.L.T. 327 (SC) and following the above judgement, Hon’ble Supreme Court in the matter of CCE Vs. A.R. Polymers Pvt Ltd reported in 2023 (384) ELT 512 (SC) held that;
“6. In the case of Jayanti Food Processing Pvt. Ltd. v. Commissioner of Central Excise, Rajasthan (2007) 8 SCC 34 = 2007 (215) ELT 327 (S.C.), this Court, while deciding on a similar issue, held that for goods to be included under the assessment of Section 4(A) of the Central excise Act, it must comply with five factors. The relevant paragraph of the judgment is being reproduced herein: “
….Even at the cost repetition the following would be the factors to include the goods in Sections 4-A(1) and (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.
If all these factors are applicable to any goods, then alone the valuation of the goods and the assessment of duty would be under Section 4A of the Act.”
14. Learned Counsel also drew our attention to the decision of this Tribunal in the matter of Sarvotham Care Ltd Vs. CCE, Hyderbad, 2012 (286) ELT 357 (Tri-Bang.), where it is held that even if a commodity notified under section 4A, if there is no statutory requirement under the law for declaring MRP on packages, cleared by the manufacturer then the assessments have to be done under the section 4 not under section 4A.
15. As regards, the finding given by the Adjudication Authority that the appellant is not a manufacturer and not eligible for claiming the benefit extended to the manufacturers of goods, it is submitted that the issue is settled by this Tribunal in the matter of Remi Sales & Engg. Ltd. Vs. CC, Mumbai – 2019 (365) E.L.T. 142 (Tri.-Mum.) where it is held that;
“From the above we find that the goods in question are sold by the Appellant to the hospital is sale to the institutional customer only. The Commissioner (Appeals) has held that an importer cannot be said to be manufacturer or packer of the goods and hence not eligible for exemption. We find that under the rules the importer is person responsible to comply with the Packaged Commodity Rules, 1977. Hence the importer has been treated at par with the manufacturer of goods. In such case for the purpose of levy of CVD the importer shall be responsible as manufacturer and eligible for exemption from complying with the provisions of RSP. We thus are of the view that the goods imported by the Appellant are liable for duty under Section 4 of CEA, 1944. We thus set aside the impugned order and allow the appeal with consequential reliefs.”
16. Regarding invoking the extended period of limitation, Learned Counsel submits that there is no reason or justification to invoke the extended period of limitation. The issue in appellant’s own case was considered by the respondent and considering the maxim res judicata, the respondent has no legal right to consider the issue afresh without challenging the order of the Adjudication Authority issued in the same case. In this regard, to substantiate the same, Learned Counsel drew our attention to the judgment of the Hon’ble Supreme Court in the matter of Jayaswals Neco Ltd., Vs. CCE – 2007(8) STR 305(SC) where it is held that;
“7. Since the point involved in the present case is identical to the point decided in the Hindustan Gas & Industries case (supra) and the department having accepted the principle laid therein to the effect that the inserts did not require any precision machining or that any such machining was done by the appellant, cannot be permitted to take a stand different than the principles laid down in the earlier case.”
17. Learned Counsel also relied the decision of the Hon’ble Supreme Court in the matter of CCE Navi Mumbai Vs. Amar Bitumen & Allied Products Pvt. Ltd. – 2006 (202) E.L.T. 213 (SC).
18. Regarding valuation, the learned counsel submits that there is no method in the statute or provision to fix the retail price. In the absence of any such provision insisting the appellant to fix the retail price, and to follow the assessment based on the retailer price is unsustainable. Learned Counsel relied on the Judgment of the Hon’ble Supreme Court in the matter of CCE, Kerala vs. Larson & Toubro reported in 2015 (39) STR 913 (SC) where it is held that “where there is no machinery for assessment, the law being vague, it would [not] be open to the assessing authority to arbitrarily assess to tax the subject.” The Learned Counsel also relied on the decision of the Hon’ble High Court of Punjab and Haryana in the matter of Famina Knit Fabs Vs. Union of India – 2020 (371) E.L.T. 97 (P&H).
19. The Learned Counsel for the appellant also submits that as per the impugned order, the MRP was fixed without following any procedure as laid down in the statues. The investigation Agency is claiming that they have conducted extensive market enquiries with the details of the importers to ascertain the retail price for previous five financial years and based on that they have come to conclusion to such method of valuation adopted by the investigation agency is illegal and unsustainable.
20. The Learned Counsel also drew our attention to the copies of the invoices produced by them and submits that the value of the goods sold by the appellant and invoices were available on record. Further, submits that during investigation it is clearly found that the goods which were cleared earlier were cleared as bulk and there is no MRP affixed on the commodities as required under the provision of law as claim by the respondent. The absence of any allegation that the goods were sold by affixing MRP, allegations made against the appellant is illegal and unsustainable. Moreover, even after selling the product to various customers over a period of time without affixing MRP, the Authority entrusted to ensure compliance of Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 has not raised any objection or proceedings against the appellant. Thus, the goods sold by the appellant is liable to be considered as goods falling under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to adopt method of valuation as per Section 4A, Central Excise Act, 1944 as held by Adjudication Authority.
21. Learned Authorised Representative (AR) for Revenue reiterated the finding in the impugned order and submits that the appellant is not a manufacturer to claim the benefit of the Rule 4 and since the goods imported by the appellant are falling under the category of goods falling under the Notification, such goods are liable to be assessed under Section 4A of the CEA, 1944 as held by the Adjudication Authority. Regarding submissions of the appellant that the issue was settled by the Adjudication Authority for the past period, Learned AR drew our attention to the finding of the Adjudication Authority;
“36.5.3 At the outset it has to be observed that the said Rule 33 was omitted from the SWM(PC) rules with effect from 14.1.2007, by Notification G.S.R. No. 425(E) dated 17.7.2006. Thus, the legal position has undergone a change. Further, as brought out in the discussions hereinabove, the goods are sold in retail as well and the packing is also fit for retail sale. Therefore, I am constrained to observe that the representations made before DC (as reproduced in para 36.5.2 above) were factually incorrect and misleading. In the circumstances, the department is not prevented from reopening the issue.”
22. Heard both sides and perused the records. Regarding invoking the extended period of limitation, law is settled that for invoking the extended period of limitation, there must be a fraud or suppression of fact for evasion of duty. Since the respondent had accepted the finding of the Adjudication Authority on the very same issue for the previous period, there is no justification to invoke the extended period of limitation. Amended provision under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 from 14.01.2007 has got no relevance in appellant’s case. On merit, it is an admitted fact that goods imported by the appellant is falling under the category of goods under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011. However, as per Rule 6 exemption is given to importers who are importing the goods for institutional or industrial consumers. As per the law laid down by Apex Court in the matter of Jayanthi Food processing (Supra), valuation under section 4A of CEA, 1944 can be adopted only if there is a requirement under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to declare MRP of such goods on the packaging. Moreover, even after selling the product to various customers over a period of time without affixing MRP, the Authority entrusted under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to ensure compliance of the said provision of law has not raised any objection. Thus, the goods sold by the appellant cannot be considered as goods falling under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to adopt method of valuation as per Section 4A of the CEA, 1944 as held by Adjudication/Appellant Authority.
23. Considering the above and also considering the ratio of the Judgments/decisions relied by the appellant, the appeal is allowed with consequential relief, if any as per law
(Order pronounced in open court on 04.07.2024)
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