Duty payable on combined MRP where goods sold are bound together

By | October 25, 2015

Section 4A, read with section 4 of the Central Excise Act, 1944

Subject :-

Valuation under Central Excise – Retail Sale Price/MRP Based

Facts of the Case ;-bound together

Assessee cleared ‘face wash gel’ free with ‘Dandruff Shampoo’ bound together with a sticker label – Assessee declared combined MRP on label and paid MRP based duty

Issue :-

Department argued that binding together of products in same label amounted to manufacture and since face wash gel was supplied free, value of face wash gel was separately includible and liable to duty – Tribunal held that :

(a) when shampoo and gel received in bulk are bound together and label is fixed thereon, it would amount to manufacture under Note 5 to Chapter 33 of Tariff; and

(b) there was no duty liability towards gel, especially as both products were under Standards of Weights and Measurement Act, 1976 and section 4A ibid

 HELD :

As per section 4A(2) read with Explanation thereto, MRP mentioned is to be sole consideration in arriving at transaction value at which excise duty is payable .Hence, Tribunal had rightly decided this issue [Paras 4 to 6]

Favour :-

In favour of assessee

Circulars and Notifications :

Circular No. 673/64/2002-CX, dated 28-10-2002

SUPREME COURT OF INDIA

Commissioner of Central Excise, Bangalore

v.

Himalaya Drug Company

A.K. SIKRI AND ROHINTON FALI NARIMAN, JJ.

CIVIL APPEAL NOS. 227 OF 2007 AND 8549 OF 2009

SEPTEMBER  9, 2015

ORDER

 

1. The respondent-assessee herein is in the business of manufacturing and marketing of various ayurvedic medicaments and cosmetics which are classifiable under Chapter Heading Nos. 30 and 33 of the Schedule to the Central Excise Tariff Act, 1985. The dispute is about the valuation of two products which are as under:—

“(a) Face Wash Gel 50 gm. free with Dandruff Shampoo 120 ml-bound together with a sticker label;
(b) Face Wash Gel 100 gm. free with Dandruff Shampoo 200 ml – bound together with a sticker label.”

2. As can be seen from the aforesaid, the two items, viz., Face Wash Gel 50 gm. and Dandruff Shampoo 120 ml were bound together and sold as one product. Likewise, Face Wash Gel 100 gm. with Dandruff Shampoo 200 ml were bound together and sold. It is not in dispute that MRP of both the items sold were mentioned and the assessee had been clearing the goods by paying excise duty at the said MRP. The Revenue, however, was of the view that since the face wash gel is sold free along with dandruff shampoo, the value/price of face wash gel should also be included and raised demand in this behalf applying the provisions of Section 4A of the Central Excise Act.

3. The Customs, Excise and Service Tax Appellate Tribunal has set aside the said order and held that the MRP mentioned on the product would be the sole consideration in view of the provisions contained in Section 4A of the Act. Section 4A reads 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 Standards of Weights and Measures Act, 1976 (60 of 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.

(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.

(4) If any manufacturer removes from the place of manufacture any excisable goods specified under sub-section (1) without declaring the retail sale price of such goods on the packages, or declares a retail sale price which does not constitute the sole consideration for such sale, or tampers with, obliterates or alters any such declaration made on the packages after removal, such goods shall be liable to confiscation.

Explanation 1. – For the purposes of this section, “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.

Explanation 2. – (a) Where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section.

(b) Where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.”

4. It is clear from the reading of sub-section (2) of Section 4 along with Explanation thereto that the MRP mentioned is to be the sole consideration in arriving at the transaction value at which the excise duty is payable. We are, therefore, of the view that the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘CESTAT’) has rightly decided the issue. The discussion in the order of the CESTAT is contained in paragraph 7 which reads as under:—

“We have gone through the records of the case carefully. The appellants receive the gel and the shampoo in bulk and repack them in retail packages. Thereafter, the shampoo along with the free gel is bound together and the label is fixed on the product. We agree with the contention of the appellant that this process amounts to manufacture as per Chapter Note 5 to Chapter 33. Further, it is seen that both the products are covered under Section 4A and Standards of Weights and Measures Act. The ratio of Oswal Fats and Oils Limited (supra) is squarely applicable, in that case binds were packed along with soaps for free supply to buyers of soap. It was held that the additional package of bindis had no connection to the price of soap, the price of bindis is not includable in the assessable value of soap. In the Surya Foods Ltd. v. CCE (supra) and cited supra, it was held that when selling certain quantities of biscuits, the appellant supplied small quantities of certain other varieties free and in such situation the value of free supplies is not includable in the assessable value. The Asstt. Controller of Legal Metrology has informed the appellants regarding legal requirements in respect of combination packages but in order to decide this issue it is sufficient that the products are covered under Section 4A and also the Standards of Weights and Measures Act. Since the Revenue has not contested that the products in question are covered under Section 4A and Standards of Weights and Measures Act, we hold that the products are assessable under Section 4A. In view of the decided case laws, there will not be any duty liability on the gel supplied free, hence there is no merit in the impugned order. Therefore, we allow the appeal with consequential relief.”

5. We find no merit in this appeal which is, accordingly, dismissed.

6. This appeal stands dismissed in terms of the aforesaid order in Civil Appeal No. 227 of 2007.

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