B1- Hyderabad Zone- Assessment and Valuation-Non-adoption of Section 4A-Valuationof Goods-Clearances made to Depots by Cement Manufacturers:-
Cement in packaged form has been notified under Section 4A of the Central Excise Act, 1944 with effect from 17.3.2012. The assessee affixes a label on the bags removed to its depots clearly stating, “meant for industrial/institutional consumer”. An audit objection has been raised in this zone for non-adoption of retail sale price based valuation on the clearances made to depots by a cement manufacturer, subsequently sold to industrial/institutional consumers. However, the assessee is clearing such consignments of cement in bags to their depots on the basis of value arrived as per Section 4 of the Central Excise Act, 1944, on the ground that the depot is nothing but an extended arm of the factory and when goods are sold to the industrial/institutional buyer, provisions of Section 4A do not apply.
Relevant legal provisions:
Rule 3 of Legal Metrology (Packaged Commodities) Rules, 2011 states that the provisions of these rules shall not apply to industrial or institutional consumers, who buy packaged commodities directly from the manufacturer for use by that institution or industry. As per Rule 4 of Legal Metrology (Packaged Commodities) Rules, 2011, “no person shall pre-pack or cause or permit to be pre-packed any commodity for sale, distribution or delivery unless the package in which the commodity is pre-packed bears thereon or on a label securely affixed thereto, such declarations as are required to be made under these rules”. However, explanation to Rule 4 of Legal Metrology (Packaged Commodities) Rules, 2011 states that the existence of packages without the declaration of the retail sale price in the manufacturer’s premises shall not be construed as violation of these rules and it shall be ensured that all the packages leaving the premises of manufacturer for their destination shall have declaration of retail sale price on them.
Discussion & Decision
It was brought to the notice of the conference that the issue had been agitated before the appellate forum by some of the Commissionerates. After discussion conference concluded that depot is a place of removal of the manufacturer under section 4(3)(c)(iii) of the Central Excise Act, 1944 from where cement is sold to the institutional/industrial buyers who are not covered under Rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011. It was also noted that definition of ‘Industrial Consumer’ and ‘Institutional consumer’ has been substituted by Legal Metrology (Packaged Commodities) (Amendment) Rules, 2015 in terms of notification dated 14.05.2015, issued by the Ministry of Consumer Affairs, Food & Public Distribution.The revised definition includes the consumer who buys packaged commodities directly from the manufacturer or from an importer or from whole sale
dealer.The conference was of the view that the valuation of goods in respect of clearances to industrial consumers even from the depot will be made under Section 4 of the Central Excise Act, 1944 and not under Section 4A of the Act ibid. The conclusion was reached in view of the fact that in case of institutional buyers purchasing goods, depot is only an extended arm of the manufacturer, being a place of removal. The issue is also covered in the Hon’ble Supreme Court judgment in case of M/s Sony India Ltd. [2004 (167) E.L.T 385].