By TIOL News Service

MUMBAI, JAN 15, 2016: THE assessees are/were engaged in the manufacture of excisable goods i.e. Lubricating Oil [CSH2710.90] on job work basis for M/s. Esso Petroleum India Pvt. Ltd. up to 31/7/2002 and from 1/8/2002 for M/s. Exxon Mobil Lubricants India Pvt. Ltd.(who had taken over by M/s. Exxon Mobil Lubricants India Pvt. Ltd.)

The assessee have been clearing the goods of packaging size upto 20 Ltrs on payment of duty on assessable value based on MRP u/s 4A of the CEA, 1944 and the goods packed in packaging size of 50 Ltrs, 210 Ltrs and bulk in tankers are being cleared on payment of CE duty on AV based on cost construction basis. After 1/8/2002 they have stopped printing MRP on the 50 Ltrs package. However, prior to 1/7/2001 the assessee were clearing the goods packed in 50 Ltrs containers on payment of duty on AV based on MRP u/s 4A.

SCNs were issued alleging that w.e.f 01/08/2002, 50 Ltrs package will require to be assessed u/s 4A on the ground that 50 Ltrs pack is meant for retail sale. Accordingly, differential duty demands were raised and which culminated in confirmation of duty demands and imposition of penalty. The orders were upheld by the Commissioner (A) but in one case the department is not happy with the penalty reduced by the Commissioner(A) inasmuch as they seek enhancement of the penalty imposed to the maximum penalty specified under Rule 25 of CER, 2002.

The appellant inter alia submitted that as per Legal Metrology Act,as evinced by the letter of Dy. Controller of Legal Metrology dated 9/5/2000, the MRP is not required to be affixed on the package of 50 Ltrs as the same is bulk pack and not for retail sale. Furthermore, even if MRP is affixed though not warranted, duty cannot be charged u/s 4A of CEA, 1944 and which matter is clarified by the Board Circular 411/44/98-CX dated 7/1/1998 & Circular No. 625/16/202 dated 28/2/2002. Judgments were also cited in this regard and in the matter of non-imposition of penalty.

The AR justified the stand taken by the department and also the appeal filed for enhancement of penalty.

The Bench after considering the submissions inter alia observed -

As per the facts of the case, we find that the 50 Ltrs package is sold in the market through distributors and consumed by the truck owners, who are the ultimate customers. In this fact, 50 Ltrs package is sold as retail sale. As per Section 4A the goods on which MRP is required to be affixed as per the provision of Standards of Weights and Measures Act shall be covered under Section 4A.

After extracting rule 34 of the SWAM (PC) Rules, 1977 the CESTAT noted -

…it is clear that if the goods are used as raw material by the industrial user then it will not be treated as retail sale and MRP is not required to be affixed. In the circumstances of the case, the fact emerges is that the goods in question are not sold to industry and is not used as raw material by any industry, it is admitted position that 50 Ltrs. Package is sold to the truck owners who consumed themselves. In such situation, it cannot be said that 50 Ltrs package is covered under the exemption provided under Rule 34 of Standards of Weight and Measures; therefore we are of the considered view that since the nature of the sale i.e. 50 Ltrs package is made to the ultimate customers, MRP is statutorily required to be affixed and the goods will be valued in terms of Section 4A.

Observing that the Board Circulars cited by the appellant are not relevant to the facts of the case; that the judgment cited in case of Castrol related to 210 Ltrs package; that the letter of Dy. Controller is addressed to a different company and facts involved therein are not on record; that Rule 34 does not provide any exemption from affixing the MRP on the product in question, the CESTAT concluded that the impugned goods i.e. Lubricating oil 50 Ltrs package should be valued in terms of Section 4A and not under Section 4 of the Central Excise Act, 1944.

The demands of differential duty confirmed by the lower authorities were upheld. In the matter of penalty imposition, the Bench observed that all the SCNs were issued within the normal period of one year & no suppression of facts or mis-statement exist. So also, the issue involved is purely of interpretation of valuation provisions and, therefore, penalty of equal amount is not warranted. Penalty imposed of Rs.9,28,432/- was reduced to Rs.2,00,000/- & from Rs.10,00,000/- to Rs.8,00,000/- respectively. Revenue appeal for enhancement of penalty was dismissed.

To conclude, the appeals filed by the assessee were partly allowed and the appeal by Revenue was dismissed.

(See 2016-TIOL-164-CESTAT-MUM)