By TIOL News Service

MUMBAI, MAY 23, 2014: THE appellant is a manufacturer of ceramic tiles (Ch. 69) notified under Section 4A of the CEA, 1944 and the appellant is discharging duty on these tiles accordingly. The case of the Revenue is that ceramic tiles are cleared to institutional buyers as well as industrial consumers such as, builders, real estate developers, etc. and in respect of sales made to such institutional/industrial consumers, there is no statutory requirement of declaring/affixing the MRP on the packages of the goods and, therefore, the provisions of Section 4A of the CEA, 1944 are not attracted and the duty liability needs to be determined in terms of the transaction value under Section 4 of the CEA.

The CCE, Raigad confirmed a duty demand of Rs.2,78,22,938/- against the appellant in respect of the clearances of tiles made by them to persons other than the dealers, during the period from 17/01/2007 to December, 2011.

The appellant is before the CESTAT.

The appellant submits that they manufacture tiles of various designs and sizes and pack the tiles in standard packages, on which MRP is declared. These tiles are sold through their own depots/dealers to the ultimate consumers. Sometimes, they receive orders from builders/real estate developers for supply of tiles in bulk. Tiles which are already packed and on which MRP is declared are cleared to these buyers. There is no difference between the tiles sold to these buyers vis-à-vis the tiles sold to others and the packages in which the tiles are sold to the so called institutional buyers are the same as those sold to the others. On the packages, there is no declaration to the effect that the ‘tiles are meant for institutional/industrial consumers or for any particular service industry and the tiles are not meant for retail sale.' In these circumstances, it is the contention of the appellant that the discharge of excise duty liability on the basis of MRP declared on the packages of tiles is correct in law.

It is also submitted that they had also referred the matter to the Legal Metrology authorities in Maharashtra, Karnataka and Gujarat and they had obtained clarifications that the provisions of Legal Metrology (Packaged Commodities) Rules, 2011 regarding mandatory declarations on retail packages are not applicable to the packages meant and marked as industrial/institutional consumers and if the packages are not marked as such, they will be treated as packages for retain sale. It has been further clarified by the said authorities that if exemption from declaration of MRP is sought, the packages should be further marked as “not meant for retail sale”. In the packages in which the tiles have been supplied, the appellant has not made any declaration that the packages are ‘not meant for retail sale'. Therefore, in terms of the clarification given by the Legal Metrology department, which is the competent department to enforce the provisions of Legal Metrology (Packaged Commodities) Rules, 2011, the appellants are required to declare the MRP on the packages supplied to builders/real estate developers and, therefore, the discharge of excise duty liability under Section 4A is correct in law.

Moreover, the builders and developers further resell these goods when they transfer the building/flat to the ultimate buyers and on the works-contracts executed by them, they have to discharge sales/VAT liability on the sale price of the various materials used in the construction activity. Therefore, it cannot be said that the supplies made to the real estate developers/builders are not for retail sale. Further, from the purchase orders placed by the buyers of these goods on the appellant, it can be seen that the goods have to be supplied in retail packages; therefore, even as per the contract entered into with the buyers, the goods are meant for retail sale and hence the impugned demands are not sustainable in law.

Reliance is also placed in support on the decisions in Jayanti Food Processing (P) Ltd. 2007-TIOL-150-SC-CX, Daenyx International Pvt. Ltd. 2008-TIOL-1741-CESTAT-DEL, Sagar Cements 2010-TIOL-1119-CESTAT-BANG, Mexim Adhesive tapes Pvt. Ltd. vs. Commissioner of Central Excise, Daman 2013-TIOL-837-CESTAT-AHM.

The Revenue representative reiterated the findings of the adjudicating authority and justified the demand.

The Bench perused the sample purchase orders placed by some of the institutional buyers and which revealed that the goods are required to be supplied in standard packages consisting fixed number of specified tiles; that these packages are the same in respect of retail sale also and on these packages the appellant has declared the MRP.

The CESTAT, therefore, observed -

+ There is no difference in respect of packages of tiles sold to retail consumers or to the so called institutional buyers and all of them are in standard packages, having MRP declared on them.

+ It is also not in dispute that, on the packages, the appellant has not made any declaration that “the packages are not meant for retail sale or the packages are meant for use by any specified industry”. In the absence of such markings on the packages, it cannot be said that the goods supplied were not in retail packages.

+ In their letter dated 23/02/2012 the Dy. Controller of Legal Metrology, Maharashtra has clarified that according to Rule 3 Packaged Commodity Rules, 2011 the provision regarding mandatory declaration on retail packages are not applicable to the packages meant and marked as industrial/institutional consumers.

+ Similarly, the Assistant Controller of Legal Metrology, Government of Karnataka, vide letter dated 24/02/2012 has clarified that institutional /industrial package does not bear the MRP marking but will have marking as meant for ‘industrial/institutional consumer' and not meant for retail sale. Similarly, controller of Legal Metrology, Government of Gujarat has clarified that the only packages which bear clear markings ‘meant for industrial consumer or meant for institutional consumer' are excluded from the provisions of Packaged Commodity Rules and such packages should have a further marking that they are ‘not meant for retail sale'.

+ From these clarifications which have been issued by the authorities implementing the Legal Metrology (Packaged Commodity) Rules 2011, it is absolutely clear that the supplies made by the appellant to the various institutional buyers are not excluded from the declaration of MRP under the Packaged Commodity Rules. We cannot disregard these clarifications given by the competent authorities in the matter.

After holding that the ratio of the apex Court decision in Jayanti Food Processing (P) Ltd. and the Tribunal decisions cited by the appellant apply to the case on hand, the CESTAT concluded that the discharge of duty liability on tiles supplied in retail packages to real estate developers/developers, etc. has to be made under Section 4A of the CEA, 1944.

In fine, the demands were held to be unsustainable and after setting aside the same, the appeals were allowed.

In passing: The Board had in Circular 625/16/2002-CX, Dated: February 28, 2002 categorically mentioned-

7. The Standards of Weights & Measures Act, 1976, and the rules made there under, are administered by the State Governments. Instances of dispute could arise between the deptt. and the assessee as to whether, in respect of a particular commodity/transaction, the assessee is exempted from declaring the retail price or not. In case of such doubt a clarification may be obtained from the concerned Deptt. (generally the Metrology Deptt .) of the State Government.

But, if the Revenue chooses to show apathy to such instructions frivolous demands would continue to be raised and consigned to the shredder by the Tribunal. At the end of the day it is the assessee who spends time pursuing legal remedies rather than concentrating on his business. Hope things change in the days to come.

Incidentally, s.4A was inserted in the CEA, 1944 on 14.05.1997 to garner more revenue in respect of specified commodities than what was being collected by valuing u/s 4 of the CEA, 1944. However, it seems the jurisdictional authorities are hell bent on frustrating this intention.

(See 2014-TIOL-845-CESTAT-MUM)