ORDER
C.N.B. Nair, Member (T)
1. The appellants are manufacturers of domestic appliances like Juicers, Mixers, Grinders and Hand Blenders. These appliances are liable to Central Excise duty under Chapter Sub-heading 85.09 of Central Excise Tariff. Further, the assessable value of these goods were required to be fixed after reducing the permissible abatement from their MRP with effect from 2.6.98 in view of Notification No. 18/98-CE(NT) dated 2.6.98 issued under Section 4A of the Central Excise Act, 1944. The impugned order has demanded a duty of over Rs. 41 lakhs in respect of these appliances removed by the appellant during the period 2.6.98 to 27.11.98. Apart from the duty, penalty of an amount equal to the duty has also been imposed on the appellant, in addition to demand of interest in respect of the amount demanded as duty. The ground for making the duty demand is that on the domestic appliances sold by them, the appellant did not pay duty on the basis of the correct MRP, but on the lower amounts of MRP mentioned in the sale invoices of the goods.
2. The material facts and circumstances leading to the duty demand are that the MRP of domestic appliances in question are declared on the cartons in which they are packed. Appellants buy cartons from carton manufacturers. At the time of coming into force of the MRP based assessment w.e.f. 2.6.98, the appellants as well as their carton suppliers had in stock considerable quantities of cartons on which the MRP as prevalent had been printed. The appellant reduced the MRPs of domestic appliances in the context of change in the basis of Central Excise valuation. The reduced MRPs were printed on stickers and those stickers were affixed on top of the existing printed MRPs on the cartons. The valuation of the goods was done based on such revised MRPs affixed on the cartons and duty paid from 2.6.98. According to the appellant, this method of declaring MRP was adopted only to avoid the wastage and loss which would have resulted from the discarding of the cartons with the earlier MRPs printed on them. The Central Excise authorities carried out investigations during November, 1998 as to whether the appellant was paying duty based on the correct MRP. The investigation covered appellant’s own premises as well as their dealers. The investigation revealed that certain quantities of domestic appliances with the earlier higher printed MRPs were available with a few of their dealers. Domestic appliances packed in cartons bearing earlier MRPs were also available in the appellant’s factory. However, goods under removal from the appellant’s factory and most of the goods in the distribution chain were found to be packed in cartons on which stickers declaring the raised lower MRPs had been affixed. The Commissioner who adjudicated the case rejected the appellant’s explanation that they had declared correct retail sale prices on the packages through the printed stickers, that those prices were the relevant MRPs and that duty had been correctly paid after taking the amount of abatement permitted under the notification from the declared MRP.
3. A perusal of the impugned order shows that the finding regarding incorrect payment of duty has been reached based on a particular legal view about the declaration of MRP. On this requirement, the Commissioner has held as under in para 20(iii) in the impugned order:
(iii) I have to consider as what is the requirements under the Standards of Weights & Measures Act, 1976 and Standards of Weights & Measures (Packages Commodities) Rules, 1977. Rule 6 of the said Rules provides for declaration on the packaged goods, the retail sale price. This declaration is required to be made by way of printing the retail sale price on the packages. This is essential requirement of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977.
Para 21 (i) reproduced below indicates that the demand is also based on Explanation 2 to Section 4A of the Central Excise Act which provided that where on 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 purpose of this Section.
21.1 The party’s contention that the reduced MRP was given on the labels affixed on such cartons is not covered within the statutory requirements. While deciding this issue even Explanation 2 under Section 4A as aforesaid is very relevant. Even if it is taken that the labels affixed on the packages showed the lower MRP as per this Explanation, the higher MRP printed on the packages would be taken for arriving at the value for the payment of duty.
During the hearing of the case, the learned SDR submitted that the impugned order is justified as the appellants had, in any case, failed to “securely” affix labels of price declaration on the cartons.
4. As against the above, learned Sr. Counsel representing the appellant took us through the relevant provisions under Section 4A of Central Excise Act, 1944 and the Weights & Measures Rules and submitted that the findings in the impugned order had no legal or factual basis. Section 4A(ii) provides that where goods are to be valued under Section 4A(i), “such value shall be deemed to be the retail sale price declared on such goods….” Thus, the valuation is to be done based on the price declared. Rule 6 of the Standards of Weights & Measures (Packages Commodities) Rules, 1977 relating to the method of declaration of sale price stipulates as under:
(i) Every package shall bear thereon or on a label securely affixed thereto a definite, plain and conspicuous declaration, made in accordance with the provisions of this Chapter as, to:
(a) ….
(b) ….
(f) the retail sale price of the package;
It is clear from this provision that the declaration of price may be on the package itself or on a label. In the present case, the appellant’s submission is that wherever the price printed on the package was required to be substituted with the revised declaration, they had affixed over the printed MRP a sticker showing the revised MRP. They have contended that by doing so, they had fulfilled the requirement for declaration in terms of Section 4A of Central Excise Act and Rule 6 of Standards of Weights & Measures Rules.
5. A perusal of the relevant legal provisions make it clear that the contention of the appellant is fully in agreement with the legal position on the subject. Therefore, the finding of the Commissioner that declaration is required to be made by way of printing, of retail sale price on the package has to be held as erroneous and contrary to the very provisions of the Weights & Measures Act and rules relied upon by him while passing the order. Printing of retail price on label/stickers also satisfies the legal requirement. The Commissioner’s finding that the present was a case involving declaration of more than one retail price also does not seem to be correct. The original MRPs printed on the cartons were the MRPs prevalent at the time of manufacture of the cartons. Subsequently, the MRPs were revised and the revised MRPs were printed on stickers and those stickers were affixed over the printed MRPs on the carton. The MRPs indicated on the stickers were in super session of the MRPs originally printed. In such a situation, there was no basis to reach a finding that two MRPs had been declared on the cartons, the originally printed MRPs and the revised MRPs shown on the stickers. Therefore, the Commissioner’s finding that the duty demand would be justified in terms of Explanation 2 to Section 4A of the Central Excise Act also is not borne out by the facts of the case.
6. Apart from the legal provisions mentioned above, the facts found during investigations also do not support a finding that the MRPs indicated on the invoices and based on which duties were paid, were not the correct MRPs of the goods. Over 70,000 Pcs. of domestic appliances are involved in the present dispute. The appellants’ records have fully brought out as to what stock of cartons with the earlier MRPs were available with them at the time when these goods were notified under Section 4A on 2.6.98, the subsequent supplies in terms of orders placed prior to 2.6.98, and how these cartons were received and utilised. Verification carried out at the appellant’s premises and in the trade chain mostly confirmed that stickers indicating the revised MRPs had been affixed in super session of the printed prices on the cartons. Dispute about continuation of old labels arose only in respect of about 200 pcs. found to be lying with certain dealers. The discrepancy in respect of these small numbers could be on account of many reasons as explained by the appellant like stocks being old or someone in the trade chain tempering with the stickers affixed by the appellant. In any case, the discrepancy in respect of so few cartons can not constitute the ground for reaching the conclusion that the MRPs indicated on the invoices were incorrect or that false MRPs had been affixed and that this has been done to evade payment of Central Excise duty. A conclusion that the appellants had failed to “securely” affix labels containing correct MRP also cannot be sustained based on the availability of a small numbers of domestic appliance with old MRPs with a few dealers.
7. In view of our finding above with regard to the legal provisions relating to declaration of MRPs and the facts of the case, it is clear that the duty demand and penalty imposed in the impugned order are not sustainable. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any, to the appellant.