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Regarding valuation of goods under Section 4A of the Central Excise Act,
1944
Central Excise Circular No. 625 dated
28th February 2002
I am directed to say that doubts have
been raised regarding the mode of valuation to be adopted in respect of goods
notified under section 4A of the Central Excise Act, 1944, which are partly sold
with the retail price printed on the packages and partly sold without printing
the retail prices on the other packages. It has been reported that problems are
being faced in respect of virtually all the commodities notified under Section
4A; e.g. lubricants, toilet soaps, paints and varnishes, automobile bulbs, baby
powder, duplicating stencil paper, adhesive tapes, cameras, batteries, aerated
water, pressure cooker, instant coffee, unrecorded audio/video cassettes,
shampoo, ceramic glazed tiles, other edible preparations etc. Some of the
situations, where MRP cannot be printed on the notified item, as brought out by
the Commissioners, are mentioned below:
1. Bulk
Supplies for personal as well as industrial use
2. Supplies in
bulk against contracts to DGS&D, Govt. Deptts. restaurants/ hotels etc.
3. Supplies to
canteen stores depots (CSD) of the defense services
4. Items
supplied free with another consumer items as marketing strategy. Example, one
Lux soap free with one box of Surf.
5. Items
supplied free as marketing strategy or for gauging the market response. Example
physician samples, bubble gums etc.
6. Items meant
for export etc.
2. The matter has been
examined. Sec.4A of the Central Excise Act, 1944 is applicable in respect of
those cases only where the manufacturer is legally obliged to print the MRP on
the packages of the goods, under the provisions of the Standards of Weights and
Measures Act, 1976 or the rules made there under or any other law for the time
being in force.
3. In respect of telephones
falling under heading 85.17 and notified u/s 4A it was noticed that the
manufacturers also make bulk supplies of telephone instruments to the Deptt. of
Telecommunication (DOT) and the MTNL, who in turn provide these instruments, on
rental basis, to the telephone subscribers. The ownership of the telephone
instruments remains with the telephone Deptt. and there is, therefore, no retail
sale involved. The manufacturers also sell the instruments in the open market on
which MRP is printed. The issue, therefore, was how to value the telephone sets,
which were sold by the manufacturer in bulk to the telephone deptt. The matter
was referred to the Ministry of Law, who have opined that valuation of telephone
instruments supplied in bulk to telephone deptt will be done as per sec.4 of the
C.E. Act, 1944 and the instruments sold in the market, with printed MRP, would
be assessed u/s 4A of the Act. The Ministry has accepted the opinion of the Law
Ministry.
4. The basic issue,
therefore, is to determine the circumstances in which sec.4A of the C.E. Act can
be applied. The wording of Sec.4A (1) makes it very clear that it will apply
only to such goods �� in relation to which it is required, under the
provisions of the Standards of Weights and Measures Act, 1976, or the rules made
there under or under any other law for the time being in force, to declare on
the package thereof the retail sale price of such goods�.". In other
words, if there is no statutory requirement under the provisions of Weights and
Measures Act to declare the retail sale price on the packages, Sec.4A will not
apply. As for example, in respect of bulk sale of ice cream to hotels/
restaurants, which are not meant for retail sales as such, the provisions of the
Weights and Measures Act will not apply. Chapter V of the Weights & Measures
(Packaged Commodity) Rules, 1977 mentions the instances where MRP is not
required to be printed on the packages. Thus, in these cases valuation will have
to be done under sec.4 of the C.E. Act, 1944.
5. A somewhat similar issue
was examined by the Board earlier vide letter F.No.341/64/97-TRU dt.11.8.97.
This clarification was issued in the context of certain assessees printing MRP
on packages even where there was no statutory requirement to do so under the
Standards of Weights & Measures Act, 1976. It was clarified that in such
cases duty will be charged u/s.4 of C.E. Act, 1944 and not u/s.4A (the
clarification dt.11.8.97 did not, however, specifically mention whether the
disputed goods were notified u/s.4A or not and whether it covered only
non-notified goods).
6. It is, therefore,
clarified that, in respect of all goods (whether notified u/s.4A or not) which
are not statutorily required to print/declare the retail sale price on the
packages under the provisions of the Standards of Weight & Measures Act,
1976, or the rules made there under or any other law for the time being in
force, valuation will be done u/s.4 of the C.E. Act, 1944(or under section 3(2)
of the Central Excise Act, 1944, if tariff values have been fixed for the
commodity). Thus, there could be instances where the same notified commodity
would be partly assessed on the basis of MRP u/s.4A and partly on the basis of
normal price (prior to 1.7.2000) or transaction value (from 1.7.2000), u/s.4 of
the C.E. Act, 1944.
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.
8. It may be kept in mind
that if an assessee does not declare or print the retail sale price in respect
of a notified commodity, which it is statutorily required to do under the
provisions of the Weights & Measures Act, or any other law for the time
being in force, the goods, on removal, will be liable to confiscation u/s. 4A
(4) of the C.E. Act, 1944.
9.
Suitable Trade notices may be issued for the information of the Trade
10.
Hindi version will follow.
11.
Receipt of these instructions may be acknowledged.
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