I am directed to invite your attention to section 4A of the Central Excise Act, 1944, which provides for valuation of notified excisable goods with reference to retail sale price subject to certain conditions and limitations.

2.     The Government has decided to apply the new scheme of charging excise duty on the basis of maximum retail price to all goods falling under sub-heading Nos. 3306.10 (Tooth Paste & Tooth powders) and 3401.20 and 3402.90 (detergents) to the Central Excise Tariff. Notification Nos. 53/97-CE (N.T) and 55/97-CE (N.T.) both dated 18.9.1997 have been issued under section 4A of Central Excise Act, 1944 in this context. The scheme shall come into force from the 1st day to October 1997.

3.     As per the provisions of sub-section (1) of the said section 4A, in respect of goods notified under this section and chargeable to duty of excise with reference to value, then notwithstanding anything contained in section 4 of the said Act, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, it any, from such retail sale price as the Central Government may allow by notification in the official gazette. Notification Nos. 54/97-CE (N.T.) and 56/97-CE (N.T.) dated 18th September, 1997 have been issued allowing an abatement of 30% of the retail sale price (MRP) in respect of tooth paste and tooth powders falling under sub-heading No. 3306.10 and 35% of the MRP in respect of goods (detergents) falling under sub-heading Nos. 3401.20 and 3402.90 mentioned in para 2 above. In other words, the assessable value will be 70% of MRP in the case of toothpaste and tooth powder and 65% to the MRP for detergents and duty has to be charged on such goods on that value.

4.     It may be mentioned that "retail sale price" has been defined in Explanation 1 to Section 4A and where more than one retail sale price is declared, then the maximum of such retail sale price has to be taken into account as provided in Explanation 2.

5.     Further, in the case of Notification Nos. 16/97-CE dt. 1.4.97 and 38/97-CE 27.6.97, which provide for small-scale exemption to specified goods, for the purposes of computing "value" under the said notification, it will be the value as determined under the provisions of section 4A read with any notification issued thereunder. Therefore, the value limits for full exemption or the concessional rate or the eligibility limit has to be computed with reference to the value as determined under section 4A, read with any notification issued under that section Notification Nos. 16/97-CE and 38/97-CE have already be suitably amended. Needless to say, the revised computation under section 4A has to be made only in respect of clearances made on or after the 1st October 1997.

6.     Notification No. 57/97-CE (N.T.) dated 18.9.97 seeks to provide for lapsing of Modvat credit lying unutilised with the manufacturer of tooth paste and tooth powder as on 1.10.97. However, manufacturer will be entitled for the credit of duty paid on those inputs which will be lying in stock as on 1.10.97 and also on inputs contained in the finished products as may be lying in stock as on 1.10.97. In other words, unutilised inputs contained in finished products, which are lying in stock as on 1.10.97, shall be allowed to lapse [for details refer Ntfn. No. 57/97-CE (N.T.)].

7.     The Commissioner are requested to issue suitable Trade Notices for the guidance of trade immediately and also appropriate instructions to the field staff so that there is no problem in the transition to MRP based valuation. Copies of the Notification Nos. 53/97-CE (N.T.) to 57/97-CE (N.T.) have already been sent to all Commissioners.