Circular No.625/16/2002-CX,Dt.28/02/2002.
Sub: Valuation of goods under Section 4A of the Central Excise Act, 1944 -
reg
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.
F.NO. 6/44/2000-CX 1
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