Circular No. 625 /16 /2002 - CX
28th February, 2002
F.NO. 6/44/2000 – CX 1
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
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:
Bulk Supplies for personal as well as industrial use
Supplies in bulk against contracts to DGS&D, Govt. Deptts., restaurants/hotels etc
Supplies to canteen stores depots (CSD) of the defense services
Items supplied free with another consumer items as marketing strategy. Example, one Lux soap free with one box of Surf.
Items supplied free as marketing strategy or for gauging the market response. Example physician samples, bubble gums etc.
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.