Cce, Chennai Vs. M/S. Eveready Industries India Ltd. - Court Judgment

Per Dr. Chittaranjan Satapathy

Heard both sides. We find that while passing the impugned order, the adjudicating Commissioner has recorded the following finding:-

“The issue to be decided is whether the poly-sleeved batteries cleared in bulk from Chennai unit to Dehradun unit are to be assessed under the provisions of Section 4A or under Section 4 of the CEA. The contention of the department is that these poly-sleeved batteries are complete in all respects and as such, should be taxed by calculating the value based on MRP. Support was drawn from the opinion given by the Department of Legal Metrology. The party strongly contended that the batteries which are imported as bare cells are brought to their Chennai unit where poly-sleeving of these cells are done and the battery thereafter will contain the name, emblem and other details. They have contended that these batteries are sent then to their Dehradun unit for blister packing individually and put in cartons for clearance and sale. Since these batteries cleared from Chennai unit are exclusively used as industrial raw material for manufacturing blister packed strips ready for retail market, the question of affixing MRP for these poly-sleeved batteries does not arise. For this, they have relied on Rule 3 of the Chpater II of the SWMPC Rules, 1977. Since the batteries as cleared from their Chennai unit are not intended for retail sale and are sent only on stock transfer to Dehradun, the valuation has been correctly done as per Cost Construction Method. They have also relied on Board’s Circular No. 625/16/2002-CX dated 28.2.2002 wherein it was clarified that MRP need to be printed only when the manufacturer is legally obliged to print the MRP on packages of goods under the provisions of SWM Act, 1976. These batteries which are cleared for testing and packing at their Dehradun unit are not covered by these provisions. The process undertaken at their Dehradun unit clearly amounts to manufacture.

I find substantial force in the party’s contention. I have examined the samples of imported Bare/Dare Cell, Poly-sleeved Cell and Blister Packed Strips. It is a fact that the goods, whichare cleared from Chennai unit to Dehradun unit are, individually a functional battery, which can be used for the purpose intended. However, the question is whether these batteries are intended for retail sale and whether such retail sale is possible in the manner and condition they are cleared from the Chennai unit to Dehradun unit. The printed blister packing in which these batteries are put in Dehradun unit makes them products, which are marketed in retail. Further, it is seen that the opinion given by the Legal Metrology Department does not categorically explain the points, which are relevant to decide the issue. The report talks about pre-determined value in terms of power capacity i.e. 1.5 volt. Since this value cannot be altered without the package being opened, it was opined that the batteries come within the definition of SWM Act, 1976. it was also opined that the batteries transferred to Dehradun unit in bulk packages are finished products. Here it is pertinent to note that the batteries are transferred in bulk for further processing in Dehradun. As categorically stated by the party, they are not intended for retail sale and they are not fit for retail sale without blister packing and printing as is the normal practice. Further, it is noticed that the Controller of Legal Metrology has stated that the batteries sent to Dehradun unit do not undergo any further manufacturing process there. This opinion is contrary to the report sent by the Assistant Commissioner of Central Excise, Dehradun. The Assistant Commissioner in his report has stated that the packing of poly-sleeving of batteries carried out by the party in their Dehradun unit is amounting to manufacture as defined under Section 2(f)(iii) of Central Excise Act, 1944.

It would appear that the issue of incorrect valuation arose mainly because of area based exemption availed by the party in their Dehradun unit under Notification No. 50/03-CE dated 10.6.2003 as amended. Though there may be a case of avoidance of tax by using the available exemption notification, there is no case for valuation of poly-sleeved batteries cleared from Chennai unit under the provisions of Section 4A. Considering the above facts and circumstances, I find that there is no short payment of excise duty on this account by M/s. Eveready Industries Ltd, Chennai.”

2. It is seen from the finding recorded by the adjudicating Commissioner that the impugned goods when cleared from the Chennai Unit to the Dehradun Unit are not in the form which can be marketed in retail. Further, he has noted that the process undertaken in the Dehradun Unit amounts to manufacture after which the impugned goods become fit for retail sale. Hence the view taken by the adjudicating Commissioner that the assessment of the impugned goods cleared from the Chennai Unit has been correctly done under Section 4 and that there is no case for valuation of the same under Section 4A of the Central Excise Act, 1944 requires no interference by us. We also find that the decision taken by the adjudicating Commissioner is in line with the decision of the Hon’ble Supreme Court in the case of Jayanti Foods Processing Pvt. Ltd. Vs. CCE, Rajasthan 2007 (215) ELT 327 (SC) in which it was held that for valuation under Section 4A, the goods should be such as to be sold in the packets. Hence, we dismiss the appeal filed by the Department.