The applicant M/s Berger Paints India Ltd. is a manufacture of paints and varnishes which are the goods notified and subjected to assessment under Section 4A of the Central Excise Act, 1944 on the basis of MRP of the product. One of the products manufactured by the applicant is base material for paints which is intended to obtain colour range of over 5000 shades by tracing through a system called Berger Colour Bank Dispensing System, which are installed at the premises of their dealers.
The company imports the colourants on payment of Chemical Vapour Deposition. The base paint is cleared from the factory in a packed tin, on payment of appropriate duty of excise on the basis of MRP of the paints under Sec. 4A.
The colourant, which is imported by the applicant, is subsequently dispatched to the depots. In the dealers premises, on identification of a particular shade by the ultimate consumer, the base in pre-packaged form is opened, colourants are added to the quantity required by the consumer and the same is tinted. After tinting, the shade of the consumers choice is obtained. In this process, the lid or cap of the package containing base material is opened and after tinting it with the colour the same is delivered to the customer.
The applicants were issued a show cause notice stating that they are not entitled to MRP based assessment as provisions of sec 4A apply only to those goods in relation to which it is required under the provisions of the Standards of Weights and Measures Act, 1976 or the rules made thereunder, to declare on the packages thereof the retail sale price of such goods and these provisions are applicable only to pre-packed commodity which has a pre-determined value and such value cannot be altered when the package or lid or cap is opened or undergoes perceptible modification. Since, in the applicants case the lid/cap of package containing the base paint manufactured by them is opened at the dealers premises and some modification in the content is carried out by adding the colourant before delivering the package to the ultimate consumer, the provision of Packaged Commodities Rules, 1977 do not apply to them and therefore, the goods have to be assessed under Sec.4 at the transaction value.
Accordingly Central Excise duty of Rs.5,36,72,253/- was demanded which was confirmed by the Commissioner who also imposed penalty of equivalent amount.
The case is before the Tribunal in the matter of Stay Application this is what the Tribunal observed -
• We find that the applicants have not been able to make out a prima facie case in their favour both on merits as well as on limitation as they have clearly failed to produce any evidence to support their contention that the base material for paint was sold in retail at the MRP indicated on the tin containers of such base material.
• The base material was being supplied to dealers only, who were tinting the same with colour after opening the package and thereafter selling the finished paint at a totally different price fixed for the final paint.
• Therefore, once the packages are not meant for retail sale at all, prima facie, the question of applicability of the Standards of Weights Measures Act, 1976 and the Rules made there under does not arise.
• Similarly, we do not find any merit in the plea of limitation inasmuch as the applicant has been determining the assessable value of the base paints on the basis of retail sale price of the final paints under Sec 4 of the Central Excise Act, 1944 which established that there was no retail sale of the base material as otherwise duty would have been paid on the retail sale price of the base paint rather than retail sale price of the final paint.
• Since there was no retail sale of the base material, the MRP indicated by the applicant in their invoices appears to be artificial price created by them in order to evade duty.
Finally, the Tribunal directed the applicant to deposit a sum of Rs.2.5 crores