MRP Based Assessment Is Applicable Only To Mineral Water, Aerated Water And Not To Packaged Drinking Water: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that MRP-based assessment is applicable only to mineral water and aerated water and not to packaged drinking water.

The bench of Sulekha Beevi C.S. (Judicial Member), and Vasa Seshagiri Rao (Technical Member) has observed that packaged drinking water cannot be assessed under Section 4A of the Central Excise Act, 1944. The bench noted that packaged drinking water is an entirely different product, falling under a separate chapter sub-heading. Further, the price of packaged drinking water is less than the price applicable to mineral water. Again, the BIS specification for mineral waters is different from that of packaged drinking water.

The appellants/assessees are in the business of manufacturing and selling packaged drinking water under the brand name “Holy Aqua,” falling under Chapter Heading 22019090 of the Central Excise Tariff Act, 1985. A thorough review of the records of the appellant revealed that they were clearing packaged drinking water from different units without taking Central Excise registration, even after crossing the cumulative value of clearances under the SSI exemption limit of Rs. 150 lakhs for all four units located at Konnakuzhy, Athur, Thiruvallur, and Sadivayil in Coimbatore, without accounting for the details of production and clearance in the daily stock account, without issuing invoices, and without payment of duty.

Hence, a show cause notice was issued for the period 2007-08 to 2010-11, proposing to demand Central Excise Duty of Rs. 4,48,070/- along with interest and for imposing penalties.

After due process of law, the original authority confirmed the duty demand along with interest and imposed an equal penalty under Section 11AC of the Central Excise Act, 1944. A separate penalty of Rs. 1 lakh was imposed on the Executive Director of the company under Rule 26 of the Central Excise Rules, 2002.

The proposal to impose a penalty under Section 27 of the Central Excise Rules, 2002, was dropped. The appellants filed appeals before the Commissioner (Appeals), who upheld the order.

The assessee contended that duty demand has been arrived at by the department on the value assessed under Section 4A of the Central Excise Act, 1944, by taking into account the M.R.P. of the product and allowing abatement applicable as per Notification No. 2/2006-CE (NT) dated 1.3.2006 / 14/2008-CE (NT) dated. 1.3.2008 / 49/2008-CE (NT) dated. 24.12.2008. The appellant had consistently submitted that the above Notifications No. 2/2006, 14/2008, or 49/2008 are not applicable to the products manufactured by the appellant as the goods are not to be subject to MRP-based assessment.

The assessee contended that “packaged drinking water” is not mentioned in column 3 of Notification No.2/2006-CE (NT) dt. 1.3.2006, 14/2008-CE (NT) dt. 1.3.2008, or Notification No.49/2008-CE (NT) dt. 24.12.2008, and hence the finding of the original authority as well as the Commissioner (Appeals) is beyond the scope of these non-tariff notifications issued under Section 4A of the Central Excise Act, 1944.

The issue raised was whether packaged drinking water is to be assessed under Section 4A of the Central Excise Act, 1944, or under Section 4 on the basis of transaction value.

The tribunal, while setting aside the demand, held that the valuation of the product has to be based upon the classification of the product. When the classification unambiguously falls under 22019090, the valuation has to be based on transaction value as per Section 4 of the Central Excise Act, 1944.

Counsel For Appellant: P. Satheesan

Counsel For Respondent: N. Sathyanarayanan

Case Title: M/s.Sree Gokulam Food and Beverages Pvt. Ltd. Versus The Commissioner of GST & Central Excise

Case No.: Excise Appeal No.41300 Of 2014

Click Here To Read The Order