The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that cement cleared in packaged form with a declared retail sale price (RSP) qualifies for concessional excise duty under Notification No. 4/2006-CE, irrespective of whether the buyer is a retail consumer or an institutional purchaser.
Jaypee Rewa Plant and Jaypee Bela Plant, both units of Jaiprakash Associates Ltd., were engaged in the manufacture and sale of cement. During the period from January 1, 2008, to February 28, 2011, the appellants cleared cement in 50 kg retail packages to various buyers, including government agencies like the Directorate General of Supplies and Disposals (DGS&D). The appellants paid excise duty under Serial No. 1A of Notification No. 4/2006-CE, which prescribes concessional duty rates for cement cleared in packaged form with an RSP.
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The department issued show cause notices in 2013, alleging that the appellants had incorrectly availed the benefit under Serial No. 1A for sales made to institutional buyers. The department claimed that such buyers are not “ultimate consumers” and the sales should have been classified under Serial No. 1C, which applies to cement cleared in other than packaged form.
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Based on this interpretation, the department confirmed a demand of Rs. 3,17,41,635 along with interest and penalties through orders dated August 31, 2021. Challenging the orders, the appellants’ counsel argued that the duty under Serial No. 1A was correctly paid since the goods were cleared in retail packages with an affixed RSP, as mandated under the Packaged Commodities Rules. They submitted that at the time of clearance from the factory, the goods were intended for retail sale and were labeled accordingly.
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The fact that some RSP-affixed cement was later sold to institutional buyers from depots did not alter the applicability of Serial No. 1A. They relied on judicial precedents including H&R Johnson (India) Ltd. v. CCE and Parasakti Cement Industries Ltd. v. CCE to argue that once goods carry an RSP, they are assessable under Section 4A of the Central Excise Act.
The department counsel argued that the concessional duty under Serial No. 1A is applicable only when goods are intended for retail sale to ultimate consumers. Since the cement in question was sold to institutional buyers like government agencies, the department argued that the appropriate classification was under Serial No. 1C. They further argued that affixing an RSP was not determinative if the goods were not meant for retail sale. The department cited multiple judgments, including Heidelberg Cement (India) Ltd. and Madras Cement Ltd., to support its position.
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The two-member bench comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) observed that the only relevant criteria under Notification No. 4/2006-CE, as amended, were whether the cement was cleared in packaged form and whether it bore an RSP, not the nature of the buyer. The tribunal observed that the Weights and Measures Rules do not prohibit affixing an RSP on goods sold to institutions, and there is no statutory bar to treating such sales differently if the goods are otherwise retail-packaged.
The tribunal explained that the notification no longer hinged on whether the sale was to a retail or industrial customer but solely on the form in which the goods were cleared. The tribunal ruled that once the goods were cleared in retail packages with RSP, the duty under Serial No. 1A was appropriately paid.
The tribunal also found no evidence of suppression or intent to evade, making the invocation of the extended limitation period and imposition of penalties unsustainable. The tribunal set aside the orders of the adjudicating authority and allowed both appeals. The demand for differential duty, interest, and penalty was quashed.
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