The Chennai bench of Customs, Excise And Service Tax Appellate Tribunal( CESTAT )has held that Maximum Retail Price ( MRP ) based assessment is not applicable to Packaged Drinking Water. The MRP-based assessment as per the above notifications applies only to mineral water and aerated water falling under Tariff Heading 22011010 or 22011020. The appellant does not manufacture mineral water.
M/s.Sree Gokulam Food and Beverages Pvt. Ltd, the appellants are engaged in the business of manufacture and sale of packaged drinking water under the brand name “Holy Aqua” falling under Chapter Heading 22019090 of the Central Excise Tariff Act, 1985. Scrutiny of 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 of SSI exemption limit of Rs.150 lakhs of all the four units located at Konnakuzhy, Arthur, and Thiruvallur and Sadivayil at Coimbatore, without accounting the details of production and clearance in the daily stock account, without issuing invoices and without payment of duty.
A show cause notice was issued for the period 2007-08 to 2010-11 proposing to demand a 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 Central Excise Rules, 2002 was dropped. On appeal, the Commissioner ( Appeals ) upheld the same.
Counsel Sri P. Satheesan appeared and argued for the appellant. The Counsel submitted that the duty demand has been arrived at by the department on the value assessed under Section 4A of 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) dt. 1.3.2006 / 14/2008-CE (NT) dt. 1.3.2008 / 49/2008-CE (NT) dt. 24.12.2008
The appellant was manufacturing only packaged drinking water which falls under CETH 22019090. The MRP-based assessment as per the above notifications applies only to mineral water and aerated water falling under Tariff Heading 22011010 or 22011020. The appellant does not manufacture mineral water.
It was submitted by the counsel 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.49/2008CE (NT) dt. 24.12.2008, and hence the said 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 notifications specify the description of goods given in Column (3) to be covered by Column (2) of the Tariff Heading. The view taken by the department that the description of goods, namely, ‘mineral water’ contained in the notification is inclusive of “Packaged Drinking water” is an erroneous interpretation of the scope of the notification.
It was submitted that as per the Tariff Heading “Mineral Waters” falls under 22011010. The product of the appellant is ‘Packaged Drinking Water’. The appellant does not add any minerals into it or demineralize the water. The classification therefore falls under 22019090 only.
Shri N. Sathyanarayanan appeared and argued for the Department. It was submitted that the appellant has contested the determination of value under Section 4A claiming that only Mineral Water and Aerated Water are covered under Sl.No. 24 & 25 of the notification. On examination of Notification No.49/2008-CE (NT) dt. 24.12.2008, it can be seen that the description of goods shown against Sl. No.24 & 25 are “Mineral Waters” and “Aerated Waters”.
The valuation of the product has to be based on the classification of the product. When the classification unambiguously falls under 22019090 the valuation has to be on transaction value as per Section 4 of the Central Excise Act, 1944. Merely because the abatement notification mentioned heading 22019090 in column (2) it cannot be said that the Packaged Drinking Water is included in the Mineral Waters.
Section 4A provides for valuation in case of goods on which RSP / MRP has to be declared as per SWM (P&C) Rules, 1977 or Legal Metrology Act, 2011. Thus for section 4A to apply the goods are to be specified by notification. Notifications 2/2006, 14/2008 and 49/2008 do not mention ‘packaged drinking water’; instead mention ‘mineral water’. These notifications give the rate of abatement available to goods which are to be assessed under Section 4A of the Act ibid.
The two-member bench comprising Vasa Seshagiri Rao, Member ( Technical ) and Sulekha Beevi Cs, Member ( Judicial ) held that the invocation of the extended period cannot be sustained. The CESTAT set aside the penalty imposed on the Executive Director of the appellant company is not warranted.
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