Relief for BEML: CESTAT holds Goods Sold to Industrial Consumers Not Liable for MRP-Based Assessment u/s 4A of CEA [Read Order]

The Bangalore Bench of Customs,Excise and Service Tax Appellate Tribunal (CESTAT) granted relief for BEML Ltd., holding that goods sold to industrial consumers were not liable for MRP-based assessment under Section 4A of the Central Excise Act, 1944.

BEML Ltd., appellant-assessee, manufactured dumpers, water sprinklers, motor graders, Tatra trucks, Tatra engines, and other goods under Chapters 84 and 87 of the Central Excise Tariff Act, 1985, primarily supplying industrial and institutional customers such as mining, construction, rail, metro, and defence sectors.

The authorities found that the appellant regularly imported components and spare parts through Chennai and Bangalore ports, which were distributed through its marketing network, and alleged that applicable duty under Section 4A of the CEA, was not paid.

Following an investigation, a demand notice was issued on 30 May 2013 for recovery of Rs. 2,72,36,253 as differential customs duty for the period April 2010 to November 2011, along with interest and penalty. The adjudicating authority confirmed the demand with interest and penalty, prompting the present appeal.

The assessee counsel submitted that the imported goods were spare parts for products like dumpers, motor graders, Tatra trucks, and water sprinklers, and had only industrial use. They were supplied to industrial consumers, either during warranty or otherwise, and repacked at the marketing division with the appellant’s labels. Duty was paid on the transaction value of these repacked goods from 1 April 2011.

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He argued that the Commissioner wrongly reassessed duty based on MRP, claiming the packages were for retail sale. He stated that the Legal Metrology (Packaged Commodities) Rules, 2011, applied only to retail packages, while the imported goods were sold to industrial consumers, not for retail. He cited various court and Tribunal decisions supporting that goods sold to industrial consumers were exempt from retail packaging rules.

The counsel also argued that the substitution of Rule 2(bb) had retrospective effect, and there was no procedure to alter the declared RSP. He submitted that the duty demand was barred by limitation, as the goods were cleared between April 2010 and November 2011, and there was no intention to evade duty.

The Revenue representative maintained the findings of the Commissioner.

The two member bench comprising D.M.Mishra (Judicial Member) and Pullela Nageshwara Rao (Technical Member) observed that the main issue was whether the spare parts and components imported by the appellant for dumpers, motor graders, and other industrial goods were liable for MRP-based assessment under Section 4A of the Central Excise Act, 1944.

It was undisputed that the goods were cleared to industrial consumers, either directly or through distributors, and were declared as “not for retail sale” in the Bills of Entry.

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The tribunal noted that the Commissioner had held that, as the appellant was an importer, the goods were liable to MRP-based duty, relying on the Legal Metrology (Packaged Commodities) Rules, 2011.

The appellate tribunal reviewed judgments including EWAC Alloys Ltd., Hi-Tech Computers, and Starlite Components Ltd., which established that goods supplied to industrial or institutional consumers, whether directly or via distributors, were not subject to retail packaging rules or MRP-based assessment. The rules were intended to protect individual retail consumers, not industrial or institutional buyers.

The tribunal found that the appellant had consistently sold the goods to industrial consumers, and RSP declarations at import had no effect on duty liability. In line with the precedents, it concluded that the goods could not be assessed to CVD under Section 4A.

Accordingly, the CESTAT set aside the impugned order and allowed the appeal, granting any consequential relief as per law.

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