Imported Computers for Educational Institutions: Assessment Under Section 4's Transaction Value Upheld as Legal and Proper

When you're in the business of importing goods, understanding the nuances of assessment is crucial.

Take the case of Acer India Pvt. Ltd., for instance. They imported notebook computers for the Rajiv Ghandhi University of Knowledge Technologies, Hyderabad.

Initially, they assessed their bill of entry based on the Retail Sale Price (RSP). But here's where it gets interesting: they later realized that since these goods were for an educational institution and not for retail sale, the assessment should have been based on the normal transaction value. This oversight led to an excess payment of duty amounting to Rs.12,41,118/-.

Acer, recognizing their mistake, requested a re-assessment based on the transaction value. They provided documents like the order placed by the educational institution, invoices, and details of the advance amount received. They even went a step further by paying back the Special Additional Duty (SAD) they had initially availed based on the RSP assessment.

However, the original authority rejected Acer's request, holding that the assessment and CV duty paid under section 4A of the Excise Act 1944 was legal and proper. Acer didn't back down. They appealed to the Commissioner (Appeals), who ruled in their favor, stating that the goods should be assessed under the transaction value.

The department, not satisfied with this decision, approached the Tribunal. They argued that since the goods were in a pre-packaged form with MRP, they should be assessed based on MRP. But Acer had a strong case. They emphasized that the goods were sold to an educational institution, making it an institutional consumer sale, not a retail sale.

The Tribunal, after considering all the facts and the law, sided with Acer. They highlighted the importance of the Legal Metrology Act and the Packaged Commodities Rules 2011. According to these rules, goods meant for institutional consumers are exempt from the provisions relating to MRP declarations.

So, what's the takeaway for you?

When importing goods, especially for institutional consumers, ensure that you're assessing them correctly. Understand the laws, stay updated, and always be ready to provide the necessary documentation to back up your claims. It's not just about paying the right amount; it's about understanding your rights and responsibilities in the complex world of taxation and customs.

Court Name : CESTAT Chennai

Parties : The Commissioner of Customs vs M/s. Acer India Pvt. Ltd.

Decision Date : 03 August 2023

Judgement ref : CUSTOMS APPEAL No. 41775 Of 2013

FINAL ORDER No. 40650/2023

ORDER : Per Ms. SULEKHA BEEVI, C.S.

This is an appeal filed by the department against the order

passed by the Commissioner (Appeals) who set aside the order passed

by original authority for assessment on the basis of RSP, and ordered

for re-assessment under transaction value, and also held that the

importer can thereafter claim refund as provided by law.

1. Brief facts are that, the respondent, M/s. Acer India Ltd. filed

bill of entry dated 06.02.2012 for import of notebook

computers consequent to an order placed by Rajiv Ghandhi

University of Knowledge Technologies, Hyderabad (RGUKT).

The respondent had assessed the bill of entry on the basis of

Retail Sale Price (RSP) for payment of duties. Later they

realized that as the goods are for supply to educational

institution and not intended for retail sale, the assessment

ought to have been done under normal transaction value,

instead of RSP based assessment. This resulted in excess

payment of duty of Rs.12,41,118/-. The respondent then

requested for re-assessment of bill of entry on the basis of

transaction value and furnished copies of documents in the

nature of order placed by the educational institution, invoices,

advance amount received from the educational institution etc.

They also paid back the Special Additional Duty (SAD) benefit

availed by way of RSP based assessment at the time of

import. The original authority rejected the request for re-

assessment and held that the assessment and CV duty paid in terms of section 4A of Excise Act 1944 is legal and proper.

Against this, the appellant filed appeal before the

Commissioner (Appeals) who vide order impugned in this

appeal, set aside the order passed by the original authority

and held that the goods are to be assessed under transaction

value and that appellant would thereafter be eligible for

refund. Aggrieved by such order the department is now

before the Tribunal.

2. The Ld. AR, Shri Rudra Pratap Singh appeared and argued for

the department. It is submitted that in the present case, the

MRP/RSP was affixed on each package. Thus the goods are

sold in a pre-packaged form. The goods which are notified

under Section 4 A and imported in pre-packaged condition

bearing MRP, should be assessed only as per Section 4 A on

the basis of MRP. The imported goods are sold by respondent

to the University which in turn is supplied to the students.

Therefore, the subject goods have to be assessed under

Section 4 A only.

2.1 The relevant part of the Standard Weight and Measures Act,

and the relevant Packaged Commodities Rules were adverted

to by the Ld. AR. The decision of the Hon’ble Apex Court in

the case of Jayanthi Food Processing (P) 2007 (215) ELT 327

was referred to canvass the argument that in the said case,

the Hon’ble Apex Court had laid down the factors for assessment under Section 4 A of the Central Excise Act 1944.

These are:-

(i) The goods should be excisable

(ii) They should be such as are sold in the package

(iii) There should be requirement in the Standards of

Weights Act or the Rules made thereunder or any other

law to declare price of such good relating to their retail price on the package.

(iv) The Central Government must have specified such

goods by notification in the official Gazette

(v) The valuation of such goods would be as per the

declared retail sale price on the packages less than the

amount of abatement.

2.2 The Ld. AR argued that all the above factors are satisfied in

the present case and therefore the assessment has to be

under 4 A only. The Ld. AR also argued that Educational

Institution cannot be considered as a ‘service industry’.

Education is neither a service nor is the institution an

‘industry’. That therefore the exclusion of chapter 2 of the

Packaged Commodities Rules 1977 will not apply in the

present case. The Ld. AR prayed that the appeal may be

allowed.

3. The Ld. counsel Shri Rohan Muralidharan appeared and

argued for the appellant. It is submitted by the Ld. counsel

that on the basis of the documentary evidence, it is established that the goods are imported for supply to educational institution and not for retail sale. The respondent had inadvertently assessed the B/E on MRP value and availed SAD exemption. On realizing the error, they voluntarily paid

back the SAD and also requested for reassessment on the

basis of transactions value. It is submitted that in the present

case, the goods are in pre-packaged form with a declaration

of MRP on the retail packages. However, the goods are sold

to RGUKT which is an educational institution. The supply

being to an institutional consumer and not intended for retail

sale, the assessment has to be under section 4 based on

transaction value, as correctly held by the Commissioner

(Appeals).

3.1 In the case of Jayanthi Food Processing Ltd. (Supra), it was

held that as long as the goods are notified under Section 4A

and imported in pre-packaged condition, bearing MRP and

the sale is directly to ultimate consumer, the assessment is

to be under Section 4 A. In the present case, as the sale is

not made to ultimate consumer, the third factor as put forth

by the Apex Court, is not satisfied. Further, while laying

down the law in Jayanthi Food Processing Ltd. the Apex Court

was dealing with the pre amended Act and Rules. With effect

from 13.01.2007, Rule 2 A has been amended which

specifically provides that the provisions relating to the

packages intended for retail sale will not be applicable when the packaged commodity is meant for ‘institutional consumer’. This position is affirmed by Hon’ble Supreme Court in CCE Vs AR Polymer Pvt. Ltd. 2023 (3) TMI 951 – SC.

In the said case the Apex Court was analysing the issue in

regard to purchases made by military and paramilitary

institutions for distribution to their employees. It was held

that the purchases are made by ‘institutional consumers’ and

not by an end consumer, and that the assessment has to be

on the basis of transaction value under Section 4 and not

under 4 A.

3.2 The Ld. counsel submitted that the SWM Act was replaced

with the Legal Metrology Act, 2009 (LMA) and SWMPC Rules

were replaced by Legal Metrology (Packaged Commodities)

Rules 2011 (LMPC Rules). As per Rule 3 of LMPC Rules, the

provisions of Chapter II pertaining to declaration of MRP

would not apply in the case of sale made to institutional

consumer. The definition of ‘institutional consumer’ covers

all the service institutions including transportation, airways,

railways, hotels, hospitals etc. who buy packaged commodity

directly from the manufacturer for use by the institution. It

is not alleged by department, that RGKUT has acted as a

dealer, and that the University further sold the goods to the

students. There is no dispute with regard to fact of sale made

by appellant to RGKUT. The decision in the case of M/s UT

Starcom Inc Vs CC Chennai 2018 (6) TMI 530 (CESTAT,Chennai) was relied by Ld. counsel to argue that in the said case supply of cement to educational institution was held to be supply to institutional consumer. The said decision of Tribunal was affirmed by the Hon’ble Apex Court as reported

in 2020 (3) TMI 776 – S.C. Similar view was taken in the

case of Charms Cosmetier Pvt.Ltd. Vs CCE 2017 (352) ELT

197 (Tribunal – Mumbai).

4. Head both sides.

5. The issue to be decided is whether the imported goods are to

be assessed under Section 4 or Section 4 A of C.E. Act 1944

for payment of Counter Vailing Duty (CVD).

5.1 The department is of the view that the goods imported being

in prepackaged form with MRP affixed, the value has to be

assessed under Section 4 A on the basis of MRP. The Ld.

Counsel for respondent has argued that though in

prepackaged form, bearing MRP since the goods were

imported without intention for retail sale and for sale to

educational institution, the assessment is to be under Section

4 of the Act.

5.2 In the grounds of appeal, the department has relied upon the

old SWM Act / Rules 1977 as well as the decision of Hon’ble

Apex Court in the case of Jayanthi Food Processing Ltd. The

imports having been made in 2012, the new Legal Metrology

Act and Packaged Commodities Rules 2011 would apply. The

relevant provision of LMPC Rules read as under:

CHAPTER II

Provisions applicable to packages intended for retail sale

Applicability of the Chapter

The provisions of this Chapter shall not apply to:-

a) Packages of commodities containing quantity of more than 25kg or 25

litres excluding cement and fertilizer sold in bags up to 50 kg ; and

b) Packaged commodities meant for industrial consumers or institutional

consumers.

Explanation: For the purpose of this rule:-

(i) “institutional consumer” means the institutional consumer like

Transportation, Airways, Railways, Hotels, Hospitals or any other

service institutions who buy packaged commodities directly from

the manufacturer for use by that institution.

(ii) “industrial consumer” means the industrial consumer who buy

packaged commodities directly from the manufacturer for use by

that industry.

5.3 From the above it is clear that only when the package is

intended for retail sale the provisions of the Chapter for

affixing MRP and other details would apply. Further, the

definition of institutional consumer has also undergone

change. Instead of the words ‘service industry’ the words

used in the new definition of institutional consumer is ‘service

institution’.

5.4 The department has not doubted that the import is for sale

to the RGKUT. This being so, the sale is not to an ultimate

consumer and is only to institutional consumer. The view

taken by the Commissioner (Appeals) that the assessment

has to be made under normal transaction value under Section

4 is indeed legal and proper. Our view is supported by the

decision of the Tribunal in the case of M/s UT Starcom Inc

(Supra) as affirmed by the Hon’ble Apex Court and the

decision of the Apex Court in the case of A.R. Polymer and

Pvt. Ltd. (Supra).

6. From the foregoing, we find no grounds to interfere with the

impugned order. The impugned order is sustained. The appeal is dismissed

(Pronounced in court on 03.08.2023)

(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)

Member (Technical) Member (Judicial)

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IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE

TRIBUNAL,

SOUTH ZONAL BENCH, CHENNAI

COURT HALL No. III

CUSTOMS APPEAL No. 41775 Of 2013

(Arising out of Order-in-Appeal No. Cus/707/2013 dated 10.05.2013 passed by

Commissioner of Customs Appeals, No.60, Rajaji Sali, Custom House,

Chennai 600 001)

The Commissioner of Customs .... Appellant

Import Commissionerate

Custom House, Chennai 600 001

Versus

M/s. Acer India Pvt. Ltd. ...Respondent

Embassy Heights

No.13, 6th Floor, Magrath Road

Next to Hosmat Hospital

Bangalore 560 025

APPEARANCE :

Shri Rudra Pratap Singh, Addl. Commissioner (A.R)

For the Appellant

Shri Rohan Muralidharan, Advocate

For the Respondent

CORAM :

HON’BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)

HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)

DATE OF HEARING : 28.07.2023

DATE OF DECISION: 03.08.2023

FINAL ORDER No. 40650/2023

Customs Appeal No. 41775 of 2013

ORDER : Per Ms. SULEKHA BEEVI, C.S.