Tribunal Declares Duty Demand on Packaged Drinking Water Under Section 4A of Central Excise Act, 1944 Unsustainable
In a significant judgment delivered on December 16, 2025, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai Regional Bench has ruled against the application of Maximum Retail Price (MRP)-based duty assessment for packaged drinking water under Section 4A of the Central Excise Act, 1944. The case concerned M/s. Sree Gokulam Food and Beverages (P) Ltd., which had been subjected to duty demands based on MRP valuation for its packaged drinking water product sold under the brand "Holy Aqua."
The Tribunal, presided over by Mr. P. Dinesha, Member (Judicial), and Mr. Vasa Seshagiri Rao, Member (Technical), found that packaged drinking water is distinct from "mineral water" and is not covered by the existing MRP notifications, specifically Nos. 02/2006, 14/2008, and 49/2008. The judgment emphasized that such notifications are statutory and can only apply to goods explicitly specified within them. The absence of packaged drinking water from these notifications rendered the MRP-based valuation inapplicable.
The Tribunal also addressed issues related to the aggregate turnover for the purpose of Small Scale Industry (SSI) exemption. It held that the aggregate clearances from all units of the appellant must be considered to determine SSI exemption thresholds, countering the isolated unit assessment approach taken by the department.
Moreover, the Tribunal rejected the invocation of the extended limitation period under proviso to Section 11A(1) of the Act, stating that classification and interpretation disputes do not justify extended limitation unless there is evidence of suppression or fraud. Consequently, penalties imposed on the company and its Executive Director, Shri K. Sinosh, were set aside, with the Tribunal underscoring the necessity for mens rea or culpable negligence to impose such penalties.
The judgment further set aside the confiscation and redemption fine imposed due to the unsustainable primary liability under Section 4A, reinforcing the absence of evidence for illegal clearance or prohibited goods.
Notably, the Tribunal referenced earlier favorable decisions for the appellant's related units in Coimbatore and Konnakuzhy by CESTAT Chennai and Bangalore, asserting the need for consistent adjudication across identical matters involving the same assessee.
This decision marks a significant victory for M/s. Sree Gokulam Food and Beverages, aligning with prior Tribunal rulings and providing clarity on the classification and valuation of packaged drinking water under central excise law.
Bottom Line:
Packaged drinking water distinct from mineral water under Central Excise law; MRP-based assessment under Section 4A of the Central Excise Act, 1944 not applicable in absence of specific inclusion in MRP notifications.
Statutory provision(s): Central Excise Act, 1944 Sections 4A, 11A(1), 11AC; Central Excise Rules, 2002 Rule 25
