Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Pune-I vs L Oreal India Pvt. Ltd on 23 April, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/1068/2010-Mum. (Arising out of Order-in-Original No. 05/CEX/2010 dated 5.3.2010 passed by the Commissioner of Central Excise, Pune-I ) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. Sahab Singh, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Commissioner of Central Excise, Pune-I
:
Appellant
VS
LOreal India Pvt. Ltd.
:
Respondent
Appearance
Shri K.M. Mondal Special Counsel for department for Appellant
Shri V.S. Nankani, Advocate for respondent
CORAM:
Mr. S.S. Kang, Vice President
Mr. Sahab Singh, Member (Technical)
Date of hearing : 23/04/2012
Date of decision :
ORDER NO.
Per : Sahab Singh
This Revenue appeal arises out of order-in-original No.05/CEX/2010 dt. 5th March 2010 passed by the Commissioner of Central Excise PuneI dropping the demand of duty of Rs.2,26,07,051/- raised vide Show cause notice dt. 19.06.2009.
2. The brief facts of the case are that respondent-assessee is engaged in the business of manufacture and sale of various cosmetics products such as hair dye, shampoo, colourants skin care etc. falling under Chapter 33 of the Central Excise Tariff Act, 1985. These goods are assessed to duty by the respondent-assessee in terms of Section 4A of the Central Excise Act, 1944.
3. Based on information, the officers of Directorate General of Central Excise Intelligence, Pune, Regional Unit searched the factory premises of respondent-assessee and seized various documents under Panchanama. During the course of preliminary investigation, the officers found that assessee has categorized its products under four divisions namely:-
i] Consumer Products Division;
ii] Luxury Products Division;
iii] Active Cosmetic Products Division;
iv] Professional Products Division.
3.1 The products belonging to all the four divisions are affixed with MRP and are sold to dealers except the products of Professional Product Division, the dealers sell all the products to the retail sale agencies for sale to the ultimate consumer. As per the policy of the respondent-assessee, the product of the Professional Product Division are sold by the dealers to the salons and beauty parlors only. The products of Professional Product Division are again sub-divided into two categories namely:
i) Technical Products :-
Which are sold only to salon for their exclusive internal in salon use;
ii) Retail Products:-
Which are sold to salon for resale b y salons to ultimate consumers.
4. During the course of investigation, the officers also found that the Technical Professional Products and their packing contained a remark product not to be resold to public /for professional use only. Further the packages carrying this product contained a leaflet wherein it is printed as this product is not for retail sale for professional use only. The officers also found that all the products including products under Professional Product Division were assessed to duty by the respondent under Section 4A of the Central Excise Act, 1944.
5. In this connection, statements of various officials of the assessee-company were recorded during the investigation and on examination of the relevant records, it was found that Technical Professional Products are neither intended nor offered for retail sale. The packages containing the Technical Professional Products specifically indicated that they are packed for exclusive use in salons which are part of a service industry. As per the provisions of Standards of Weights and Measures (Packaged Commodities)Rules 1977, if the packages are not intended or offered for retail sale or if the packages are for exclusive use of servicing any industry, there is no requirement of affixing of MRP on the packages.
6. Therefore, it appeared to the officers that the provisions of Standards of Weights and Measures (Packaged Commodities) Rules 1977 regarding affixation of MRP are not applicable to the Technical Professional Products of the assessee-company and hence these products are liable to be assessed to duty under Section 4 instead of Section 4A of the Central Excise Act, 1944.
7. After completion of the necessary investigation a show cause notice dt. 19.6.2009 was issued to the respondent-assessee by Additional Director General DGCEI, Mumbai General unit alleging contraventions of provisions of Section 4 (1) (a) of the Central Excise Act, 1944 and Rules 4,6 & 8 of the Central Excise Rules 2002 and demanding duty of Rs. 2,26,07,051/- inclusive of Education Cess of Rs.5,52,907/- covering the period from 1.6.2004 to 30.4.2009. After getting the reply to the show cause notice and granting the personal hearing to the respondent-assessee, the Commissioner passed the impugned order against which the Revenue is in appeal.
8. We have heard at length Shri K.M. Mondal Learned Special Counsel for the Revenue and Shri V.S. Nankani Learned Advocate for the Respondent.
9. At the outset, Shri K.M. Mondal invited our attention to Para 25 and 27 of the show cause notice and submitted that duty demand relates to Technical Professional Products only. However, Commissioner has misread the show casue notice and proceeded on the basis that the duty demand relates to both technical products and retail products. In this connection, he referred to para 36 of the impugned order where the Commissioner has framed the issues for decision.
9.1 He then submitted that the Standards of Weights and Measures (Packaged Commodities) Rules 1977 were amended w.e.f. 13.1.2007 and hence both amended and unamended Rules will apply to the goods in question inasmuch as the period of demand covers both pre and post 13.1.2007.
9.2 Shri K. Mondal then submitted that as per the policy of the respondent-assessee, the Technical Professional Products are sold only to salons through its dealers and as per the agreement between the dealers and the respondent-assessee these products are not intended or offered for retail sale. This is quite evident from the label/leaflet/packages of these products on which the words products not for retail sale and for professional use only are printed. He also showed us some of the sample packages during the hearing in this regard. He submitted that the use of these products requires professional training and expertise and these products are mainly used with other products. He said that for application of Majirel Coloration Creme, it is to be used in a mixture wherein 50 ml of Majirel Creme is blended with 75ml of Oreor Crhme developer by salon. He submitted that MRP, though printed on the packages of these products is not significant because these products are meant for providing services to the consumers by salons. He submitted that the package of Technical Professional Products sold to salons cannot be termed as retail package nor the sales thereof can be termed as retail sale and as such there was no requirement of mentioning retail sale price on such package. In this connection he referred to various definitions from the Standards of Weights and Measures (Packaged Commodities) Rules 1977, such as retail package [Rule 2(p)], retail sale [ Rule 2(q)], retail sale price [Rule 2 (r) etc. both pre and post 13.1.2007. He also referred to Rule 3,6 and 34 of the Standards of Weights and Measures (Packaged Commodities) Rules 1977 as it stood prior to 13.1.2007.
9.3 Shri K.M. Mondal also submitted that salon is a part of fashion industry which provides various services such as hair color, hair styling, hair texture to the customers. Referring to Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules 1977 as it stood before 13.1.2007, he submitted that as per this Rule nothing contained in these rules shall apply to any package containing a commodity if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as raw material or for the purpose of servicing any industry, mine quarry. Since the Technical Professional Products were meant for servicing salon industry, these products were outside the purview of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 prior to 13.1.2007. As far as the position after 13.1.2007 is concerned he referred to Rule 2A of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977, which states that the provisions of Chapter-II shall not apply to package, commodities meant for industrial consumers or institutional consumers . He also referred to the Explanation to Rule 2A where institutional consumers have been defined as those consumers who buy packaged commodities directly from manufacturer/packers for service industry like transportation (including airways, railways) hotel or any other similar service industry. He emphasized that salons are part of service industry. In his submissions, the requirement of direct purchase from the manufacturer is satisfied inasmuch as the technical products are to be sold exclusively to salons by the dealers and distributors as per the agreements.
9.4 Shri K.M. Mondal also sought to take support from the Apex Court judgement in case of M/s. Jayanti Food Processing Pvt. Ltd. reported in 2007 (219) ELT 327 (S.C.). He particularly referred to para 9 to 18 of the said judgment.
10. Shri V.S. Nankani learned Advocate for the respondent pointed out at the outset that the Review Order dt.28th May 2010 based on which the Revenue appeal has been filed goes beyond the scope of the Order-in-Original dt. 5th March 2010. He submitted that the Deputy Controller of Legal Metrology, Mumbai vide his letter dt.9.3.2009 clarified that the goods in question were covered by the Standards of Weights & Measures (Packaged Commodities) Rules, 1977. This clarification was taken into consideration by the Commissioner while passing the impugned order. However, subsequent to passing of the impugned order, on a reference from the department, the Deputy Controller of Legal Metrology, Mumbai vide his letter dt. 15th May 2010, informed the respondent-assessee that the clarification issued by him earlier vide his letter dt. 9th March 2009 stands withdrawn. This letter of withdrawal of clarification is a subsequent event is cannot be taken into consideration in the appeal. However, this very letter has been taken into consideration in the review order passed by the Committee of Chief Commissioners. In support of his contention, the learned Advocate relied upon the following two decisions of the Tribunal:
(i) Senior Magnetics Ltd. Vs. Collector of Customs 1992 (62) ELT 377 (Tribunal)
(ii) Collector of Customs, Bombay Vs. Liwe International Bombay 1985 (20) ELT 107 (Tribunal) 10.1. The learned Advocate then invited our attention to para 9 of the Affidavit dt. 31.1.2011 filed by the Director Legal Metrology in response to the Writ Petition No.2256/2010 filed by the respondent-assessee in the Honble High Court of Bombay. In the said para 9 of the Affidavit, it has been stated that the petitioners product in pre-packed form are covered under the definition of term pre-packed commodity. He submitted that in the light of this Affidavit the petitioners (respondent-assessee) sought to withdraw the writ petition. Accordingly, the Honble High Court allowed the petition to be withdrawn leaving all contentions open vide its order dt. 31.3.2011.
10.2. The learned Advocate then submitted that what is to be seen is whether the commodity is pre-packed or not. Once, it is pre-packed, it is covered by the Standards of Weights & Measures (Packaged Commodities) Rules, 1977. He submitted that there is no dispute that goods in question are pre-packed and hence the goods have been rightly assessed to duty under Section 4A of the Central Excise Act, 1944. In this connection, he relied upon the judgment of Honble Bombay High Court in the case of Larsen & Toubro Ltd. Vs. Union of India reported in 2012 (275) E.L.T. 153 (Bom.). He particularly referred to para 13,14 & 15 of the judgement. He also sought to take support from the judgement of Honble Supreme Court in case of Jayanti Food Processing (P) Ltd. cited (supra). He particularly referred to para 33 & 34 of the cited judgment.
10.3. Learned Advocate also referred to the Board Circular No.625/16/2002-CX dt. 28.2.2002 whereby the Board has advised the field formations that in case of any doubt in respect of any particular commodity as to whether the assessee is exempted in declaring the retail price or not a clarification may be obtained form the concerned department (generally the Metrology Department of the State Government).
10.4. Finally, the learned Advocate submitted that in the event, the Revenue appeal is allowed partly or wholly, the matter should go back to the adjudicating authority for giving a decision on the point of limitation inasmuch as the Commissioner vide dropping the show cause notice in toto, did not give any finding on the limitation.
11. In the rejoinder, Shri K. M. Mondal submitted that the judgment of Honble Apex Court in Jayanti Food Processing (P) Ltd. relied upon by the learned Advocate helps the Revenue rather than assessee inasmuch as in para 34 of the judgment, the Honble Supreme Court has observed as we do not accept the argument for the simple reason that there does not appear any factual assertion on the part of the Department that the packages contained a declaration that they were specially packed for a particular industry for servicing the same. In the absence of this factual background the applicability of Rule 34 is completely ruled out. He submitted that in the present case the packages contained a declaration the this product is not for retail sale. For professional use only. He also submitted that there was no need for the Department to seek any clarification from the Legal Metrology Department, because the Department has no doubt about the assessments of goods to duty under Section 4 of the Central Excise Act, 1944.
12. After careful consideration of the submissions made by both the sides, we have found sufficient reasons to hold that it is a fit case for remand to the Commissioner for de novo adjudication both on merits as well as on limitation. Therefore, we do not wish to express our views on the merits of the case. We find that the products under Professional Product Division have been divided by the respondent-assessee into two categories, namely (i) Technical Products, (ii) Retail Products. The dispute as seen from the show cause notice relates only to Technical Products. However, the Commissioner has proceeded on the wrong footing that the dispute relates to both the products and accordingly Commissioner has arrived at the conclusion. In these circumstances, we set aside the impugned order and send the matter back to Commissioner with the direction that the Commissioner shall give specific findings only with respect to Technical Professional Products having regard to the provisions of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 both pre and post 13.1.2007. The Commissioner shall also give finding on limitation in case it is found that demand is sustainable either wholly or partly. The Commissioner shall pass a speaking order only on the above points after giving a reasonable opportunities to the respondent-assessee of being heard. We leave all contentions open for the decision by the Commissioner.
13. In the result, the Revenues appeal is allowed by way of remand.
(Pronounced in court on ) (S.S. Kang) Vice President (Sahab Singh) Member (Technical) Sm ??
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