Custom, Excise & Service Tax Tribunal
M/S Arora Product vs Cce, Jaipur-Ii on 23 June, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Court No.I
E/Appeal No.1316/2006
(Arising out of order in appeal No.72(HKS)CE/JPR-II/2006 dated 23.1.2006 passed by the Commissioner of Customs & Central Excise (Appeals), Jaipur)
Date of Hearing:23.6.2011
For Approval and signature:
Honble Justice Shri R.M.S. Khandeparkar, President
Honble Shrir Mathew John, Technical Member
_________________________________________________
1. Whether Press Reporters may be allowed to see
The order for publication as per Rule 27 of the
CESTAT(Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of
the CESTAT (Procedure) rules, 1982 for
publication in any authoritative report or not?
3. Whether their lordships wish to see the fair
copy of the order?
4. Whether order is to be circulated to the
Department Authorities?
M/s Arora Product Appellants
Vs
CCE, Jaipur-II Respondent
Appeared for the Appellant: Shri S. Yadav, Advocate
Appeared for the Respondent: Shri S.K. Panda, Joint CDR
Coram: Honble Justice Shri R.M.S. Khandeparkar, President
Honble Shri Mathew John, Member (Technical)
ORDER
Per Mathew John:
The appellants are engaged in the manufacture of Chewing Tobacco falling under Sub-heading No. 2404.41 of the First Schedule to the Central Excise Tariff Act, 1985.
2. The officers of the Anti-Evasion Wing of Central Excise Commissionerate, Jaipur-II visited their factory premises by surprise on 29.9.2004 and conducted various checks and found that they manufacture four different types of packages and on the following details were inter alia printed on the pouches and the packages.
1. 12 Grms Pouch of NATRAJ Zarda with Chuna Weight MRP MRP of Multi Piece Package 12 grams Rs. 2/- per pouch Rs.50/- of 25 pouches
2. 6 Grms Pouch of NATRAJ Zard with Chuna Weight M.R.P. MRP of Multi Piece Package 6 grams Rs.1/- per pouch Rs.30/- of 32 pouches
3. 3 Grms Pouch of NATRAJ Zard with Chuna Weight M.R.P. MRP of Multi Piece Package 3 grams Rs.0.50 per pouch Rs.12/- of 24 pouches
4. 6 Grms Pouch of NATRAJ Zard with Chuna Weight M.R.P. MRP of Multi Piece Package 6 grams Rs.1/- per pouch Rs.35/- of 35 pouches
3. Chewing Tobacco has been notified under Section 4A of Central Excise Act w.e.f. 1.3.2003 vide S.No. 24A of Notification No. 13/2000-CE(NT) dated 1.3.2002. It was observed that the appellants had cleared Chewing Tobacco and paid Central Excise duty by adopting value as arrived at under Section 4A of Central Excise Act, 1944 on the basis of MRP on all types of multi-piece packages (3 gm., 6 gms., 12 gms.) up to 7.3.2004. However, with effect from 8.3.2004 the appellants stopped payment of Central Excise duty adopting value under Section 4A of Central Excise Act, 1944 on multi piece packages containing 3 gms and 6 gms pouches and instead started paying duty adopting value under Section 4 of Central Excise Act, 1944. The appellants continued to pay Central Excise duty on 12 gms. Pouch under Section 4A of Central Excise Act, 1944.
4. Under Rule 34 of Standards of Weights and Measures (Packaged Commodities) Rules 1977, if any goods are sold by weight and the net content of each of the retail pack is below 10 gms, the manufacturers were not required to affix MRP on such packages. The Appellants were claiming this exemption for items 2, 3 and 4. The SCN raises the issue that these goods were not sold by weight but in terms of number of pouches. Further the SCN alleged that the multi piece packages also were retail packages and hence under the law the Appellants were required to affix MRP on the multi-piece packages and they were doing so. So the SCN proposed that provisions of section 4A of Central Excise Act would apply to the multi-piece packages containing individual pouches with content 3 gms and 6 gms and this basis demanded differential duty and interest and also proposed penalty.
5. The Appellants say that the goods were sold by weight and only individual pouches were meant for retail sale and the multi piece packages were not meant for retail sale.
6. If Revenues contention is correct, the Appellant was required under the Standards of Weights and Measures (Packaged Commodities) Rules 1977 to affix MRP on multi-piece package. If they were required under the law to do so and since the item was notified under Section 4A of the Central Excise Act, assessable value was required to be determined as per the provisions of the said section 4A and central excise duty was to be paid accordingly.
7. If the Appellants contention is correct they were not required under the Standards of Weights and Measures (Packaged Commodities) Rules 1977 to affix MRP on multi-piece package. If they were not required under law to do so, even if they had affixed MRP on the multi-piece packages the provisions of section 4A would not apply even if it is a product notified under section 4A and consequently provisions of section 4 of Central Excise Act were to apply to such goods like any other case and the Appellants had paid duty accordingly from 08-03-2004. This legal position stands clarified under Circular No. 411/44/98-CX dated 31-07-1998 issued by CBEC and a few decisions of the Tribunal and Higher Courts.
8. The adjudicating officer considered the submissions and gave his findings as under:
A similar question arose before the Honble High court, Madras as reported in 2004 (163) ELT 160 in the case of Varnica Herbs. In the case cited, herbal hair dye manufactured by the petitioner-assessee were being packed in sachets of 8 gms in weight in Photo Protective Pouch and six such pouches were being packed in a Mono Carton. The contention of the petitioner was that merely because sachets were placed in a mono-carton that would not make the pack a multi-piece package. The assesse also claimed the benefit of exemption under Rule 34 ibid. The Honble Court after considering the matter held that articles kept in separate pouches by the petitioner could be termed as multi piece package in view of provisions contained in Rule 6 ibid, which requires every retail package to contain the net quantity and the maximum retail price read with the definition of multi-piece package given in Rule (j) ibid. The Honble Court has further held that even though the net weight of a commodity might be less than 10 gms., but if it was evident that article was not intended to be sold either by weight or by measure as contemplated under Rule 34(b) ibid, then benefit of Rule 34(b) ibid will not be applicable. The facts of the present case are identical to Varnica Herbs case. In this case also small packs of 3 gms and 6 gms are not intended to be sold either by weight or by measure.
9. Aggrieved by the order the Appellant filed appeal with the Commissioner (Appeal). The Commissioner (Appeal) confirmed the finding of the adjudicating authority. He also examined the issue whether the multi-piece-package is a retail package and recorded his finding in para 13 of the order which is reproduced below:
13. The other point that has been raised is that the appellants were clearing only whole sale packages, that too, only to intermediaries and not to consumers. These wholesale packages or the poly packs containing 32 pouches of 6 gms each, 24 pouches of 3 gms each and 35 pouches of 6 gms each could not be considered multi piece package since they did not intend to sell these poly packs to the retail consumers particularly since the commodity did not have a very high shelf life. It has also been pleaded that no retail sale of the pouches was taking place at the factory gate. As regards retail sale by them at the factory gate, I find that there can be no case where a manufacturer is actually selling its goods directly to the retail consumer. The sale has to be through a network of distributors and dealers and retails who will ultimately sell the goods to the ultimate consumer. If the appellants contention in this respect is accepted, there would be no way in which assessments under the MRP scheme could be administered. Coming to the point of multi-piece packing, I find it necessary to reproduce the definition of multi piece package as under:-
multi piece package means a package containing two or more individual packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole.
The definition says intended for retail sale either in individual pieces or the package as whole. That means there should be an intention of selling either the package as a whole or as individual pieces, in retail. The condition in which the goods are actually sold is not a pre-requisite for qualifying the definition. I find that the appellants are clearing the packages of smaller pouches in a larger pouch and the individual pieces are meant for retail sale by the retailers. This is a fact which is also not in dispute. It is also a fact that the said larger pouch is also capable of being sold in retail and any consumer who wishes so, can purchase the complete pouches from any retail. The fact that the appellants are selling these goods to the traders does not in any way effect this property of the package. It quite clearly emerges that the package containing number of pouches of chewing tobacco is covered by the definition of multi piece package as contained in the Packaged Commodity Rules. The packages being cleared by the appellants are very much covered by the definition. Circular No. 492/58/99-CX dated 2.11.99 issued by the CBEC also quite clearly states that declaration of retail sale price of multi piece packages and individual pieces contained in such a multi piece package (if the individual pieces are capable of being sold separately) is statutorily required. The said Circular goes on to state that such packages are required to be assessed in terms of Section 4A of the Act.
10. Aggrieved by the order of Commissioner (Appeal), this appeal is filed before the Tribunal.
11. The Appellants rely on CBEC Circular 411/44/98-CX dated 31-07-98;
Subject : Charging of excise duty with reference to maximum Retail Price - Reg.
I am directed to say that doubts have been raised as regards charging of excise duty with reference to maximum retail price under Section 4A of Central Excise Act, 1944 in cases where MRP is not required to be affixed on packings, as a statutory requirement under the Standards Weights and Measures Act or any other Law for the time being in force, even though some manufacturers may voluntarily be affixing the MRP on such packings.
2.?Instructions were issued by the Board vide Letter F. No. 341/64/97-TRU, dated 11th August, 1997 clarifying that sub-section (1) of Section 4A applies only when the MRP is required to be indicated under the provisions of Standards Weights and Measures Act, 1976 or under any other law for the time being in force. In other words, Section 4A applies only when there is statutory requirement of affixing the MRP. Accordingly, in case a manufacturer voluntarily affixes MRP which is not statutorily required then the excise duty on goods in such packings shall not be charged on the basis of Section 4A of the Central Excise Act, 1944.
3.?The Commissioners of Central Excise may however require the manufacturers to intimate and declare to the jurisdictional Assistant Commissioner of Central Excise as regards the packings on which MRP is not required to be affixed statutorily may be asked to indicate full description including weight, etc. of such packings. It may be examined and ensured by the Assistant Commissioner that the packings are such that they are exempt under the provisions of the Standards Weights and Measures Act and the rules made thereunder. Such packings will be assessed to excise duty under the provisions of Section 4 of Central Excise Act, 1944.
4.?The matter has been re-examined and it has been decided to reiterate the above instruction contained in Boards Letter F. No. 341/64/97-TRU, dated 11th August, 1997. Accordingly, the instructions dated 30-4-1998 regarding Shampoo sachets communicated to Chief Commissioner, Vadodara and some assessees may be treated to have been withdrawn. Such cases may also be decided in accordance with the instructions contained in this Circular.
5.?All pending disputes/assessments on the issue may be settled in the light of these guidelines.
6.?Field formations and trade may be advised suitably.
7.?Receipt of this Circular may please be acknowledged.
12. They also rely on the following decisions namely,
(i) CCE Vs. Kraftech Products Inc-2008 (224) ELT 504 SC.
(ii) CCE Vs. Kraftech Products Inc.005 (179) ELT 43(Tri-Mum)
(iii) Swan Sweets Pvt Ltd Vs. CCE -2006 (198) ELT 565 (Tri-Mum)
(iv) CCE Vs. Makson Confectionary Pvt. Ltd-2010(259) ELT5 SC
13. Per Contra the Ld JCDR points out that in the case of Kraftech Products Supra, was of hair dye packed in individual sachets containing 3 grms and multi piece packet contained three such packages only and thus the total weight of the multi-piece package itself was below 10 grms which is not the case in this case. The Ld. JCDR relies on the decision of Madras High Court in Vernica Herbs Vs CBEC-2004 (163) ELT 160.
14. We have considered the facts of this case and the various decisions of this Tribunal and the Higher Courts quoted by either side.
15. In the case of Kraftech Products (2008 (224) ELT 504 SC) hair dye in 3 grm sachets packed into multi-piece package of three such sachets was under dispute. The Apex Court did not accept the argument that the goods were sold in numbers and accepted the contention of the assesse that the goods were sold by weight. In para 23 the Apex Court observed as under:
23.?We have noticed hereinbefore that each package offered to sell to the customer contains three sachets. Net weight of all the three sachets are stated thereon. It is a multi-piece package which is capable of being offered to sell as such only because a package is a multi-piece package, the same cannot be taken out of the umbrage of exemption clause contained in Rule 34 of the Rules. Why the commodity cannot independently be sold either by weight or measure is beyond our comprehension particularly when Rule 12(2) permits the same. The illustration appended to Rule 2(j) bring out a clearer picture. It states that the combined net weight shall be taken into consideration for the purposes mentioned therein. After combined weight is taken into consideration for the purpose of applicability of the Rules, there is no reason as to why the said purpose shall not be considered to be a relevant factor for applying the exemption provision. Assuming Rule 2(j) was otherwise vague or unambiguous, illustration appended thereto brings out the true meaning and purport thereof. The reasoning adopted by the Madras High Court in Varnica Herbs (supra) does not appeal to us.
It was rendered per incuriam. It was held to be so in Urison Cosmetics Ltd. (supra) by a Larger Bench of the Customs, Excise and Service Tax Appellate Tribunal. We agree with the said opinion of the Tribunal.
16. The argument that goods are sold by numbers can be raised in respect of commodities like cakes of toilet soap, or tins of talcum powder. But any customer would see the weight of the soap cake or the weight of the contents in a tin of talcum powder before being satisfied about the price for the item. So the argument that such commodities are sold by number is not an acceptable argument. Moreover the Apex Court has specifically overruled the decision of the Madras High Court as explained above. So there is no merit in the argument that the commodity is not sold by weight.
17. In the case of CCE Vs. Kraftech Products Inc -2005 (179) ELT 43 (-Tri.-Mum), cachets of hair dye containing 3 grms each was packed into muti-piece package of 3 such units and in this case also the weight of the muti-piece package also was less than the exemption limit prescribed under Rule 34 of the Packaged Commodities Rules.
18. It is to be noted that in the present case the facts are different and the weight of the muti-piece package is not within the exempted limit. So these case laws are not applicable to the facts of the present case.
19. The next issue is whether the multi piece package is a Retail package or not. This matter has been examined at length by the larger Bench of the Tribunal in the case of Swan Sweets Pvt Ltd. In this case chocolates weighing 4 gms each was packed in a jar of 125 such chocolates. In that case the assesse had not affixed MRP for the jar as a whole. So it was very evident that the manufacturer did not intend the jar to be sold in Retail. Extracts from para 1.2 and para 2.5 of the order are relevant which are reproduced below:
Extracts from para 1.2 of the order :
(e) The whole sale pack in which the individual Toffy Max Caramel/Chocolate are packed carries, inter alia, the following declaration on it :
Wholesale Package MRP 50 paise per piece (inclusive of all taxes) Net Weight 500 g (125 Units) Mfg.
........
Batch No. ........ Extracts from para 2.5 of the order:
If the plastic jar or plastic bag, in which the Toffees are packed, are packages intended for retail sale, the law requires that the Maximum Retail Price (inclusive of all taxes) of the said jar or bag is to be printed on them. Since the appellants never intended the jar or bag to be sold to the retail consumers as such, the Maximum Retail Price for the bag or jar is not printed on the bag or jar. What is required to be printed on the bag or jar is the MRP for individual Toffee. Thus, the appellants are not printing any price for the whole package. The information given on the bag or jar is only for the dealers or distributors, who handle the said bags or jars in the distribution channel. If the appellants had intended the bag or jar to be sold to the retail consumers, they would have printed the price of the bar or jar at one place in a definite, plain and conspicuous manner as Rule 6 requires. The PC Rules use the expression intended for retail sale at numerous places in order to define whenever and wherever a particular set of information is required to be given on a package. Whether a packaged commodity is intended for retail sale or not will depend on the persons who organize the distribution and sale of the product and on none else.
20. Thus the labels on the jar clearly indicated that the jar was not intended for retail sale. That is not the situation in the present case. In the present case MRP is indicated for the multi-piece package was indicated on the multi-piece package showing the clear intention that such multi-piece package also was intended for retail sale.
21. Retail sale has been defined under Rule 2 (q) of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977. This definition reads as under:
(q) retail sale, in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities or consumption by an individual or a group of individuals or any other consumer.
22. The declaration to be made on every package is prescribed in Rule 6 of the said Rules reads as under:-
6.?Declaration to be made on every package -
(1)?Every package shall bear thereon or on a label securely affixed thereto a definite, plain and conspicuous declaration, made in accordance with the provisions of this Chapter as to -
(a) the name and address of the manufacturer, or where the manufacturer is not the packer, of the packer or with the written consent of the manufacturer;
(b) the common or generic names of the commodity contained in the package;
Explanation :- Generic name in relation to a commodity means the name of the genus of the commodity, for example, in the case of common sale, sodium chloride is the generic name.
(c) the net quantity, in terms of the standard unit of weight of measure, of the commodity contained in the package or where the commodity is packed or sold by number, the number of the commodity contained in the package;
(d) the month and year in which the commodity is manufactured or pre-packed.
(e) the retail sale price of package;
(f) where the sizes of the commodity contained in the package are relevant, the dimensions of the commodity contained in the package and if the dimensions of the different pieces are different, the dimensions of each such different piece;
(g) such other matters as are specified in these rules. It is to be noted that as per Rule 2A of the said Rules the expression package in Rule 6 shall be construes as package intended for retail sale.
23. So in the case before us the Appellant was required under law to declare MRP on the multi-piece package and the Appellant was doing so. Further this commodity was notified for levy of excise duty based on valuation as per section 4A of the Central Excise Act. Thus both the legal requirements for applying section 4A were satisfied and hence Central Excise duty should have been paid adopting the value as per section 4A.
24. Consequently the Appeal fails and is accordingly rejected.
(Order pronounced on_________________) (Justice R. M. S. Khandeparkar) President (Mathew John) Member(Technical) 12