Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Cce, Kolkata I on 2 December, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. I DATE OF HEARING : 02/12/2010. DATE OF DECISION : 02/12/2010. Excise Appeal No. 620 of 2005 [Arising out of the Order-in-Appeal No. 69/Kol-V/2004 dated 16/08/2004 passed by The Commissioner of Central Excise (Appeals), Kolkata.] For Approval and signature : Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) 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 Polar Industries Ltd. Appellants Versus CCE, Kolkata I Respondent
Appearance Shri Jeevesh Mehta, Advocate for the Appellants.
Shri S.R. Meena, Authorized Representative (DR) for the Respondent.
CORAM : Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) Order No. ________________ Dated : ,,,,,,,,,,,_____________ Per. Shri Justice R.M.S. Khandeparkar :-
Heard the learned advocate for the appellants and DR for the respondent. This appeal arises from order dated 4th November 2004 passed by Commissioner (Appeals), Kolkata, whereby the appeal filed by the appellants against the order of the Adjudicating Authority has been dismissed. The Assistant Commissioner at Kolkata by his order dated 31st March 2004 had held that the electric fans sold in bulk by the appellants during the period from March 2002 to October 2003 were to be assessed under Section 4 of the Central Excise Act, 1944 instead of Section 4A of the said Act and, therefore, had confirmed the demand of differential duties of Rs. 1,66,439/- and Rs. 32,550/- alongwith the interest thereon besides imposing penalty of equal amount.
2. The dispute in the matter is whether the electric fans supplied by the appellants to the various department of the Government during the period from March 2002 to October 2003 at the rate agreed upon between the appellants and DGS&D to be assessed under Section 4 or 4A of the said Act. The authorities below have held that the assessment had to be under Section 4 and not under Section 4A as was claimed by the appellants.
3. The facts that the appellants are manufacturers of electric fans and had agreed for supply of such fans to different departments of the Government during the period from March 2002 to October 2003 at the rate agreed upon with the DGS&D are not in dispute. Accordingly various fans under 66 invoices issued during the period from March to May 2003 and under 21 invoices during the period from June 2003 to October 2003 were supplied to the government departments. The entire dispute resolves round the question as to whether such supply can be considered as a retail sale or wholesale sale which is commonly known as bulk sale.
4. The learned advocate for the appellants placing reliance in the decisions in the matter of Jayanti Food Processing (P) Ltd. vs. CCE, Rajasthan reported in 2007 (215) E.L.T. 327 (S.C.), Purisons Engineering Pvt. Ltd. vs. CCE, Delhi II reported in 2004 (164) E.L.T. 417 (Tri. Del.), CAS Engineers Pvt. Ltd. vs. CCE, Delhi I reported in 2004 (173) E.L.T. 507 (Tri. Del.), BPL Telecom (P) Ltd. vs. CCE, Cochin reported in 2004 (168) E.L.T. 251 (Tri. Bang.), ITEL Industries Pvt. Ltd. vs. CCE, Calicut reported in 2004 (163) E.L.T. 219 (Tri. Bang.), Commr. of C. Ex. & Cus., Hyderabad IV vs. Jay Engineering Works Ltd. reported in 2009 (246) E.L.T. 182 (Tri. Bang.), Surya Kiran Engineering Works P. Ltd. vs. CCE, Noida reported in 2010 (252) E.L.T. 449 (Tri. Del.) and the Circular No. 625/16/2002-CX dated 28th February, 2002 submitted that considering the provisions of Section 4 and 4A of the said Act as well as the provisions of Standards of Weights and Measures Act, 1976 readwith The Standards of Weights and Measures (Packaged Commodities) Rules, 1977, the supply by of the goods by the appellants was essentially on retail basis and the contract with the DGS&D was a rate contract and not a contract for supply on wholesale basis and, therefore, the provisions of Section 4A of the said Act were clearly attracted for the purpose of assessment of the goods. Referring to the decision in Jayanti Food Processing (P) Ltd. he submitted that it has been clearly held therein that the nature of sale is not relevant and what is relevant for the purpose of deciding the applicability of Section 4A are the criterias laid down by the Honble Supreme Court in para 2 of the said decision and having so applied to the facts of the case, the order passed by the lower authorities cannot be sustained. He further submitted that this position is also clear from the said Circular dated 28th February 2002. It is his further submission that they were required to print MRP on the package of ceiling fans in terms of The Standards of Weights and Measures Act and once such requirement is established the assessment of goods has necessarily to be under Section 4A of the said Act. The supply made by the appellants on the basis of rates fixed by DGS&D on the basis of rate contract cannot be considered to be a bulk sale. He further submitted that the finding of the authority based on Circular dated 28th February, 2002 that the goods were not meant for retail sale is incorrect. The fact that the goods which required MRP to be printed were not actually sold at the price shown on the packages is immaterial as in cases where there is obligation for manufacturer to print a MRP on the packages with only exception as specified under Rule 34 of the said Rules and in the facts and circumstances of the case, the same was not attracted. He further submitted that this position has also been accepted by the department in another case of the appellants themselves and that is apparent from the order of the Deputy Commissioner, Noida passed on 28th February 2005 in relation to the period from 1st September 2001 to 31st December 2003.
5. On the other hand the DR submitted that the supply of goods was not on retail basis but on wholesale basis in as much as that the supply was for a fixed period and at the rate agreed upon under the contract with DGS&D. Such a supply according to the DR cannot be construed as retail sale but has to be considered as bulk sale. Placing reliance in the decision in the matter of CCE, Chennai II vs. Australian Foods Ltd. reported in 2009 (242) E.L.T. 504 (Mad.) and CCE, Raipur vs. Aero Agro Chemical Inds. Pvt. Ltd. reported in 2007 (217) E.L.T. 396 (Tri. Del.) submitted that the decision of the Apex Court in Jayanti Food Processing (P) Ltd. would apply in cases where facts disclosed applicability of Standards of Weights and Measures Act, 1976 and Rules made thereunder, and in particular Chapter 2 of the said Rules to the transaction and not otherwise. According to DR since the supply of goods was not on retail basis but on bulk basis in the sense it was for a period spread over number of months at a fixed rate agreed under the contract, the same has to be considered as bulk supply. According to DR the authorities below having correctly assessed the materials on record and having rightly held that the provisions of Section 4A are attracted in the facts of the case, no fault can be found with the impugned order.
6. In Jayanti Food Processing (P) Ltd. the Apex Court in para 6 while rejecting the contention sought to be canvassed about sale of goods to be in bulk and that, therefore, provisions of Section 4A would not apply but the assessment had necessarily to be under Section 4 of the said Act held that we have already clarified above that it is not the nature of sale which is relevant factor for application of Section 4A but the applicability would depend upon five factors which we have enumerated in para 2 above. In para 2 of the judgment of the Apex Court, it was held that :-
In short after introduction of Section 4A, the nature of sale lost its relevancy in the sense that the valuation did not depend upon the factor whether it was a wholesale or sale in bulk or a retail sale. The whole section covered the goods which were packaged and sold as such with the rider that such package had to have a retail sale price thereupon under the provisions of SWM Act, Rules made thereunder or under any other law. Thus, viewed from the plain language of the Section, where the goods are excisable goods and are packaged and further such packages are required to mention the price thereof under the SWM Act, Rules made thereunder or under any other law and further such goods are specified by the Central Government by notification or Official Gazette, then the valuation of such goods would be on the basis of the retail sale price of such goods and only to such goods the provisions of sub-Section (2) shall apply whereby it is provided that the value of such goods would be deemed to be such retail price declared on the packages. In course, the assessee shall be entitled to have a reduction of abetment as declared by the Central Government by the notification in the official gazette.
7. The Apex Court further specifically enumerated the five factors which are required for applicability of Section 4A as under :-
(i) The goods should be excisable goods
(ii) They should be such as are sold in the package ;
(iii) There should be requirement in the SWM Act or the Rules made thereunder or any other law to declare the price of such goods relating to their retail price on the package ;
(iv) The Central Government must have specified such goods by notification in the Official Gazette ; and
(v) The valuation of such goods would be as per the declared retail sale price on the packages less the amount of abatement.
8. Plain reading of the above reading of the Apex Court in Jayanti Food Processing (P) Ltd. would disclose that in order to take resort to Section 4A for the purpose of valuation of the goods and assessment of duty all the five factors narrated therein must be present. One of those five factors is that there should be requirement in the SWM Act or the Rules made thereunder or any other law to declare the price of such goods relating to the retail price on the packages. There is no dispute that at the relevant time only law which required declaration of price on the packages was comprised under SWM Act and the Rules made thereunder. In fact it is the Chapter 2 of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 which required such declaration. In fact, Rule 2A under Chapter 2 of the said Rules provided that the provisions of the said Chapter shall apply to all pre-packed commodities except in respect of grains and pulses containing quantity more than 15 kg. Rule 3 provided that the provisions of the said chapter shall apply to packages intended for retail sale and expression package, wherever it occurred in the said chapter should be construed accordingly.
9. The expression retail sale is defined under Rule 2 (q) and for the relevant period the definition of retail sale, in relation to a commodity, was that the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer. The term retail package was defined under Section 2 (p) to mean a package containing any commodity which is produced, distributed, displayed, delivered or stored for sale through retail sales, agencies or other instrumentalities for consumption by an individual or a group of individuals. The expression retail sale price was defined under Section 2 (r) to mean the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on package, there shall be printed on the packages the words maximum or max. retail price, inclusive of all taxes or in the form of MRP Rs. - .. inclusive of all taxes. The explanation to the said provision stated that for the purpose of the clause maximum price in relation to any commodity in packaged form shall include all taxes, local or otherwise freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding and a like as a case may be.
10. Before we proceed to deal with the matter it would be worthwhile to take note of the definition of the expression wholesale package under Section 2 (x) of the said Rules. The wholesale package accordingly means a package containing :-
(i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer ; or
(ii) a commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or delivery such commodity to the consumer in smaller quantity ; or
(iii) packages containing ten or more than ten retail packages provided that the retail packages are labelled as required under the rules.
11. In view of various arguments sought to be advanced it would be worthwhile also to take note of Rule 34. The same reads as under :-
Rule 34. Exemption in respect of certain packages. Nothing contained in these rules shall apply to any package containing a commodity if, -
(a) the marketing on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry :
Provided that this exemption shall not be available in respect of
(i) any yarn which is sold in hanks to handloom weavers ;
(ii) any component, part or material used in any workshop, service station or any other place where servicing or repairing of any bicycle, tricycle or motor vehicle within the meaning of Motor Vehicle Act, 1939 (4 of 1939), is undertaken ;
(iii) any package containing a commodity of net content of 5 kilogram or 5 litre or less and displayed for sale at the retail outlet.
(iv) any package containing a commodity to be sold by number or length and displayed for sale at the retail outlet.
(b) the net weight or measures of the commodity is twenty grams or twenty millilitres or less, if sold by weight or measure :
[***] Provided that the declaration in respect of maximum retail price and net quantity shall be declared on packages containing 10g to 20g or 10ml to 20ml.
(c) [***]
(d) any package containing fast food items packed by restaurant/hotel and the like.
(e) It contains scheduled formulations and non-scheduled formulations covered under the Drugs (Price Control) Order, 1955 made under section 3 of the Essential Commodities Act, 1955 (10 of 1955).
(f) Agricultural farm produces in packages of above 50 kg.
12. Taking into consideration the decision of the Apex Court in Jayanti Food Processing (P) Ltd. and the provisions of law referred to above it is apparent that in cases where the provisions of Chapter 2 of the said rules are attracted the question of invoking Section 4 of the said Act cannot arise. In that case, the valuation and assessment has to be in terms of Section 4A. However, in cases where the provisions of chapter 2 and in particular in relation to the requirement of declaration of MRP on the packages is not applicable or attracted, then the valuation and assessment will have to be in terms of Section 4 of the said Act. At the same time, in terms of the provisions of law, the wholesale package need not necessarily contain the retail packages without any MRP being printed. On the contrary, if we read the said definition, it specifically refers to the retail packages also. It specifies that when number of retail packages are brought together and they are supplied it would result in sale of wholesale package.
13. In the case in hand, undoubtedly it was sought to be alleged against the appellants that there was bulk supply of the goods and, therefore, the provisions of chapter 2 of the said rules would not apply. The expression bulk supply is nowhere defined either in the said Act or in the said Rules. It is, however, commonly understood that whenever it is bulk supply it refers to wholesale supply. But before arriving at any finding about the wholesale supply or bulk supply in a case where a dispute is raised that the nature of supply does not disclose to be the bulk supply, but it is a retail supply, it is always necessary for the Adjudicating Authority to analyse the materials placed on record in that regard by both the parties and to arrive at a appropriate finding as to whether the nature of supply discloses to be of wholesale nature or retail one. Neither the perusal of the order passed by the Adjudicating Authority nor by the lower Appellate Authority discloses any discussion on this aspect nor any specific finding, and that too when records clearly disclose the dispute having been raised by the appellants that it was not a bulk supply but a retail supply. It was sought to be contended on behalf of the department that since the supply was made for a number of months it is to be construed as a bulk supply, however, we are not being pointed out any provision of law in that regard which give rise to such presumption nor any specific finding in that regard by either of the lower authorities. Since the entire dispute resolves round this basic issue and indeed it is relevant for appropriate decision in the matter, it was necessary for the Adjudicating Authority to undertake the said exercise and to arrive at a correct finding on the said issue. In our considered opinion, the whole exercise by both the authorities without ascertaining this aspect of the matter is totally unfruitful and, therefore, both the orders are liable to be set aside and matter remanded to the Adjudicating Authority to deal with the same in accordance with the provisions of law and bearing in mind the observations made hereinabove. We have made specific reference to various provisions of law necessarily because the authorities below while deciding the matter should apply their mind in relation to those provisions of law by applying the same to the facts of the case as those provisions of law would definitely assist the authorities below in arriving at correct conclusion relating to the dispute between the parties. Needless to say that the authorities below will have to also consider all the reported decisions relied upon by the advocate for the appellants as well as the DR while deciding the matter.
14. For the reasons stated above, therefore, the appeal is allowed and the impugned orders are set aside and matter is remanded, as stated above, for fresh consideration according to law. The appeal is accordingly disposed of.
(Justice R.M.S. Khandeparkar) President (Rakesh Kumar) Member (Technical) PK