Customs, Excise and Gold Tribunal - Bangalore
Kwality Biscuits (P) Ltd. vs The Commissioner Of Central Excise on 30 November, 2006
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Appeal No. 117/2004 dated 1.10.2004 passed by the Commissioner of Central Excise (Appeals-II).
2. The issue involved in the present appeal is the correct valuation of the biscuits cleared by the appellants and packed in tins of 2.5 kg. and above. The appellant paid duty under Section 4A of the Central Excise Act. Revenue contends that Section 4A is not applicable and only Section 4. Consequently, proceedings were initiated against the appellants. The Addl. Commissioner held the following (a) biscuits cleared in excess of 1 kg. Should be valued under Section 4 (b) Demand of differential duty of Rs. 3,84,777/- (c) demand of interest under Section 11AB (d) penalty of Rs. 3,84,777/- under Section Rule 25 of the Central Excise Rules, 2002. The Commissioner (A) in the impugned order upheld the Order-in-Original. The appellants are highly aggrieved over the impugned order and they have come before this Tribunal for relief.
3. Shri Radha Krishna, learned advocate appeared for the appellant and Shri K. Sambi Reddy, JDR appeared for the Revenue.
4. The learned advocate urged the following points.
(i) The biscuit is notified as commodity within the purview of Standards of Weights and Measures (Packaged Commodities) Rules and when sold would attract assessment to Excise duty under Section 4A of Central Excise Act. Biscuit is also a commodity notified under Central Excise Notification for assessment to duty under Section 4A of the Central Excise Act. The packages weighing more than 1 kg. were not intended for sale to any industry or establishment coming within the scope of Rule 34 of Packaged Commodity Rules 1977. In these circumstances, the assessment under Section 4A is correct, (ii) The provision of Section 4A has not excluded the disputed goods from its scope, even though the packages weighed more than 1 kg. and optionally marked with MRP declaration.
(iii) As per Rule 6 of Standards of Weights and Measures (Packaged Commodities) Rules, the price of the goods has to be affixed on the goods for retail sales which has been complied with in the instant case.
(iv) No opportunity was given to the appellants while determining the transaction value by the Respondent and consequently, the differential duty demand is liable to be set aside.
(v) The reasoning of the lower appellate authority that mere packing of goods of more than 1 kg. in weight would exclude the application of Section 4A is erroneous and opposed to the Provisions of Section 4A.
(vi) The penalty imposed under Rule 25 equal to the duty demanded is not justified on the facts and circumstances of the case. This is an assessment dispute and the appellant has a bonafide belief that assessment should be under Section 4A. There is no deliberate intention on the part of the appellant to evade any duty and no finding has been given for imposition of penalty.
(vii) The impugned order in appeal admitted that no opportunity was extended to the appellant to know the reworking of assessable value, which was done excluding the participation of the appellants in such exercise. Annexure-l to the impugned order of the Additional Commissioner clearly indicates that Section 4 transaction value was determined by the department at figures more than retail price declared by the appellant. The entire exercise was erroneous rendering the demand unsustainable.
(viii) The learned advocate relied on the following case laws.
a. CCE, Chandigarh v. Pilot Products 2005 (118) ECR 332 (Tri.-Delhi) wherein it is held that when an issue revolves around the interpretation of a Notification, penalty is not imposed.
b. Itel Industries Pvt. Ltd. v. CCE, Calicut this case, it has been held that packages of notified goods not exempt under Rule 34 of (Standards of Weights and Measures (Packaged Commodities) Rules, 1977 ought to be assessed under Section 4A of the Central Excise Act.
c. CCE, New Delhi v. Ishaan Research Laboratories P. Ltd. (Tri.-Delhi)
5. The learned departmental-representative reiterated the grounds of appeal.
6. We have gone through the records of the case carefully. The reasoning of the lower authorities for holding that assessment should be done under Section 4 and not Section 4A is as follows.
According to Rule 5 of the Standards of Weights and Measures (Packaged Commodities) Rules "no person shall pre-pack or cause or permit to be pre-packed, any commodity for sale, distribution or delivery except in such standard quantities as are specified in relation to that commodity in Schedule-Ill". Further, Sub-Rule 6(1)(F) ibid requires that the retail sale price of such specified goods should also be declared. The implication of this provision is that the commodity should be packed in specific quantities as declared in Schedule -III. Reference to Schedule-Ill shows that the biscuits to which these provisions apply should be packed in quantities of 25g, 50g, 75g, 100g, 150g, 200g, 250g, 300g and thereafter in multiples of 100g upto 1 kg. It is therefore, evident that any package containing biscuits in excess of 1 kg. is not specified in the said Schedule-III. In such a situation where a person packs biscuits in a package in excess of one kg, there is no requirement of declaration of the retail sale price. Hence, in the present case, the goods are not covered by the provisions of Standards of Weights and Measures Rules 1977 and Standards of Weights and Measures Rules 1976. In view of the above finding, the lower authority has come to the conclusion that Section 4A would not be applicable to the impugned products.
6.1 We are afraid that the conclusion reached by the lower authorities is not correct for the reason that they had not read Rule 5 completely. Therefore, we are reproducing Rule 5 of the Standards of Weights and Measures (PC) Rules, 1977 completely.
RULE 5 - Specific commodities to be packed and sold only in standard packages - On and from the commencement of these rules, no person shall pre-pack, or cause or permit to be pre-packed, any commodity for sale, distribution, or delivery except in such standard quantities as are specified in relation to that commodity in Schedule-III:
Provided that the Central Government may, if it is satisfied that for any technical or mechanical reason it is not possible to pre-pack any commodity in the standard quantities specified in Schedule-III, authorize the pre-packing of such commodities in such quantities as it may specify.
[Provided further that nothing in this rule shall disallow any person from packing any commodity specified against serial numbers 1,2,3, 18 and 18A in column 2 of the Third Schedule in any quantity beyond the maximum standard quantity specified in column 3 of that Schedule.] A careful reading of the above Rule shows that biscuits which are in Sl. No. 3 in Schedule-III can be packed in any quantity beyond the maximum standard quantity. Therefore, the reasoning of the lower authorities is incorrect. The appellants are at liberty to pack the biscuits in quantities of more than 1 kg. for retail sale.
6.2 Apart from the above, if the commodity is to be exempted from the above Rules, it should be by way of Rule 34 of the Standards of Weights and Measures (PC) Rules, 1977. Rule 34 deals with exemption in respect of certain packages. For example, if the commodity is packed specially for the exclusive use of any industry as raw material, then there is no need for following the Rules like affixing the maximum retail price, etc. In the present case, Revenue has not shown that biscuits would come under Rule 34. In our view, in the present case, the statutory conditions for adopting valuation under Section 4A of the Central Excise Act have been fulfilled in the following manner.
(i) The impugned commodity biscuit have been notified by the Central Government under the provisions of the Standards of Weights and Measures Act 1976 to declare on the package the retail sale price.
(ii) Notification under Section 4A has also been issued in respect of biscuits.
(iii) Biscuits are not exempted from the Standards of Weights and Measures (PC) Rules under Rule 34 of the Rules.
6.3 In these circumstances, the appellants have correctly discharged their duty liability in terms of Section 4A. In this connection, we rely on the decision of the Tribunal rendered in the case of Itel Industries Pvt. Ltd. v. CCE, Calicut wherein it is held that if the packages in question are not exempt under Rule 34, the good will be liable to be valued under Section 4A and not under Section 4 of the Central Excise Act. It has been made very clear that the fact that goods are sold in bulk under a contract cannot be the criteria for valuation. If such a view is taken, then most consignments will be out of Section 4A because sale to first tier of trade of goods covered by Packaged Commodities Rules take place in wholesale quantities. Further, there is no requirement under Section 4A or under Packaged Commodities Rules that goods covered by this provisions should actually be sold in retail. In the above decision, the decision of the Tribunal rendered in the case of Jayanti Food Processing Pvt. Ltd. v. CCE has been followed.
6.4 Summing up, in view of the fact that the impugned goods viz., biscuits are notified under Section 4A and are not exempted under Rule 34 of the Packaged Commodity Rules, their valuation would be under Section 4A only. Further, there is no requirement in respect of biscuits that they cannot be packed in packages weighing more than 1 kilogram in view of the second proviso to Rule 5 mentioned above. Thus, we allow the appeal with consequential relief, by setting aside the impugned order.
(Pronounced in open Court on 30 Nov. 2006)