TMI Blog2011 (7) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to their various depots for being sold to their dealers in packaged form. The value of the base paints, so manufactured and cleared, had been determined by them under Section 4A of the Central Excise Act, 1944 and in terms of the Notification No. 13/2002-C.E. (N.T.), dated 1-3-2002 upto 28-2-2006 and under the Notification No. 2/2006-C.E. (N.T.), dated 1-3-2006 thereafter. It was noticed that at the dealers premises, these base paints were mixed with various shades derived from the colour bank dispensing machine. The bought out colourants were mixed in these base paints to obtain the desired colour and shades. Thus, the base paints manufactured and cleared by the notice was not sold to or purchased by the ultimate consumer and was meant for supply to the dealers, where it underwent change and perceptible modification by opening of the package and adding and mixing of the desired colourants prior to its delivery to the ultimate consumer. 3. Rule 1(3) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as the SWM (PC) Rules, 1977 for sake of brevity) is applicable only to commodities in packaged form. Rule 2(l) thereof defined p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47-448/2009, dated 15-4-2009 [2009 (247) E.L.T. 754 (Tri.-Chennai)], which was appealed against by the department and before the Hon ble Apex Court and the Hon ble Apex Court vide order dated 11-1-2010 [2011 (269) E.L.T. A148 (S.C.)] has dismissed the appeal filed by the department in the facts and circumstances of the case. As the issue is identical which has attained finality by the decision of Chennai Bench of the Tribunal as well as by the Hon ble Apex Court. Therefore, the adjudication order be set aside and appeal to be allowed with consequential relief. 7. Shri K.M. Mondal, ld. Consultant for the Revenue appeared before us who contended that the facts of this case are not similar to the case before the Chennai Bench of this Tribunal. To differentiate the facts, he drew our attention to para 23 of the impugned order wherein the adjudicating authority has observed that the explanation 2 to Section 4A of the CEA, 1944 provided that in case where on the package of any excisable goods have more than one retail price is declared, the maximum of such retail sale price shall be deemed to be retail sale price. The appellant determined the value of the base paints under Section 4A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... colourants through the computerized automatic dispensing machines for paint in standard quantities as specified in Schedule III to the SWM Rules, 1997. Therefore, the appellants were allowed to pre-pack base material of paints for making paints to be delivered through the said computerized machine, after specifying the certain condition. It does not mean that the appellants goods are covered by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Therefore, finally he prayed that the facts of this case are distinguishable from the facts of the case decided by the Chennai Bench of this Tribunal, hence, the impugned order is to be upheld. In alternate, he further prayed that in view of the submission made herein above, the matter be referred to the Larger Bench. 9. On careful examination of the submissions made by both sides, the first issue before us is that whether the facts of the matter before the Chennai Bench of this Tribunal and the matter in hand are identical or not. To know the facts, the show-cause notice issued in both the cases are reproduced herein under :- Ph : 0413 2336995 Fax: 0413-233124 2221999, 2331243 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of Rule 2(1) of the abovesaid Rules, (1) Pre-packed commodity with its grammatical variations and cognate expressions means a commodity or article or articles which, without the purchaser being present, is placed in a package of whatever nature, so hat the quantity of the product contained therein has a pre-determined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification and the expression package , wherever it occurs, shall be construed as a package containing a pre-packed commodity . 5. From the above, it appears that the provision of the PC Rules, 1977 are applicable only to pre-packed commodity which has a pre-determined value and such value cannot be altered without the package or lid or cap being opened or undergoing perceptible modification. Inasmuch as the lid/cap of package containing the base manufactured by Berger is opened at the dealers premises and perceptible modification of the content is made before delivering the package to the ultimate consumer, it appears that the provisions of PC Rules, 1977 does not apply to the impugned base manufactured by Berger. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Act, 1944. ii. Differential duty of ₹ 9,48,29,097/- and differential Education Cess of ₹ 8,39,937/-) (as per Annexure to this notice) should not be demanded from them in respect of clearances made during April 2002 and March 2006, under Section 11A of the Central Excise Act, 1944. iii. Appropriate interest on the said duty amount should not be demanded from them under Section 4A of the Central Excise Act, 1944. iv. Penalty should not be imposed on them under Section 11AC of the Central Excise Act, 1944. 11. M/s. Berger Paints (India) Limited, Pondicherry are further directed to produce at the time of showing cause all the evidences upon which they intend to rely in support of their defence. 12. If no cause is shown against the action proposed to be taken within the prescribed period or if they do not appear before the adjudicating audthority when the case is posted for hearing, the case will be decided on merits. 13. This notice is issued without prejudice to any other action or any further action that may be taken against them under the Central Excise Act, 1944 or the Rules made thereunder or any other law for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantity of the product contained therein has a pre determined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification and the expression package, wherever it occurs, shall be construed as a package containing a pre-packed commodity. 5. From the above, it appears that the provisions of the PC Rules, 1977 are applicable only to pre-packed commodity which has pre-determined value cannot be altered without the package or lid or cap being opened or undergoing perceptible modification. Inasmuch as the lid/cap of package containing the base manufactured by Berger is opened at the dealer s premises and perceptible modification of the content is made before delivering the package to the ultimate consumer, it appears that the provisions of PC Rules, 1977 does not apply to the impugned base manufactured by Berger. 6. The provisions of Section 4A of the Central Excise Act, 1944 is applicable only to the goods in relation to which it is required, under the provisions of Standards of Weights and Measures Act, 1976 or the Rules made thereunder or under any other law for the time being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessed under Section 4A should not be assessed under Section 4 of the Central Excise Act, 1944. (ii) Differential duty of ₹ 5,27,77,454/- (Five Crores Twenty Seven Lakhs Seventy Seven Thousand Four Hundred Fifty Four Only) and differential Education Cess of ₹ 8,94,799/- (Eight Lakhs Ninety Four Thousand Seven Hundred Ninety Nine Only) as per Annexure to this notice, totally amounting to ₹ 5,36,72,253/- (Five Crores Thirty Six Lakhs Seventy Two Thousand Two Hundred Fifty Three Only) should not be demanded and recovered from them in respect of clearances made during April 2002 to March 2007, under the proviso to Section 11A(1) of the Central Excise Act, 1944. (iii) Appropriate interest on the said duty amount should not be demanded and recovered from them under Section 11AB of the Central Excise Act, 1944. (iv) Penalty should not be passed on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. 11. M/s. Berger Paints (India) Limited, Goa, are further directed to produce at the time of showing cause all the evidences upon which they intend to rely in support of their defence. 12. If no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that this matter is squarely covered by the judgment of Chennai Bench of the Tribunal in the Appellant s own case reported in 2009 (247) E.L.T. 754, as the facts of the two cases are identical and for this reason, the impugned order is not sustainable, since certain points raised by the Department have not been dealt with in this order, a separate order is being recorded by me. 13. Before coming to the certain questions of law raised by the Department, it would be worthwhile recapitulating the facts of the case. The appellant manufacture paints, varnishes and thinners falling under Chapters 32 and 38 of the Central Excise Tariff, and one of the products manufactured by them is base paint falling under Chapter 32, which is intended to obtain paints of colour range of over 5000 shades by tinting through a system called Berger Colour Bank Dispensing System at the dealer s premises. All the goods falling under Chapter Heading Nos. 3208, 3209 and 3210 are notified under the Notification issued under Section 4A of the Central Excise Act, 1944 for assessment of duty on the assessable value determined on the basis of declared MRP minus abatement. There is no dispute that the base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined under Section 4 of the Central Excise Act. The Department, therefore, proposes to charge duty on the goods on the basis of MRP declared of the base paint less trade discount less taxes. It is on this basis that a show cause notice was issued to the Appellant for demand of differential duty of ₹ 5,27,77,454.00 along with interest in respect of clearances of base paints made during the period from April, 2002 to March, 2007 and also for imposition of penalty on the Appellant under Section 11AC of the Central Excise Act. This show cause notice was adjudicated by the Commissioner, vide order-in-original No. 12/Commr./ GOA/CX/07 dated 10-9-2007, by which the duty-demand as made in the show cause notice was confirmed along with the interest and penalty of equal amount was imposed on the Appellant under Section 11AC. It is this order of the Commissioner, which is under challenge. 14. One of the main contentions of the Department is that the goods, in question, are not a pre-packed commodity in terms of the definition of this term as given in Rule 2(1) of the SWM Rules, and, hence, the provisions of Section 4A would not be applicable. 14.1 In terms of the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of inter-state trade and commerce. From a perusal of the definition of pre-packed commodity in Rule 2(l) of the SWM Rules, it is clear that a pre-packed commodity must have the following features : (a) It should have been packed without the purchaser being present, the package being of whatever nature; (b) The package must contain a quantity of certain pre-determined value; (c) The packing is such that the value of the quantity packed cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing perceptible modification. 15.1 Thus, when a specified quantity of a specified value of a commodity has been packed in a package/container in absence of the customer and the packing is as such that the value of the packed commodity cannot be altered without the package, or its lid or cap being opened or undergoing perceptible modification (for example sealed or temper-proof packing), the same would be covered by the definition of pre-packed commodity . For determining whether a commodity is pre-packed commodity , the fact that the package/containers containing the commodity is opened by the consumer or by somebody els ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the customers would not cease to be pre-packed commodity. 17. If the Department s contention that Section 4A would be applicable, and value must be determined under Section 4, is accepted, the assessable value would be the price at which the Appellant were selling the goods to their dealers, not the maximum retail price printed on the packages at which the goods are sold to the ultimate consumers. However, para 8 of the show cause notice proposes to charge duty on the value determined on the basis of MRP less trade discount less taxes. In my view when value is determined under Section 4 under which the assessable value is the transaction value, which in this case, would be the price at which the goods are sold to the dealers, there is absolutely no justification for determining the assessable value on the basis of MRP printed on the base paint containers at which the dealers sell the paint to the consumer. The Department cannot plead that Section 4A is not applicable and at the same time also charge duty on MRP less trade discount and taxes. The show cause notice does not mention as to on what basis the assessable value is sought to be determined on the basis of MRP. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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