TMI Blog2007 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... PL Telecom Ltd., CA 1385/2005 against Himachal Exicom Communication Ltd. These appeals by themselves formulate into one group relating to the sale of telephone instruments by the assessees. CA 2877/2005, CA 6168/2005 and CA 5840/2006 against Electrolux Kelvinator and Electrolux India relate to the sale of Refrigerators. Further CA 6559-6560/2005 against Explicit Trading and Marketing Pvt. Ltd., pertain to the sale of bottled mineral water. Lastly CA 498/2006 against Ramani Power Cables Pvt. Ltd. relate to the sale of Electric Filament Lamps. 2. All these appeals pertain to the interpretation of Section 4 and 4A of the Central Excise Act, 1944 (hereinafter referred to as "the Act") and the provisions of Standards of Weights Measures Act, 1976 (hereinafter referred to as "the SWM Act") as also the Standards of Weights Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as "the SWM (PC) Rules"). In the appeals filed by the assessees, Jayanti Foods and Nestle India the Tribunal has accepted the contention of the Department that these assessees should be assessed under Section 4A while the contention of the assessees is that they should be assessed and taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything contained in Section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette. (3)The Central Government may, for the purpose of allowing any abatement under sub-section (2) take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods. (4) If any manufacturer removes from the place of manufacture any excisable goods specified under sub- section (1) without declaring the retail sale price of such goods on the packages, or declares a retail sale price which does not constitute the sole consideration for such sale, or tampers with, obliterates or alters any such declaration made on the packages after removal, such goods shall be liable to confiscation. Explanation 1. For the purposes of this section, "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 in the 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 the such retail price declared on the packages. Of course, the assessee shall be entitled to have a reduction of abatement as declared by the Central Government by the notification in the Official Gazette. Even at the cost of repetition the following would be factors to include the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... displayed, delivered or stored for sale through retail sales, agencies or other instrumentalities for consumption by an individual or a group of individuals". Definition of "retail sale" under Rule 2(q) is as under : "retail sale", in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or group of individuals or any other consumer." Definition of "retail sale price" under Rule 2(r) is as under : "retail sale price" means 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 MRP Rs… incl., of all taxes. Explanation : For the purposes 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 the like, as the case may be." Definition of "wholesale dealer" und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the retail sale price thereof. Explanation : For the removal of doubts, it is hereby declared that a sale, distribution or delivery by a wholesale dealer to a retail dealer or other person is a "retail sale" within the meaning of this sub-rule." Chapter III deals with the provisions applicable to wholesale packages. Rule 29 pertains to the declaration required to be made on every wholesale package. Chapter V deals with the exemptions. Rule 34 thereof is extremely important. It runs as under : "34.Exemptions in respect of certain packages Nothing contained in these rules shall apply to any package containing a commodity if, - (a) the marking 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". 5. When we read these rules along with provisions of Section 4A of the Act, it would be clear that where there is a general exemption like Section 34 under the SWM (PC) Rules such goods and/or packages of such goods shall not be covered by Section 4A(1) and (2) of the Act. However, all such packages which are covered under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly display on the said packs that "the pack was not meant for retail sale". The ice-cream contained in the said pack of four litres used to be sold in unpacked form by the hotel to which the said ice-cream used to be supplied. The contention of the assessee, therefore, was that since the pack which could be described as the bulk pack of four litres, was not meant to be sold in retail, it was bound to be treated as a wholesale transaction and as such the assessee was not required under SWM Act and the Rules made thereunder to print the Maximum Retail Price (hereinafter referred to as "MRP") which was a pre-condition for application of Section 4A of the Act for the purposes of valuation and assessment. The further contention of the assessee is that the assessee is entitled to exemption under Rule 34 of the SWM (PC) Rules. This stand was not accepted by the Assessing Authority or the Appellate Authority who held that the valuation would have to be under Section 4A and not under Section 4 of the Act (perhaps because that would yield more revenue). The Tribunal has upheld those orders dismissing the appeals filed by the present appellant. That is how the matter has come before us. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... display the MRP on the four litres pack voluntarily. Shri Subba Rao very heavily relied on this fact. We do not think that merely because the assessee displayed the MRP on the four litres pack, that would negate the case of the appellant altogether. We have already shown in the earlier part of the judgment the conditions required for application of Section 4A. The plain language of Section 4A(1) unambiguously declares that for its application there has to be the "requirement" under the SWM Act or the Rules made thereunder or any other law to declare the MRP on the package. If there is no such requirement under the Act and the Rules, there would be no question of application of Section 4A. Thus if the appellant is successful in showing that there is no requirement under the SWM Act or the Rules made thereunder for declaration of MRP on the package, then there would be no question of applicability of Section 4A(1) (2) of the Act. Even if the assessee voluntarily displays on the pack the MRP, that would be of no use if otherwise there is no requirement under the SWM Act and the Rules made thereunder to declare such a price. 13. Learned Counsel for appellant took us through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e already explained earlier that the nature of sale is of no consequence. The material consideration is that such sale should be in a "package" and there should be a requirement in the SWM Act or the Rules made thereunder or any other law for displaying the MRP on such package. We find the requirement to be only under Rule 6(1)(f) which applies to "retail package" meant for "retail sale". What is required to be printed under Rule 6(1)(f) is the "retail sale price" of the package. "Retail sale price" is defined under Rule 2(r) and it suggests that the "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer. The Rule further suggests the manner in which the "retail sale price" shall be mentioned on the package. It is the case of the appellant that the four litres pack was not meant to be sold as the package to the ultimate consumer and the sale was only to the intermediary or as the case may be, to the hotel. If that was so, then there is no necessity much less under Rule 6(1)(f) to mention the "retail sale price" on the package. 14. It was tried to be suggested, relying on the language of the unamended Rule 2A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Counsel further argues that such "package" was for the purposes of "servicing the hotel industry or catering industry" as the case may be. Learned Counsel is undoubtedly right when he seeks to rely on Rule 34 which provides for exemption of the "packages" which are specially packed for the exclusive use of any industry for the purposes of "servicing that industry". Shri Subba Rao supported the view expressed by the Tribunal that the words "servicing any industry" could not cover the present case and he further suggested that ice-cream cannot be a "raw material" for any industry. He is undoubtedly right that the ice-cream cannot be termed as "raw material" for any industry. However, the words "or for the purposes of servicing any industry" are broad enough to include the transaction in question, i.e., the sale of a pack of ice-cream to the retail industry. Hotel does not manufacture the ice-cream and is depended entirely upon the sale of ice-cream to it by the assessee for ultimately catering the commodity in the package, i.e. ice-cream to the ultimate consumer. In our view this can be squarely covered in the term "servicing any industry". The word "service" is a noun of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect. However, considering the fact that the notification came after the order of the Tribunal and further it was sought to be explained by the subsequent notification dated 17-1-2007, we are not going into that question. 19.In the result the Civil Appeal No. 2819 of 2002 is allowed. Civil Appeal No. 1738 of 2004 20. This takes us to the next appeal which is filed by Nestle India Ltd. The appellant M/s. Nestle India Ltd., are engaged in the manufacture of wafers covered with milk chocolate under the brand name "KITKAT" falling under Chapter 19 of Central Excise Tariff Act, 1985. This product is a specified product under the provisions of Section 4A and is included in the notification and accordingly the duty was being paid on the said chocolate in terms of Section 4A based upon the "retail sale price" after claiming the deductions on account of abatements. M/s. Nestle India entered into a contract with M/s. Pepsico India Holdings Ltd., where the agreed price of the KITKAT packet was Rs. 4.80 and the chocolate so purchased at that price by M/s. Pepsico was meant for free supply of the same along with one bottle of Pepsi of 1.5 litres in pursuance of their Sales Promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile accepting the case of the Revenue simply went on to hold that once the goods are specified items under Section 4A(1) of the Act and are excisable goods, the chargeable duty would be required to be assessed on the MRP. The Tribunal also recorded that the only exception where a manufacturer can deviate from the general rule of printing MRP on the package would be Rule 34 of SWM (PC) Rules. It further held that the said Rule did not apply to the case of the assessee. The Tribunal also relied upon the first Explanation to Section 4A of the Act and came to the conclusion that even if a portion of goods is sold at a lower rate than the MRP affixed thereon, the assessable value in respect of such percentage of goods will not be lowered on that ground. The Tribunal also referred to the advertisements issued by Pepsico wherein it was displayed that KITKAT worth Rs. 12 will be given free with one 1.5 litres bottle of Pepsi. The Tribunal also held that the circular dated 28-2-2002 did not apply to the case of the assessee. Holding thus, the Tribunal dismissed the appeal. 24. Shri Lakshmi Kumaran firstly pointed out that the KITKAT chocolate sold to Pepsico was for free distributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direct reference to Entry 4 in Para 1 of the Circular which we have extracted above. Our attention was also invited to a ruling of the Tribunal reported in Commissioner of Central Excise, Ludhiana v. Pepsi Foods Ltd. [2005 (186) E.L.T. 603] wherein a view has been taken, relying on the aforementioned circular, that the packet of Lays (Potato Chips) which was to be supplied free along with Pepsi of 1.5 litre was bound to be assessed under Section 4 and not under Section 4A of the Act. Learned Counsel points out that this judgment is not challenged by the Revenue and has become final. He further suggests that in keeping with the law laid down by this Court in CCE, Vadodara v. Dhiren Chemical Industries [2002 (139) E.L.T. 3] the Department cannot now turn back and take a contrary stand. There is no doubt that the judgment of the Tribunal cited supra was attempted to be distinguished in the impugned judgment of the Tribunal on the ground that there appeared a price printed on labels affixed on Pepsi bottle and sold by M/s. Varun Beverages indicating that KITKAT worth Rs. 12 is given free with the said Pepsi Bottle. In our view this printing of the price on the labels of Pepsi would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000. Again merely because the goods are specified items under Section 4A(1), that by itself will not be a be all and end all of the matter as before such goods are brought in the arena of Section 4A(1), there would have to be the satisfaction of a particular condition that the packages of such goods are "required" under the SWM Act and the Rules made thereunder to declare the MRP. The Tribunal has even erred in holding that the circular dated 28-2-2002 is not applicable to the present case. A cursory glance at the circular would suggest that it is applicable to the present case where two commodities have been sold as a market strategy. 28. Shri Subba Rao also heavily relied on Para 9 of the impugned judgment and further relied on the first Explanation of Section 4A and suggested that the "retail sale price" would be the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumers and includes all taxes, local or otherwise. The Tribunal has held, relying on the expression "may be" in contradistinction to the expression "shall be" that even if a portion of the goods are sold at a lower rate than the MRP affixed therein, the assessable val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... package". However, what is material is the definition of "retail sale price". The requirement of Rule 6(1)(f) is specific. It requires the retail sale price of the package be printed or displayed on the package. If there is no sale involved of the package, there would be no question of Rule 6(1)(f) being attracted. There is a clear indication in the definition of "retail sale price" as provided in Rule 2(r) which clearly explains that the MRP means the maximum price at which the commodity in packaged form "may be sold" to the ultimate consumer. Thus, the definition of "sale" in Section 2(v) of the SWM Act becomes relevant. Therefore, unless there is an element of sale, as contemplated in Section 2(v), Rule 6(1)(f) will not be attracted and thus such package would not be governed under the provisions of SWM (PC) Rules which would clearly take such package out of the restricted arena of Section 4A(1) of the Act and would put it in the broader arena of Section 4 of the Act. 30. Shri Lakshmi Kumaran lastly relied on Rule 34(a) of the SWM (PC) Rules and pointed out that the case was completely covered under that Rule since firstly the package in this case specifically declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred to as the "BSNL"). The purchaser did not sell these instruments to the general public but instead provided the instruments on rental basis or otherwise to their customers, meaning thereby that there was no further sale of these instruments. The product falls under sub-heading 8517 and is covered under Notification No. 9/2000-C.E. (N.T.), dated 1-3-2000 and subsequently by Notification No. 5/2001, dated 1-3-2001. It was, therefore, an admitted position that from 1-3-2000 Electronic Push Button Telephones manufactured by the assessees were specified goods and were bound to be valued for assessment with reference to the retail price under Section 4A of the Act. It is also an admitted position that on all the telephone pieces sold to DoT, MTNL and BSNL, as the case may be, the assessees had declared the MRP. The assessees got the advantage of the abatement and because of that they were required to pay lesser duty under Section 4A as compared to the duty chargeable under Section 4 of the Act on the basis of contract price. The abatement was 40% on the retail price. It was undoubtedly true that bulk supply was made by the telephone manufacturing assessees to DoT, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a large number of packages, such bulk purchase itself rules out the applicability of the SWM (PC) Rules. Under Rule 2A, as it then stood, it was provided that Chapter II apply to all pre-packaged commodities. Rule 3 thereof provided that the provisions of Chapter apply to the packages intended for "retail sale" which would mean that the sale would be for consumption by an individual or group of individual or any other consumer. There can be no doubt that the telephone instruments were to be used by the consumers. Therefore, the telephones were sold to these three instrumentalities, there is no escape from the fact that these telephones were meant to be ultimately used by the consumers and it is only with that object that the said telephones were purchased by the three instrumentalities from its manufacturers. Therefore, the sale of the telephone instruments would be covered in the term "retail sale". Rule 6 is thereafter very clear which requires every package to make certain declarations including the declaration of the "retail sale price" on the package. There is also no dispute that the said declaration was indeed made on the package of each piece of telephone. If this be so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MRP on them as from the orders of the Tribunal we do not find such factual position emerging. That was the most relevant factor and we are sure that the Tribunal could not have missed it. Again we do not find that such a factual position was canvassed before the Tribunal. We, therefore, reject this contention and accept the assertion on the part of the counsel for the assessees that the MRP was displayed on each package. However, we leave it open to the Department to check this factual position again and the Department would be free to proceed if the MRP is not printed on the part of any particular assessee. It was also asserted by Shri Subba Rao further that some of the assessees had not paid the duty on the MRP but on the contract price. There is no reference of this assertion even before the Tribunal. Instead we have the affidavits before us that in each case the duty has been assessed not on the contract price but on the MRP. We do not wish to go into that question now at this juncture but we only clarify that if that is so, then the Department would be free to take action against the concerned assessees. All the learned Counsel for the assessees accepted that if at all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract price under Section 4 of the Act, the duty would be more than the duty paid under Section 4A(1) of the Act. The Tribunal, in all the three cases, has held in favour of the assessees holding that these cases would be governed by the decision of the Tribunal in ITEL Industries Pvt. Ltd. v. CCE reported in [2004 (163) E.L.T. 219] in which case the sale of telephones by the telephone manufacturing companies to DoT, MTNL BSNL was considered and it was held that the duty will be under Section 4A of the Act and not under Section 4. Relying on that decision, the Tribunal in Civil Appeal No. 2877/2005 has held in favour of the assessees. It is also held by the Tribunal that Rule 34(a) of SWM (PC) Rules would not be attracted in these cases. In short the Tribunal has held that these cases are identical with the cases involving the sale of telephone. We have already approved the judgment of the Tribunal pertaining to the sale of telephones in the earlier part of this judgment. We do not see any reason to take a different view in case of the Refrigerators. It was feebly stated by Shri Subba Rao that the assessees have paid the duty based on contract price and not on the MRP. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arallel with Jayanti Food's case and urged that the valuation is bound to be under Section 4 of the Act as the Tribunal had incorrectly held that the "package" would be a "retail package". Learned Counsel relied on the definition of "wholesale package" under Rule 2(x) of the SWM (PC) Rules and pointed out that the "package" in question came within the definition of "wholesale package" as there are a number of retail packages in the form of Mineral Water Bottles in that one package and further the said package is not intended for sale directly to a single consumer. These bottles which were of 200 ml. capacity were not meant for sale directly to a single consumer. He, therefore, urges that this matter was identical with Jayanti Foods' case and, therefore, we should take a view that the valuation should be on the basis of Section 4 and not under Section 4A of the Act as has been done by the Tribunal. Though the Tribunal has relied on the judgment passed by it in the case of Jayanti Foods, we find that there is no parallel in between Jayanti Foods and the present case. In a way there is a conflict in these two cases in the sense that while Jayanti Foods would want its valuation under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le package". Once that position is clear, there is no question of the applicability of Section 4 of the Act as the "package" as it is a retail sale of the package to the Jet Airways which supplies the same to the passengers on demand. Therefore, the contention of Shri Subba Rao has to be rejected that we should draw a parallel in this case with the appeal of Jayanti Foods and hold that Section 4 is applicable to the transactions. Once that position is clear, the "package" will be covered under Section 6 requiring the declaration of "retail sale price" which appears on the package. In this behalf we must take into consideration the definition of "commodity in packaged form" as provided in Section 2(b) of the SWM Act. The definition is as under : "2(b) "commodity in packaged form" means commodity packaged, whether in any bottle, tin, wrapper or otherwise, in units suitable for sale, whether wholesale or retail." Twelve bottles were packed in a wrapper and the wrapper contained the MRP price though the bottles themselves did not have the price. Therefore, we accept the view taken by the Commissioner (Appeals) and the Tribunal that the MRP was correctly mentioned and as such ..... 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