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CCE, Delhi Versus M/s Shakti Zarda Factory (India) Pvt. Ltd.

2017 (1) TMI 970 - CESTAT NEW DELHI

Valuation - Transaction value u/s 4 or MRP based value u/s 4A of Central Excise Act, 1944 - retail pouches containing tobacco weighing 6 gms. and 7 gms. each - The said pouches are then packed in a polythene pack. The polythene pack contained 52/ 42/40/32 pouches - when these chewing tobacco pouches containing less than 10 gms. of net weight were put together (12 to 52 numbers) in the polythene bag whether to consider such polythene bag as a multi piece pack or a wholesale pack? - Held that: .....

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s to the weight contained, either of toothpaste or powder inside the pack. The price is directly influenced by the weight of the content. The buyer and the seller is fully aware that the product is sold by its quantum though for convenience it is put in unit packages. Hence, it is clear that product like chewing tobacco is sold always with reference to the weight contained in the pouch though the pouch as a unit is sold. Accordingly, we are in agreement with the conclusion reached by the lower a .....

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r dated 28/02/2002 which clarified the scope of application of provision of Section 4A. It was noted that SWM Act, 1976 and Rules made thereunder are administered by the State Governments. In case of doubt a clarification may be obtained from the concerned Department of the State Government. In the present case, we note that for a situation covered by same set of facts, clarification was sought by the industry from the Legal Metrology Department. In response to letter dated 28/07/2003 of All Ind .....

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cted to as MRP based assessment under Section 4A - appeal dismissed - decided against Revenue. - Excise Appeals No. 1840 of 2007 with C.O. No. 232 of 2007 and E/2192 of 2007 with C.O. No. 155 of 2008 and E/59089 of 2013 with C.O. No. 61731 of 2013 - A/50362-50364/2017-EX[DB] - Dated:- 17-1-2017 - Shri S.K. Mohanty, Member (Judicial) And Shri B. Ravichandran, Member (Technical) Ms. Neha Garg, Authorized Representative (DR) for the appellant S/Shri R.K. Tiwari and P.S. Gupta, Advocates for the Res .....

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er the weight of the tobacco contained therein. The dispute in the present case relates to those retail pouches containing tobacco weighing 6 gms. and 7 gms. each. The said pouches are then packed in a polythene pack. The polythene pack contained 52/ 42/40/32 pouches. The respondent/assessee claimed that the tobacco cleared in 6 gms./7 gms. pouches are not covered by the provisions of Notification 10/2003-CE (NT) dated 01/03/2003. The Revenue contended that the polythene pack containing these ma .....

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red by above-mentioned rules and further the pouches containing multiple numbers of such retail tobacco pouches are to be considered as wholesale package and not a multi piece package for retail sale. The Original Authority confirmed the differential duty holding that the respondent/ assessee is liable to pay duty in terms of Section 4A and not on transaction value in terms of Section 4 of the Act. On appeal, the Commissioner (Appeals) set aside the original order and allowed the respondent/asse .....

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Tribunal vide final order No. 50895-50896 dated 19/02/2016. However, the Revenue filed an application for rectification of mistake in the said final order. It was prayed that the case laws relied upon by the Revenue were not mentioned and discussed in the final order. This amounts to error apparent on record and accordingly prayer was made for rectification of the said mistake. The application for ROM was allowed by the Tribunal vide miscellaneous order No. 51186 of 2016 dated 09/09/2016. Accor .....

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bility of Section 4A of the Act for the valuation of chewing tobacco with reference to retail sale price. Rule 34 of SWM PCR 1977 exempts application of these rules to certain packages. Packages containing a commodity with net weight of less than 10 gms. is not covered by these rules. Chewing tobacco is neither sold by weight nor sold by measure. It is sold in numbers. The respondent is packing chewing tobacco in 6 gms. and 7 gms. pouches. Many such pouches were to be again in polythene package. .....

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ackage. Wholesale package is a package containing a number of retail packages intended for sale to an intermediary and not intended for sale to a single consumer. 4. The learned AR also relied on the statements given by persons who are dealing with the product to reiterate that the multi piece packages are meant for retail sale. 5. The Revenue relied on the following decisions :- (i) Roys Industries Ltd. vs. CCE, Hyderabad reported in 2010 (259) E.L.T. 387 (Tri. LB) ; (ii) Arora Product vs. CCE, .....

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he commodity, declaration of number of retail pouches and price of each retail pouch as well as net quantity of tobacco contained in the package as required under Rule 29 of the SWM PCR 1977. These are nothing but wholesale packages and were not intended for retail sale. These package did not show MRP of the whole package. He reiterated that the inscription of these packages was, contain 52 retail pouches of MRP of rupee one each . This will factually show that this package as nothing but wholes .....

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obacco was sold with reference to weight in a pouch. The learned Counsel submitted that the Revenue recorded certain statements of a few persons and their deposition was mis-construed and relied upon selectively. Denial of cross-examination of these witnesses is legally not justifiable. Their statements given behind the back of the respondent cannot be quoted without giving opportunity to cross-examine them to bring out the correct factual position. The learned Counsel relied on the clarificatio .....

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d as wholesale packages and need not carry retail sale price declaration. 8. The learned Counsel for the respondent relied on the following decided cases :- (a) CCE, Rohtak vs. Gupta Tobacco Co. reported in 2010 (252) E.L.T. 271 (Tri. Del.) as affirmed by Hon ble Supreme Court reported in 2014 (301) E.L.T. A70 (S.C.); (b) Loknath Prasad Gupta vs. CCE, Kolkata III reported in 2006 (204) E.L.T. 412 (Tri. Kolkata) as affirmed by the Hon ble Supreme Court in 2010 (259) E.L.T. 5 (S.C.) ; (c) CCE, Vap .....

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s Pvt. Ltd. vs. CCE, Rajkot reported in 2006 (198) E.L.T. 565 (Tri. Mumbai) 9. We have heard both the sides and perused the appeal records. We note that, admittedly, chewing tobacco sold in pouches with MRP is covered by the provisions of Section 4A in terms of Notification 10/2003-CE (NT) dated 28/02/2003 which amended Notification 13/2002-CE (NT) dated 01/03/2002. However, the dispute is with reference to chewing tobacco contained in pouches of below 10 gms. net weight. The respondent/assessee .....

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ed under Section 4A it automatically attract MRP based assessment. We note that the various stipulations and statutory requirement as per the Standards of Weights and Measures Act, 1976 and Standards of Weights & Measures (Packaged Commodity) Rules, 1977 are to be examined. The legal provisions relevant to the present dispute as examined by the lower Authorities are reproduced below :- The applicable provisions of Standards of Weights and Measures Act, 1976, are :- Retail package means a pac .....

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s or the package as whole. [Rule 2 (j) of the Standards of Weights & Measures (Packaged commodities) Rule 1977] Rule 17 of the Standards of Weights & Measures (Packaged commodities) Rule 1977 lays down the additional declarations to be made on multi-piece package (1) Every multi-piece package shall bear therein, in addition to the declaration of (a) the number of individual piece contained thereto :- (b) the retail sale price of the multi-piece package; Provided that where individual pie .....

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smaller package. Chapter V of the Standard of Weights & Measures (Packaged Commodities) Rule 1977 relate to exemptions from the provisions of these rules. Rule 34 provided for exemption in respect of certain packages. The relevant provision contained in Rule 34 is to the following effect: Exemption in respect of certain package. (1) Nothing contained in these rules shall apply to any package containing a commodity if (a)……… (b) The net weight or measure of the commodity .....

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1976 or the rules made thereunder or under any other law for the time being enforced, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-Section (2) shall apply. It is apparent on reading the provisions of Section 4A and the notification issued thereunder that the assessment under Section 4A is linked to the provision of SWM Act, 1976. It is pertinent to note that the said Act and the Central Excise Act, 1944 were enacted for different purposes .....

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d under MRP based assessment the first one is requirements under SWM Act and rules made thereunder and the second one is notification under Section 4A of the Central Excise Act, 1944. Regarding the scope of SWM Act and its applicability for Section 4A assessment, we referred to the decision of the Tribunal in CCE, Nagpur vs. Sony Polymers Pvt. Ltd. dated 15th April, 2016 in appeal No. E/546 of 2007. The Tribunal observed as under :- 13. We would like to observe that the Standards of Weights and .....

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nufacturers, in the natural order of activities, undertake production and utilise channels for distribution of the products. A proprietorial interest is implicit in packaged products and manufacturers, generally, tend to clear goods that are intended for retail market in packages deliverable as such to customers, whether directly or through a channel of distribution. The consumer does not have the opportunity to use the senses to grade the goods against the wish-list in the mind. Nor is it possi .....

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specificity that a taxation statute is required to possess is not surprising. The definitions that distinguish the packaging to which the prescriptions apply should be viewed in that context. The objective being the protection of consumer interests, the prescriptions under the Rules are designed for declaration on the packing intended for delivery as such to the ultimate user. The manufacturer is not required to conform to the prescriptions on other packaging intended for convenience of handlin .....

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non-compliance and, since 2003, provided for re-assessment. The State cannot, except under health and safety laws, dictate the manner in which goods are to be delivered or received by the customer but it has prescribed the information content to be declared if the goods are delivered to the customer as pre-packaged with the consumer as the target of marketing. The gap between intent and the outcome is bridged by enforcement at the last point of sale. Other than display on the retail shelf, inte .....

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orities are not empowered to dictate or presume intention for retail sale. Nor can the prescription in Rules be insisted upon as a strategy to levy a higher amount of tax. 16. The definitions also make it clear that the manner in which the consumer chooses to buy the product is not germane to determination of applicability of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Retail packages do not pose the problem of applicability of Rules. Except to the extent that they .....

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e-sale distribution and the intent for retail distribution in the secondary packing is made apparent by declaring the retail sale price thereon. 17. The Rules supra were not notified with taxation as an objective. It predates the incorporation of section 4A in Central Excise Act, 1944. It is the manufacturer who is obliged under Central Excise Act, 1944 to discharge the duty liability and a harmonious construction of section 4A of Central Excise Act, 1944 and the Standards of Weights and Measure .....

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e secondary packing. Consequently, the packages are not multi-piece packages as it was, apparently, not the intent of the manufacturer to sell the goods to the ultimate consumer in the secondary packing. And as retail selling price is not declared on the secondary packages, section 4A of Central Excise Act, 1944 is not applicable. The pieces inside the secondary packing are, apparently, intended for sale only as individual pieces at the last point of sale to the ultimate consumer. 19. These indi .....

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ways perceived as purchasable only in numbers. That may be so from the point of view of the consumer but, in accordance with our discussion of this aspect supra, that viewpoint is not relevant to the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. The exemption provision in Rule 34 does expressly qualify the threshold of grammage and mililitrage with the clause if sold by weight or measure. The original authority has contrived to fit correction pens within the exclusion of .....

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shape of a pen, which is merely the container, with the material inside. Therefore, the sticks and pens containing commodities that are below the threshold prescribed for compliance with the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 are beyond the ambit of section 4A of Central Excise Act, 1944 . We are in full agreement with the above analysis and find that the issue in the present case can be examined and resolved on this background. 11. The Revenue relied on the dec .....

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kages. The Tribunal observed that the ratio of Swan Sweets Pvt. Ltd. (supra) is applicable to the sale of wholesale package and the ratio of Kraftech Products (supra) would apply to sale of multi-piece retail packages. If the total weight of multi-piece retail package is above 20 grams as in the said case, the MRP based valuation would apply. We note the case of the Revenue in the present proceedings is not supported by the reliance on the decision of the Tribunal in Roys Industries Ltd. (supra) .....

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n Sweets Pvt. Ltd. has since been affirmed by the Hon ble Supreme Court as reported in 2010 (259) E.L.T. 5 (S.C.). 12. Similarly, we find the reliance placed by the Revenue on the decision of the Tribunal in Arora Product (supra) and Radha Tobacco Co. (supra) is also not appropriate. In the said case, the assessee had affixed MRP in the multi-piece package and it was recorded that the intention is such that the multi-piece package was also for retail sale. In fact in Radha Tobacco Co. the assess .....

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applying the relevant definition. Here it is necessary to note the nature of product and the manner of transaction at the retail end of sale. Chewing tobacco is packed in small pouches of specific weight. There are different types of pouches carrying different quantity of chewing tobacco. The weight of such tobacco contained in the pouch is printed. The price is also accordingly fixed. Admittedly, the price fixed has direct relevance to the quantity of tobacco contained in the pouch. The conten .....

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e that the product is sold by its quantum though for convenience it is put in unit packages. Hence, it is clear that product like chewing tobacco is sold always with reference to the weight contained in the pouch though the pouch as a unit is sold. Accordingly, we are in agreement with the conclusion reached by the lower authority in the impugned order on this count. 13. In Gupta Tobacco Co. (supra), the Tribunal held that chewing tobacco was not capable of being sold in numbers but was sold in .....

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n detail, the implication of the terms intended for retail sale and sold to ultimate consumer . When the manufacturer intends the wholesale pack to be sold to a retailer and not to ultimate consumer the assessment under Section 4A is not sustainable. The said decision of the Tribunal was affirmed by the Hon ble Supreme Court, as mentioned earlier. 14. We also referred to Board Circular dated 28/02/2002 which clarified the scope of application of provision of Section 4A. It was noted that SWM Act .....

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