2007 (3) TMI 584 - AT - Central Excise

Summary

Issues:
1. Differential demand of duty and penalty based on valuation of goods under Section 4A of the Central Excise Act.
2. Interpretation of Packaged Commodity Rules, 1977 regarding the classification of goods as retail packs.
3. Applicability of exemption under Rule 34(1)(b) of the Packaged Commodity Rules to the goods in question.
4. Comparison of decisions by different benches and the applicability of legal provisions to determine exemption eligibility.

Issue 1 - Differential demand of duty and penalty:
The impugned order confirmed a duty demand of over Rs. 1.7 crores and imposed a penalty of Rs. 17 lakhs on the appellants. The demand was based on the valuation of goods under Section 4A of the Central Excise Act. The appellants sought waiver of pre-deposit and stay of recovery for the duty and penalty amounts. The goods in question were Hair Dye cleared in mono-cartons, each containing 6 sachets of 8 gms. The Revenue contended that the multi-pack of the commodity was not exempted from the Packaged Commodity Rules, leading to the demand. However, the appellants argued that each sachet should be considered a retail pack for exemption under Rule 34(1)(b).

Issue 2 - Interpretation of Packaged Commodity Rules:
A learned single judge of the Madras High Court held that the mono-cartons should be treated as retail packs, applying the Packaged Commodity Rules, 1977. The Division Bench stayed coercive recovery of duty pending a writ appeal by the appellants. The appellants argued that a crucial provision under the Standards of Weights & Measures Act was not considered by the single judge, affecting the judgment. The appellants cited a Larger Bench decision in the case of Urison Cosmetics Ltd., which found a similar product to be exempt from the Packaged Commodity Rules.

Issue 3 - Applicability of exemption under Rule 34(1)(b):
The appellants claimed exemption under Rule 34(1)(b) of the Packaged Commodity Rules, contending that their product should be exempted as it was sold by weight and each sachet contained less than 10 gms. of the commodity. The Tribunal considered the legal provisions, including entry no. 25 of the 5th Schedule to the Packaged Commodity Rules, supporting the appellants' claim for exemption.

Issue 4 - Comparison of decisions and legal provisions:
The Tribunal compared decisions by different benches, noting conflicting views on the exemption eligibility under the Packaged Commodity Rules. The appellants relied on decisions following the Larger Bench decision in Urison Cosmetics Ltd., while the Revenue cited a contrary view from another bench. The Tribunal acknowledged the need to examine the case in light of legal provisions, indicating a prima facie case for the appellants to claim exemption from the Packaged Commodity Rules and Section 4A.

In conclusion, the Tribunal granted the waiver of pre-deposit and stay of recovery for the duty and penalty amounts, considering the complexity and high stakes involved in the case. The appeal was scheduled for further hearing to delve deeper into the legal aspects and conflicting interpretations.