2006 (1) TMI 269 - AT - Central Excise

MRP based valuation Section 4A retail packs Held that - that in the case of multi-piece package such a package should contain two or more individually packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole. In the case of a wholesale package, inter alia, it should contain 10 or more than ten retail packages provided that the retail packagers are labeled as required under the Rules. A harmonious construction of the three definitions would show that a unit package, which is consumed by the ultimate consumer, is a retail package; and a package which contains two such unit packages but not more than 9 such unit package, is a multi-piece package; and if a package which contains ten or more such unit packages, is a wholesale package. - goods are required to be packed and sold by weight, viz. Kgs. and not by numbers. - Under the circumstances, the packages under which the impugned products are sold by the appellants clearly fall within the exemption provided under Rule 34(1)(b) of the said Rules. goods can not be subject to MRP valuation

Issues Involved:
1. Applicability of Section 4A of the Central Excise Act, 1944 for valuation of confectionery.
2. Statutory requirement to declare Maximum Retail Price (MRP) on wholesale packages.
3. Classification of packages as retail or wholesale under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
4. Exemption under Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 for packages below 10 grams.
5. Interpretation of "multi-piece packages" and "wholesale packages."
6. Validity of penalties imposed by the lower authorities.

Issue-wise Detailed Analysis:

1. Applicability of Section 4A of the Central Excise Act, 1944 for valuation of confectionery:
The appellants argued that the valuation of confectionery should not be determined under Section 4A as there is no statutory requirement to declare MRP on individual pieces weighing less than 10 grams. The Tribunal noted that valuation under Section 4A can only be resorted to when the commodity is notified under Section 4A(1) and there is a statutory requirement to affix MRP. The Tribunal referred to several CBEC circulars clarifying that if there is no statutory requirement to declare MRP, the assessment should be done under Section 4, not Section 4A.

2. Statutory requirement to declare Maximum Retail Price (MRP) on wholesale packages:
The Tribunal examined the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which apply to packages intended for retail sale. Rule 3 of the Packaged Commodities Rules states that the provisions apply to packages intended for retail sale. The Tribunal concluded that since the wholesale packages were not intended for retail sale, there was no requirement to declare MRP on them.

3. Classification of packages as retail or wholesale under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977:
The Tribunal analyzed the definition of "wholesale package" under Rule 2(x) and "retail package" under Rule 2(p). It was found that the wholesale packages containing individual pieces of confectionery were meant for distribution in the trade and not for retail sale to the ultimate consumer. Therefore, the packages cleared by the appellants were classified as wholesale packages.

4. Exemption under Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 for packages below 10 grams:
The Tribunal noted that Rule 34 exempts packages containing commodities with a net weight of 10 grams or less from the requirement to declare MRP. Since the individual confectionery pieces weighed less than 10 grams, they were exempt from the MRP declaration requirement.

5. Interpretation of "multi-piece packages" and "wholesale packages":
The Tribunal rejected the Revenue's contention that the packages were "multi-piece packages" as defined under Rule 2(j) of the Packaged Commodities Rules. The Tribunal clarified that both the individual pieces and the package as a whole must be intended for retail sale to be classified as multi-piece packages. Since the wholesale packages were not intended for retail sale, they did not qualify as multi-piece packages.

6. Validity of penalties imposed by the lower authorities:
The Tribunal set aside the penalties imposed by the lower authorities, as the duty demands based on Section 4A were not upheld. The appeals were allowed, and the orders of the lower authorities were set aside.

Conclusion:
The Tribunal concluded that the confectionery cleared in wholesale packages was not subject to valuation under Section 4A of the Central Excise Act, 1944, as there was no statutory requirement to declare MRP on individual pieces weighing less than 10 grams. The appeals were allowed, and the penalties imposed by the lower authorities were set aside.

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