2008 (3) TMI 12 - SC - Central Excise

Central Excise MRP Based Valuation u/s 4A read with rule 34 and 12(2) of Standards of Weight & Measurement (Packaged Commodity) Rules, 1977 - Multi peace package of 3 pouches of 3 gms each provisions of MRP not applicable and valuation is do be done u/s 4 of Central Excise Act, 1944

Issues Involved:
1. Interpretation of Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977.
2. Applicability of Section 4 and Section 4A of the Central Excise Act, 1944.
3. Whether the commodity is sold by weight or measure and the implications for excise duty.
4. Validity of show cause notices issued under Section 11A of the Central Excise Act, 1944.
5. Relevance of the Circular Letter dated 2nd November, 1999 issued by the Central Board of Excise & Customs.
6. Applicability of the exemption clause under Rule 34(b) to multi-piece packages.
7. Analysis of conflicting judgments and their implications.

Detailed Analysis:

1. Interpretation of Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977:
The primary issue is the interpretation of Rule 34, which provides an exemption for packages containing commodities if the net weight is 10 grams or less. The court examined whether this rule applies to multi-piece packages where each individual piece meets the weight requirement but the combined weight exceeds it. The court concluded that Rule 34(b) applies to any package containing a commodity sold by weight or measure, provided the net weight is 10 grams or less.

2. Applicability of Section 4 and Section 4A of the Central Excise Act, 1944:
Section 4 deals with the valuation of excisable goods based on the normal price, while Section 4A pertains to valuation with reference to the retail sale price. The court determined that Section 4A would not apply if Rule 34(b) of the Standards of Weights and Measures Rules exempts the package from declaring the retail sale price. Consequently, the valuation should be carried out under Section 4.

3. Whether the Commodity is Sold by Weight or Measure and the Implications for Excise Duty:
The court noted that the commodity in question is sold in a multi-piece package, with each sachet containing less than 3 grams. The packaging disclosed both the individual and total weight, indicating an intention to sell by weight. This complies with Rule 12(2) and Schedule V, which allows for the sale of cosmetics by weight or measure.

4. Validity of Show Cause Notices Issued Under Section 11A of the Central Excise Act, 1944:
The respondent was served with multiple show cause notices demanding differential central excise duty, penalties, and interest. The court found that these notices were issued beyond the statutory period of six months, rendering them barred by limitation.

5. Relevance of the Circular Letter Dated 2nd November, 1999 Issued by the Central Board of Excise & Customs:
The Circular Letter clarified that multi-piece packages containing individual pieces of less than 10 grams or 10 ml are not exempt under Rule 34(b) if the total quantity exceeds these limits. However, the court found that this opinion was not based on legal principles and did not consider the implications of Rule 12 and the definition of "multi-piece package" under Rule 2(j).

6. Applicability of the Exemption Clause Under Rule 34(b) to Multi-Piece Packages:
The court held that Rule 34(b) applies to multi-piece packages if the net weight of each individual piece is 10 grams or less, provided the product is sold by weight or measure. This interpretation aligns with the plain language of the rule and the illustration provided in Rule 2(j).

7. Analysis of Conflicting Judgments and Their Implications:
The court reviewed conflicting judgments, including the Madras High Court's decision in Varnica Herbs and the Tribunal's decision in Urison Cosmetics Ltd. The court found the Madras High Court's reasoning unpersuasive and agreed with the Tribunal's interpretation that Rule 34(b) applies to multi-piece packages. The court also referenced its own decision in Jayanti Food Processing (P) Ltd., which emphasized the importance of statutory requirements for retail sale price declarations.

Conclusion:
The court upheld the appellate authority and the Tribunal's decisions, confirming that the respondent is entitled to the exemption under Rule 34(b) and should be assessed under Section 4 of the Central Excise Act, 1944. The show cause notices were deemed invalid due to being time-barred. The court dismissed the appeals related to the hair dye product but allowed the appeals concerning lip smoother and shampoo, emphasizing that these products are not typically sold in large multi-piece packages for retail sale.

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