2024 (7) TMI 476 - SC - Central Excise

Method of Valuation - Section 4 or Section 4A of the Central Excise Act, 1944 - denial of exemption under Rule 34(b) on the ground that the poly pack contains a quantity of more than 10 gms of chewing tobacco - whether the packages made by the respondent-assessee are such that under the said Rules, there is a requirement to declare the retail price of the goods on the packages? - HELD THAT - The Commissioner held that an HDPE bag containing 100 poly packs does not contain a declaration of selling price and therefore, it would be a wholesale package. There is no finding recorded that what is distributed or sold by the respondent is a poly pack containing 33 plus one small pack. The respondent s case that 100 poly pack packages are being put in one HDPE bag has been accepted by the Commissioner. Therefore, the respondent is selling HDPE bags containing 100 poly packs each to the distributors and dealers. The said Rules do not require the display of price on such HDPE bags. Even assuming that 100 poly packs were retail packages, HDPE bags would be covered by the definition of wholesale package as defined in clause (iii) of Rule 2(x) of the said Rules. Thus, the HDPE bags are not group packages within the meaning of Rule 2(g). The impugned judgment is not satisfactorily worded, the ultimate conclusion recorded in the impugned judgment that Section 4A(1) of the Excise Act was not applicable to the goods subject matter of the show cause notices, cannot be faulted with - there is no reason to interfere with the impugned judgment - Appeal dismissed.

Summary

Issues Involved:
1. Applicability of Section 4 or Section 4A of the Central Excise Act, 1944.
2. Classification of goods as group packages or wholesale packages under the Standards of Weight & Measures (Packaged Commodity) Rules, 1977.
3. Requirement of declaring Maximum Retail Price (MRP) on the packages.

Issue-wise Detailed Analysis:

1. Applicability of Section 4 or Section 4A of the Central Excise Act, 1944:
The primary issue was whether the goods sold by the respondent-assessee should be valued under Section 4 or Section 4A of the Central Excise Act, 1944. The proceedings were initiated based on show cause notices issued to the respondent-assessee, alleging that the respondent was packing chewing tobacco in poly packs and HDPE bags, each containing 33 small pouches of 6 grams and one pouch of 15 grams. The notices claimed that the larger poly packs, marked with MRP, were intended for retail sale and thus should be valued under Section 4A. The Tribunal, however, set aside the Commissioner's order, concluding that the goods were not intended for retail sale and thus Section 4A was not applicable.

2. Classification of Goods as Group Packages or Wholesale Packages:
The show cause notices alleged that the larger poly packs were group packages intended for retail sale, as defined under Rule 2(g) of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977. The respondent contended that the poly packs and HDPE bags were wholesale packages under Rule 2(x) of the said Rules, as they were sold to distributors or dealers and not directly to consumers. The Commissioner initially held that the poly packs were intended for retail sale due to the MRP declaration, but the Tribunal disagreed, stating that the poly packs were not intended for retail sale.

3. Requirement of Declaring Maximum Retail Price (MRP) on the Packages:
The Commissioner's order emphasized that the poly packs contained declarations in terms of Rules 6 and 16, which are part of Chapter II of the said Rules, applicable to packages intended for retail sale. The Commissioner argued that the presence of MRP on the poly packs indicated an intention for retail sale. However, the Tribunal found that the respondent's practice of packing 100 poly packs into one HDPE bag, which did not declare the sale price, classified the HDPE bags as wholesale packages. Consequently, the requirement to declare MRP on the poly packs did not mandate the application of Section 4A.

Conclusion:
The Supreme Court upheld the Tribunal's decision, concluding that the HDPE bags containing 100 poly packs were wholesale packages and not group packages intended for retail sale. Therefore, the provisions of Section 4A of the Central Excise Act, 1944, were not applicable to the goods in question. The appeals were dismissed with no order as to costs.