2017 (1) TMI 970 - AT - Central Excise

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 - there are two legal requirements for a commodity to be taxed 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. While the retail pouch may be sold in number, the sale is with reference to the weight of tobacco contained in the said pouch. As an analogy we can mention that toothpaste in tubes and talcum powder in packs are sold in numbers. But the reference is 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 authority in the impugned order on this count. In Loknath Prasad Gupta 2006 (8) TMI 58 - CESTAT, KOLKATA , the Tribunal held that 25 pouches of Khaini each containing 5 gms./9 gms. packed in polythene packs without MRP in such package is not governed by valuation under Section 4A. This order of the Tribunal has been affirmed by the Hon ble Supreme Court in Commissioner of Central Excise, Rajkot Versus M/s Makson Confectionery Pvt. Ltd. 2010 (9) TMI 10 - SUPREME COURT . Board Circular 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 India Tobacco Manufacturers Association, the Director of Legal Metrology, Department of Consumer Affairs, Government of India vide his letter dated 22/08/2003 clarified the legal position to the effect that all packages below 10 gms. are totally exempt from the purview of rules - Further, in accordance with Rule 2 (x) and Rule 29 the package containing 10 or more retail packages, common wholesale package, need not carry retail sale price declaration thereon. The impugned goods cannot be subjected to as MRP based assessment under Section 4A - appeal dismissed - decided against Revenue.

Issues Involved:
1. Central Excise duty liability based on Section 4A of the Central Excise Act, 1944.
2. Applicability of Notification 10/2003-CE (NT) dated 01/03/2003.
3. Classification of polythene packs containing multiple retail pouches as multi-piece or wholesale packages.
4. Interpretation of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977.
5. Eligibility for refund relief based on Commissioner (Appeals) orders.

Issue-wise Detailed Analysis:

1. Central Excise Duty Liability Based on Section 4A of the Central Excise Act, 1944:
The core issue is whether the chewing tobacco pouches weighing less than 10 grams should be assessed based on the Maximum Retail Price (MRP) under Section 4A or on the transaction value under Section 4 of the Central Excise Act. The Tribunal noted that the chewing tobacco pouches of less than 10 grams were cleared by the respondent/assessee and duty was discharged on the transaction value. The Revenue contended that these should be assessed based on MRP, arguing that the polythene packs containing multiple pouches should be considered as multi-piece packages.

2. Applicability of Notification 10/2003-CE (NT) dated 01/03/2003:
The Tribunal acknowledged that chewing tobacco sold in pouches with MRP is covered by Section 4A in terms of Notification 10/2003-CE (NT). However, the dispute revolved around whether the pouches below 10 grams net weight fall under this notification. The Tribunal emphasized that the applicability of Section 4A is contingent upon the provisions of the Standards of Weights and Measures Act, 1976 and the associated rules.

3. Classification of Polythene Packs Containing Multiple Retail Pouches:
The Tribunal examined whether polythene packs containing multiple retail pouches should be classified as multi-piece packages or wholesale packages. It was argued by the respondent that these polythene packs, which contain pouches of 6 grams and 7 grams, are wholesale packages, not intended for retail sale, and thus should not be assessed based on MRP. The Tribunal found that the polythene packs did not bear the MRP for the whole package, supporting the respondent's classification as wholesale packages.

4. Interpretation of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977:
The Tribunal referred to various definitions and rules under the Standards of Weights and Measures (Packaged Commodity) Rules, 1977, particularly Rule 34, which exempts packages containing commodities with net weight less than 10 grams. The Tribunal also cited previous judgments and clarifications from the Department of Legal Metrology, which supported the exemption of such packages from MRP-based assessment. The Tribunal emphasized that the intent of the manufacturer and the nature of the packaging are crucial in determining whether a package is for retail or wholesale.

5. Eligibility for Refund Relief Based on Commissioner (Appeals) Orders:
The Tribunal upheld the Commissioner (Appeals) order, which allowed for consequential refund relief to the respondent/assessee based on the finding that Section 4A was not applicable to the clearances made. The Tribunal found that the refund should be granted after due scrutiny of documents as per applicable provisions.

Conclusion:
The Tribunal dismissed the appeals filed by the Revenue, finding no merit in their arguments. The Tribunal upheld the classification of the polythene packs as wholesale packages and not subject to MRP-based assessment under Section 4A. The decision also affirmed the eligibility for refund relief as determined by the Commissioner (Appeals). The Tribunal's order emphasized the importance of the Standards of Weights and Measures Act and the associated rules in determining the applicability of MRP-based assessment.

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