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TMI Blog2006 (1) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... g/selling the sugar confectionary (e.g. Toffy Max Caramel/Chocolate) is described as under : (a) Individual Toffy Max Caramel/Chocolate is wrapped in a printed plastic film. The weight of the individual Toffy Max Caramel/ Chocolate is about 4 gms., including the weight of the wrapper. (b) The Toffy Max Caramel/Chocolate are thereafter packed in wholesale pack. The wholesale packs either in the form of plastic jar or plastic bag. (c) The weight of the wholesale package is around 500 gms. in the case of Poly Bag and around 1 kg. in case of jar. (d) The MRP printed on the Individual Toffy Max Caramel/Chocolate is 0.50 Paise. (e) The whole sale pack in which the individual Toffy Max Caramel/Chocolate are packed carries, inter alia, the following declaration on it : Wholesale Package MRP 50 paise per piece (inclusive of all taxes) Net Weight 500 g (125 Units) Mfg. ........ Batch No. ........ Without affecting the Net Weight, occasionally, there could be variation in the number of units. 1.3 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the valuation formula prescribed vide Section 4A of the Central Excise Act, 1944 and these are not assessable under the provisions of the Notification No. 13/2002-C.E. (N.T.) thereunder. 1.7 Appeal Nos. E/2041 and 2042/04 of M/s. Cadbury (India) Ltd. were also heard, along with the above appeals, as these cases were also on identical nature and issues. 2.1 The issue in these cases is whether the confectionary cleared in separate individual pieces, each piece being exempt from the operation of the MRP Act and the Rules thereunder in terms of Rule 44(1)(b) of the MRP Rules when such individual pieces are cleared in whole packs of jar, boxes or pouches, as per the definition of Wholesale Package (Commodity) vide Rule 2(x) of the Standards Weights and Measures (Packaged Commodities) Rules, 1977 and the package being cleared not being covered as a multi piece package under Rule 2(j) of the MRP Rules and their assessment, therefore, under Section is correct. 2.2 All these appeals are being disposed of by this common order as the issue being the same. 2.3 Valuation under Section 4A of the Central Excise Act, 1944 can be resorted to when the commodity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for declaring the MRP on the packages by the manufacturer and such commodities are notified by the Government under Section 4A(1). It has also been clarified that even if an item is notified under a Notification issued under Section 4A(1), if there is no statutory requirement to affix MRP, then Section 4A cannot be resorted to. It is an obvious fact that in the trade all items are ultimately meant for sale to customers. The question is, whether in the form in which the goods are cleared are meant for retail sale or not? It is only such packs, which are intended for retail sale, are to be affixed with MRP and only in respect of such commodities, Section 4A will be applicable, if notified by the Government, for the purposes of Section 4A. The view of lower authorities that the moment the goods are notified under Section 4A(1), then the goods are liable to duty with reference to the MRP, cannot be upheld. 2.5 In Chapter 11 of the MRP Rules, Rule 2A states that provisions of the chapter shall apply to pre-packaged commodities except in respect of grains and pulses containing a quantity more than 15 kg. Rule 3 further clarifies that the provisions of this chapter shall appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules. (2) Where a commodity consists of a number of components and these components are packed in two or more units, for sale as a single commodity, the declaration required to be made under sub-rule 3(1) shall appear on the main package and such main package shall also carry information about the other accompanying packages". "Retail sale price" has been defined in Rule 2(r) as under : (r) "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on package, there shall be printed on the packages the words "Maximum or max. retail price.....inclusive of all taxes or in the form MRP Rs....... Incl. of all taxes". Explanation : For the purposes of the clause "maximum price" in relation to any commodity in packaged form shall include all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be. If the plastic jar or plastic bag, in which the Toffees are packed, are packa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate manufactured on behalf of NIL, it is found that the individual Toffy Max Caramel/Chocolate weighs about 4 gms, which is meant for retail sale in trade. The retail packs of Toffy Max Caramel/Chocolates are packed in wholesale package and each wholesale package weight would vary from 500 gms. to 520 gms. Such wholesale packages are cleared by the appellants to wholesale traders who in turn sell the packs to retailers. The retail traders break open such wholesale pack for retail sale. Therefore, the packs in which the appellants clear the Toffy Max Caramel/Chocolates are wholesale packages which are meant for the convenience of distribution in the trade and are not intended for retail sale to the ultimate consumer. Since per capita consumption of confectionary in India is 300 gms. per annum as submitted by the appellants and nothing contrary is shown. Therefore, it is not normal intent and feasible for a consumer to consume about 500 gms. of confectionary of the same flavor on one consuming occasion. Rule 2(p) of the Packaged Commodities Rules defines retail packages to mean - "a package containing any commodity which is produced, distributed, displayed, delivered or stored for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late to children at School or in neighbourhood to celebrate the birthday of a son. Such occasional purchase, if they shall take place, would not be a normal intended sale of Toffy Max Caramel/Chocolate. Therefore, 500 gms. pack of individual toffees in jar, box or pouch would not be a normal sale and will not cause for assessments for Central Excise purposes under Section 4A. 2.7 The findings and the view of the Revenue that product removed is a multi-pack also cannot be accepted, since the term 'multi-pack' is a work of art in MRP Rules and has to be interpreted in the fashion provided thereunder. It is relevant to note that the definition of 'wholesale package' has undergone various changes. Rule 2(x) of the MRP Rules was amended on 17-8-1999 vide the Standards of Weights and Measures (Packaged Commodities) (Second Amendment) Rules, 1999, wherein in Rule 2, Clause 10, after sub-clause 2, the following sub-clause was inserted, (iii) more than ten packages where total value of the retail packages exceed Rs. 100/- The above clause was amended once again vide Notification No. GSR 631(E), dated 21-7-2000 and the amended clause reads as under : (iii) p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the products involved herein, which are below 10 gms. weight individually, has been shown to us. Confectionary cleared from the appellants' factory have discharged duty under Section 4 of the Act on the packs intended for retail sale, which are below 10 gms. in weight in jars, boxes, poly bags/polyethylene bags, etc., in which the individual packs are kept/placed at the time of clearance, which are below 10 gms. are wholesale bags, which are not intended for retail safe. In fact, the Commissioner (Appeals) admits purchases by individuals of such bags to be an isolated rare occasion as recorded by him and not a norm. Such, packs are not required to declare MRP on them. Reading of Rule 34 under Chapter V of the MRP Rules is as under :- Chapter V "34. Exemption in respect of certain packages - Nothing contained in these rules shall apply to any package containing a commodity if - (a) ......... (b) the net weight or measure of the commodity is twenty grams or twenty milliliters or less, if sold by weight or measure. (Provided that the declaration in respect of maximum ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Individual units of sugar confectionary weighing 4 gms. approx. are packed in individual packages either with a wrapper around the confectionary or in the form of pillow packs/sachets and sealed. (ii) The retail packages of confectionary as described above are then packed into one of the following containers: (a) Wholesale jars containing about 720 grams and above, containing 216 to 250 pieces of confectionary approximately. (b) Wholesale pouches containing about 500 grams containing about 125 pcs. of sugar confectionary of the same flavour, which are clearly wholesale packages. These pouches are primarily used to refill jars lying with the retails. (iii) The appellants sell to HLL and others in bigger wholesale cartons containing about 36 poly bags/42 poly bags. These cartons are primarily meant for large wholesalers. (iv) HLL and others in turn sell the wholesale cartons containing the wholesale pouches to their Redistribution Stockists, who are large wholesalers of various foods and other products. The Redistribution Stockist has the option of selling directly to: (i)&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise Act, 1944. The Central Board of Excise & Customs had once again vide Circular No. 625/16/2002-CX., dated 28-2-2002, clarified that Section 4A of the Central Excise Act, 1944 applicable in respect of those cases only where the manufacturer is legally obliged to print the MRP on the packages of the goods, under the provisions of the Standards of Weights and Measures Act, 1976 or the Rules made thereunder or any other law for the time being in force. In the light of the clarifications given in the above Circulars, the appellants submit that, the CBEC had recognized the practice of sale of goods both under MRP as well as to buyers in bulk and the decision of the Ld. Commissioner (Appeals) to bring such clearances of wholesale packs within the ambit of retail packs for charging duty on the basis of MRP and the requirement of declaring the MRP on individual packages under Rule 6(1)(f) of the SWMR, is not tenable. (b) The appellants further submit that the valuation under Section 4A cannot merely be resorted to because of the production of goods are notified under the Notification issued under Section 4A(1), but is applicable only when there is a statutory requirement to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Act, 1944 or in the Central Excise Tariff Act, 1985. In the absence of the statutory definition of the word 'Consumer', it is necessary to understand the meaning of the term as defined in the dictionaries and as interpreted by the Courts, from time to time. The word 'Consumer' is defined in Black's Law Dictionary as follows : "One who consumes. Individuals who purchase, use, maintain and dispose of products and services. Users of the final product". The word "Consumer" has been defined in the book - Words and Phrases of Excise and Customs - 2nd Edition by S.B. Sarkar of Centax Publications Pvt. Ltd., New Delhi-110 003, as follows :- "Consumer means user of an article (Opp. Producer). Purchaser of goods or services. 'Consumer goods' means those used directly (especially domestically) not in manufacturing etc. - (page 366). The Pocket Oxford English Dictionary defines the word "Consumer" as follows :- "One who consumes, esp. One who uses a product; person who buys or uses goods or services". As explained above, in the instant case, the impugned wholesale packages containing the confectionary are sold to a retailer, who in turn sells individual pieces of the said conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of 10 numbers of such pouches/packages, therefore, are clearly exempt from the declaration of MRP. Any declaration of a recommended price is merely an advice to the wholesale trade or a voluntary declaration and cannot form the basis of valuation of these packages under Section 4A of the Central Excise Act, 1944. The status of such wholesale pouches of 500 gms. and that of the wholesale jars of 720 gms. as 'wholesale packages' is, therefore, very clear. The appellants further submit that while sugar confectionary is chargeable to duty on a MRP basis under the provisions of Section 4A, it is very clear that even under Section 4A, the declaration of MRP must be mandated by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. It is clear from the provisions of Rule 29 ibid, that wholesale packages need not bear the MRP. As explained above, the impugned goods are not normally purchased by an 'ultimate purchaser' as it is not feasible for such a consumer to consume candies of the same flavour on one consuming occasion. It is further submitted that small packages of confectionery weighting less than twenty grams if sold by weight are clearly exempt from the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4A of the Central Excise Act. Hence a declaration made under Rule 17(1) of the SWMR of certain additional details in respect of the impugned packages such as sale price and the number of individual pieces of the commodity contained in such packages is not tenable. It is, therefore, the submission of the appellants that these poly packs and pet jars weighing 500 gms. and 720 gms. and above are clearly "wholesale packages" as they are not purchased by retail customers/ultimate consumers. The decision in the impugned Order-in-Appeal that the exemption given in Rule 34(1)(b) of the PCR would not be available to the impugned products as the same are being sold in pieces/numbers and not by weight is completely misplaced in as much as the impugned products, as explained above, are cleared from the appellants' factory either in pouches of 500 gms. and in jars of 720 gms. and above which are sold in the wholesale market as such, which is a mandatory requirement that as per the National Industrial Classification, the sugar confectionary is required to be sold in Kgs., i.e. by weight. This clearly shows that the impugned goods are sold by weight in the market and not by pieces/number ..... X X X X Extracts X X X X X X X X Extracts X X X X
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