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TMI Blog2011 (4) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... 1944. Declaration of retain sale price - the same goods in some cases may require to bear the declaration as stipulated under Rule 6 (1) (f) of the Packaged Commodities Rules, some other goods of the same class but not intended for retail sale may be exempted from the obligation for a declaration of retail sale price. Consequently the mode of assessment and the incidence of duty would be different in respect of goods identical in shape, size, functions, & packing but declared for a different use. It is likely that at different points of time and having regard to the market conditions, duty leviability may be more if goods are intended for retail sale or vice versa. This places an additional responsibility on the applicant for making a true and correct declaration at the time of import and to ensure that the goods are used for the purpose for which the declaration is made and that there is no diversion from one intended use to another. Calculation of CVD - (i) Products intended for providing certain specialized end to end service - (ii) Products for internal and captive use of the applicant. - (iii) Free samples - (iv) Free replacement under warranty arrangements - Value to be dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service agreement or sold out to "large customers". As per the proposed activity, it is stated that it would also be known to the applicant at the time of such clearance that the products proposed to be imported would be used for display, as free samples or for replacement of defective machines. 3. It is submitted by the applicant that where the imported products are not intended for retail sale, additional duty of customs leviable under sub-section (1) of Section 3 of the Customs Tariff Act, 1975 should not be based on the Maximum Retail Price (MRP) of the products, irrespective of whether it is printed on the package before clearance. The applicant submits that in law, the MRP need not be printed on such products even under the Standards of Weights and Measures Act, 1976 (hereinafter referred to as the SWM Act) or the rules made thereunder, namely the Standards of Weights and Measures (Packaged Commodities) Rules, 1977(hereinafter referred to as the Packaged Commodities Rules), if the products are not meant for retail sale and are declared as such at the time of clearance. According to the applicant therefore, the additional customs duty under Section 3 of the Customs Tariff Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the outer package thereof. The imported equipments could be installed either at the client‟s premises or at the applicant‟s own premises. The products would be capitalized in the books of accounts of the applicant. The applicant will be responsible for upkeep and maintenance of the equipment, supply of parts and consumables required therein and generally provide support in the operations thereof. The applicant undertakes to furnish at the time of import the requisite contract / correspondence evidencing the arrangement for provision of services as aforesaid. B. Sale of products to large customers: Such customers would include Government Departments, institutional, commercial, industrial users and service providers such as DGS&D, EIH, LANCO etc.. These customers will buy the products for their end use and not for any resale and trading thereof. The products will carry a declaration on the outer packing "Products not meant for Retail Sale". The applicant undertakes to furnish at the time of import the requisite contract / correspondence evidencing the aforesaid arrangement. C. Internal and captive use of the products in the applicant's premises: The products in this cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to the said sub-section (2) which is relevant for the matter before us. Proviso to sub-section (2) of Section 3 of CTA, 1975 reads as follows:- "Provided that in case of an article imported into India,- (a) in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such article; and (b) where the like article produced or manufactured in India, or in case where such like article is not so produced or manufactured, then, the class or description of articles to which the imported article belongs, is the (i) goods specified by notification in the Official Gazette under sub-section (1) of section 4A of the Central Excise Act, 1944(1 of 1944), the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale price as the Central government may, by notification in the Official Gazette, allow in respect of such article under sub-section (2) of section 4A of that act or (ii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bear thereon in the prescribed manner the "retail sale price" of the package. As per clause (r) of rule 2 of the Packaged Commodities Rules "retail sale price" has been defined as follows: (r)"Retail sale price" means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer……………." As per Rule 2 A of the Packaged Commodities Rules, the said Chapter II does not apply to institutional and industrial consumers. In the explanation to the said rule 2A these terms have been defined as follows,:- "(a) Institutional consumer:- Means those consumers who buy packaged commodities directly from the manufactures / packers for service industry like transportation [ including airways, railways ], hotel or any other similar service industry. (b) Industrial consumer. - Means those consumers who buy packaged commodities directly from the manufacturers / packers for using the product in their industry for production, etc." Rule 3 of the Packaged Commodities Rules further provides that the provisions of said Chapter II "shall apply to packages intended for retail sale……" The expression "retail sale" has been defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of retail price per se is required merely because a package is an imported package. The applicant has pointed out that prior to its amendment on 13.1.2007 Rule 33 specifically applied to packaged commodities imported into India and there was a requirement to declare on all pre packaged items imported into India the retail sale price as per clause (r) of Rule 2. However, the requirement of declaration to be made on every package was specifically excluded in terms of Rule 33 (4) as it then stood. The said Rule 33 has been omitted with effect from 13.1.2007 "confirming the position that in respect of imported packages that are not intended for retail sale there is no obligation to mark the retail sale price and hence the provisions of Section 4 A of the Central Excise Act cannot be attracted". 9. The Departmental Representative (DR) appearing on behalf of the Commissioner has contested the arguments made on behalf of the applicant. It has been submitted that the application for advance ruling itself is not maintainable because the proposed import of goods identical to the goods previously imported cannot be considered as an "activity which is proposed to be undertaken" by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a package. Hence according to the DR the status of individual packages cannot determine whether or not the provisions of SWM Act are attracted or not. Industrial consumer has been defined in Chapter II to mean a consumer who buys packed commodities directly from the manufacturers / packers for using the product in their industry for production etc. The DR submitted that the applicant is neither a manufacturer nor a packer which can be said to be supplying the goods to industrial consumers within the definition in Chapter II. Hence these deliveries to the so called industrial consumers are not exempt from the provision of the SWM Act or Rules made thereunder. Further the goods supplied by the applicant are not going to be used as raw materials consumables or inputs so as to enable the receivers of these goods to be classified as industrial consumers. 12. Before coming to the merits of the issue requiring a determination, it is felt necessary to deal with some of the preliminary objections raised by the Departmental Representative. It has been claimed that the application for advance ruling is not maintainable because many of the items are already being imported by the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backs, refunds & exemption from duties shall apply to the duty chargeable under Section 3 of CTA, 1975 as they apply in relation to duties leviable under the Customs Act. As can be observed the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975 are so inextricably linked that it is not proper to interpret Section 28H of the Customs Act, 1962 in a narrow sense as has been sought to be done by the Departmental Representative. Value of imported goods for levy of additional duty of custom is again dependent on the value of goods under Section 14 of the Customs Act, 1962. Moreover, it cannot be denied that had the same questions been posed by an applicant in relation to the same goods manufactured and cleared from a factory within the country, these would squarely be within the jurisdiction of the Authority in terms of sub-section (2) of Section 23C of the Central Excise Act, 1944. The provisions of Section 4A of the Excise Act are similar to the provisions of the proviso to sub-section (2) of Section 3 of the CTA, 1975. We do not therefore think It proper to deny a ruling to the applicant on the questions raised. Proviso to sub-section (2) of Section 3 of the CTA, 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. The Hon‟ble Supreme Court in its judgment in the case of M/s Jayanti Food Processing (P) Ltd vs Commissioner of Central Excise, Rajasthan [2007(215)ELT 327 (SC)] has observed as follows:- "The requirement of rule 6(1) (f) is specific. It requires the retail sale price of the package be printed or displayed on the package. If there is no sale involved of the package, there would be no question of rule 6 (1) (f) being attracted." In view of this interpretation it is difficult to accept the contention of the DR that all packaged commodities whether meant for captive consumption or for servicing are required to bear the declaration pertaining to maximum retail price. We are also unable to accept the proposition that "institutional consumers" and "industrial consumers" which have been kept out of the applicability of Chapter II of the Packaged Commodities Rules are the only two excluded categories. The obligation to indicate the retail sale price arises only in respect of packages intended for retail sale. Once the obligation has been established, the law has exempted sales made to "institutional consumers" and the "industrial consumers", as defined in the Packaged Commodit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards of Weight and Measures (Packaged Commodities) Rules, 1977 when produced / packed / sold in domestic market shall be subject to compliance of all the provisions of said rules, when imported into India. Therefore whatever is the obligation for making a declaration in respect of packaged commodities produced or manufactured within India under SWM Act or Rules made thereunder has to be discharged in respect of packaged commodities imported into India. 16. The Departmental Representative has also claimed that since the goods have landed in India as a result of a sales transaction between the buyers in India and the seller abroad, these goods satisfy the requirement of rule 3 regarding Chapter II being applicable to packages intended for retail sale. This argument is without any basis because as per sub rule (3) of Rule 1 of the Packaged Commodities Rules the said rules apply to commodities in the packaged form which are intended to be sold in the course of inter-State trade and commerce. The transaction between the foreign supplier and the Indian buyer is a transaction in the course of International Trade and not inter-State trade. The said import transaction by the applicant by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price in terms of the proviso to the said sub-section (2) is determined in respect of each of the categories of business activities of the applicant as follows: A. Providing certain specialized end to end services: As per the information furnished by the applicant and summarized in clause A of paragraph 5 of this ruling, the goods in this category are not intended for sale; these would be used for providing services. In the circumstances there is no requirement under Rule 6 (1) (f) of the Packaged Commodities Rules to declare the retail sale price on the package. Consequently the proviso to sub-section (2) of Section 3 of CTA, 1975 is not applicable in respect of this category of goods. The additional duty of customs would therefore be leviable by applying the provisions of the main sub-section (2) of the said Section 3 i.e the aggregate of the value of the imported goods determined under sub-section (1) of Section 14 of the Customs Act, 1962 and duty of customs leviable under Section 12 of the said Customs Act or under any other law for the time being in force (transaction value method). B. Sale of equipment to large customers: In this category the applicant proposes to supply th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. The Government departments and other large customers cannot be categorized as industrial consumers also because they are not going to put these products for use in any industry for production etc. In view thereof, the benefit of exclusion clause under rule 2 A is not available to the applicant in respect of sale of products to large customers which may include Government departments, commercial users and service providers etc. For the products covered by this category of imports, the provision of rule 6(1)(f) are squarely applicable and as such the applicant would be required to declare the retail sale price on the packages intended for sale to Government departments and other large customers. In that event the value of the imported goods for the levy of additional duty of customs would need to be determined on the basis of retail sale price by applying the proviso to sub-section (2) of Section 3 of CTA, 1975, that is, the MRP based assessment. C. Captive use of the products in the applicant's premises: In this category of the proposed business activity also the products are not intended for retail sale but would be used by the applicant within its own business premises for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14 of Customs Act and duty of customs chargeable thereon under sub-section (1) of Section 12 of the said Act or under any other law for the time being in force, that is, the transaction value method. 19. As may be observed from the aforesaid analysis, the same goods in some cases may require to bear the declaration as stipulated under Rule 6 (1) (f) of the Packaged Commodities Rules, some other goods of the same class but not intended for retail sale may be exempted from the obligation for a declaration of retail sale price. Consequently the mode of assessment and the incidence of duty would be different in respect of goods identical in shape, size, functions, & packing but declared for a different use. It is likely that at different points of time and having regard to the market conditions, duty leviability may be more if goods are intended for retail sale or vice versa. This places an additional responsibility on the applicant for making a true and correct declaration at the time of import and to ensure that the goods are used for the purpose for which the declaration is made and that there is no diversion from one intended use to another. The applicant would no doubt be mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the First Schedule to the Customs Tariff Act, 1975 and used for the following business activities details of which have been specified in para 5 will be assessed to additional duty of customs on the basis of a value which shall be the aggregate of the value determined under sub-section (1) of Section 14 of the Customs Act, 1962 and Customs duty leviable under sub-section (1) of Section 12 of the Customs Act, 1962 or under any other law for the time being in force, under the main sub-section (2) of Section 3 of CTA, 1975. (i) Products intended for providing certain specialized end to end service. (ii) Products for internal and captive use of the applicant. (iii) Free samples (iv) Free replacement under warranty arrangements The aforesaid goods would be leviable to Special Additional Duty under sub-section (5) of Section 3 of CTA, 1975; no exemption is available to such goods under Notification No. 29/2010 dated 27.2.2010. In respect of the following activities however, imported products will be assessed to additional duty of customs on the basis of the retail sale price in terms of the proviso to sub-section (2) of Section 3 of CTA, 1975. (i) Products intended for sale to Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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