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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 ..... e products became known to the applicant in some cases at the time of clearance for home consumption, and in some cases, the same was known only at a point of time subsequent to the clearance for home consumption. 2. In the application for advance ruling and further written submissions filed by the applicant, it is stated that the applicant proposes to import, sell and supply specific high performance and latest technology office automation, information technology and electronic products classifiable under Chapter headings 8517, 8528, 8443 and 8472 of the First Schedule to the Customs Tariff Act, 1975. However, under the proposed activity, the applicant wants to import the equipments based on the orders received from the clients for provision of services or under service agreements, as the case may be, as well as negotiations in the form of proposals, correspondence etc. with the prospective clients. It would be definitely known to the applicant at the time of clearance for home consumption that the products proposed to be imported by the applicant, would either be supplied to the clients under the service agreement or sold out to "large customers". As per the proposed activity, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainly in respect of multifunctional devices and printers classifiable under headings 8443 31 90 and 8443 32 90 respectively of the First Schedule to the Customs Tariff Act, 1975. The multifunctional devices are claimed to perform two or more of the functions of printing, copying or facsimile transmission and are capable of connecting to an automatic data processing machine or network. The proposed business activities have been classified by the applicant into various categories as follows:- A. Providing certain specialized end to end services: After importation, the aforesaid products would be installed at the premises of clients who have entered into agreement with the applicant for providing end to end services. These clients could be either large corporates from service industry, financial institutions, consultancy firms, large printers & jobbers which will use the applicant‟s services and goods either for providing services to their customers or for generating print out material such as brochure, leaflets etc.. The equipments would bear the declaration "Products not meant for Retail Sale" on the outer package thereof. The imported equipments could be installed either at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in retail since the same would be used for free replacement under warranty arrangements. Apart from aforesaid categories, the applicant would continue to be engaged in the business of retail sales of such products. 6. Additional duty of Customs on imported articles is leviable under sub-section (1) of Section 3 of the Customs Tariff Act, 1975 [CTA, 1975] and is equal to excise duty for the time being leviable on a like article if produced or manufactured in India. If such excise duty on a like article is leviable at any percentage of its value the additional duty of customs shall be calculated at that percentage of the value of the imported article. Sub-section (2) of the said Section 3 of CTA, 1975 prescribes the manner of calculating the value of imported article for levy of additional duty. It lays down that the value of imported article shall be the aggregate of (i) the value of the article determined under Section 14 of the Customs Act, 1962 and (ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 or any other law (with some exceptions). It is, however, the proviso to the said sub-section (2) which is relevant for the matter before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the proviso to the said sub-section (2). This would in turn require a determination whether the applicant is required to declare the retail sale price on the goods sought to be imported for its various categories under the provisions of SWM Act, 1976 and rules made thereunder The other stipulation for the applicability of the MRP based assessment is fulfilled since the applicant has declared in the application that all the equipments proposed to be imported by it have been notified under sub-section (1) of Section 4A of the Central Excise Act, 1944. 7. Since the levy of the additional duty of customs under the CTA, 1975 is dependent on the requirement or otherwise of a declaration of the retail sale price on the package, it is necessary to examine the provisions of the SWM Act and the rules made thereunder. Chapter II of the Packaged Commodities Rules framed under SWM Act contains various provisions relating to packages intended for retail sale. Rule 6 (1) (f) of the Packaged Commodities Rules under the said Chapter II requires every package intended for retail sale to bear thereon in the prescribed manner the "retail sale price" of the package. As per clause (r) of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f term "retail package" by virtue of the definition of retail package given in clause (p) of Rule 2 of the Packaged Commodities Rules. The said clause reads as follows,: "(p) "retail package" means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages: Provided that for the purposes of this clause, the expression "ultimate consumer" shall not include industrial or institutional consumers." It has been contended therefore that in respect of bulk supplies to Government and other institutions for the purpose of Rule 2(p) a broader meaning has to be assigned. Further, the explanation under Rule 2 A defining institutional and industrial consumers will come into play only if Chapter II becomes applicable. According to the applicant this is not so in the present case and if the supplies are not to the ultimate consumers then there will be no marking of retail sale that would be required. The applicant has also emphasized that no declaration of retail price per se is required merely because a package is an imported package. The applicant has pointed out that prior to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the goods for the purposes of levy of additional duty intended for captive use, servicing, sales to Government departments etc. 11. Referring to the definition of the expression "retail package" as per clause (p) of Rule 2 of the Packaged Commodities Rules, it has been contended by the DR that any imported packages in whatever form shall always get classified as a retail packages and provisions of the Packaged Commodities Rules would get applied. It was also submitted that even though Rule 3 declares that provision of Chapter II shall apply only to packages intended for retail sale, the imported packages would be covered within the ambit of the said Chapter II because they have already been sold before their importation. It was implied that imported packages have landed in India only after the sale has been affected and thus are subject to provision of Chapter II in view of the definition of "retail package" in clause (p) of Rule 2. The expression "retail sale" has been defined in Clause (q) of Rule 2 in relation to commodity and not in relation to a package. Hence according to the DR the status of individual packages cannot determine whether or not the provisions of SWM Act ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that under Section 28H, sub-section (2), clause ( c ), the Authority can entertain questions pertaining to the principles to be adopted for the purposes of determination of value of the goods under the provisions of the Customs Act, 1962. The ruling has however been sought in respect of additional duty of customs which is leviable under sub-section (1) of Section 3 of CTA 1975. The additional duty of customs is equal to excise duty for the time being leviable on a like article produced or manufactured in India. Sub-section (2) of said Section 3 lays down the manner of computation of value of the imported goods chargeable to additional duty on ad valorem basis. Such a value has been specified to be the aggregate of value of the imported article determined under sub-section (1) of Section 14 of the Customs Act and the duties of customs chargeable under the Customs Act or under any law for the time being inforce. Sub-section (8) of Section 3 of the CTA, 1975 further provides that the provisions of the Customs Act, 1962 including those relating to drawbacks, refunds & exemption from duties shall apply to the duty chargeable under Section 3 of CTA, 1975 as they apply in relation to dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale price" means the maximum price at which the packaged commodities may be sold to the ultimate consumers. By virtue of the provisions of rule 3, Chapter II [of which rule 6 is a part] applies only to packages intended for retail sale. The conclusion that is obvious from the aforesaid provisions of the Packaged Commodities Rules is that a declaration regarding retail sale price in terms of rule 6 needs to be made only in respect of packages intended for retail sale. There is no requirement for such a declaration in respect of packages which are not intended for retail sale. It is to be noted that retail sale has been defined in clause (q) of rule 2 in relation to a commodity to mean the sale, distribution or delivery of said commodity. The declaration under rule 6 is required to be made in respect of package not only for sale but also for distribution or delivery; however, the declaration relating to the retail sale price would be required to be made under clause (f) of sub-rule(1) of the said rule 6 only in respect of packages intended for retail sale. The Hon‟ble Supreme Court in its judgment in the case of M/s Jayanti Food Processing (P) Ltd vs Commissioner of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted packages which are intended for retail sale to the ultimate consumers for the purpose of consumption of the commodity contained therein would also be deemed as retail packages. Imported packages have also to satisfy the criteria of "intended for retail sale" to be categorized as retail package. In any case the term "retail package" has not been used in rule 6 (1) (f) requiring declaration to be made on a package. It has also not been used to define "retail sale price" or even the "retail sale". The requirement to make a declaration is not affected directly by the fact whether or not goods are covered by definition of retail package. We may hasten to add that the apart from the provision of the Packaged Commodities Rules, the requirement of indicating declaration on the imported packages also flows from the provisions of the Foreign Trade (Development and Regulation) Act, 1992 and the instruments made thereunder. As per Notification No. 44(RE-2000)/1997- 2002 dated 24.11.2000, all packaged products which are subject to the provisions of the Standards of Weight and Measures (Packaged Commodities) Rules, 1977 when produced / packed / sold in domestic market shall be subject to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is requirement under the SWM Act or the rules made thereunder to declare the retail price on the packages. The fact that legally it is not required in certain cases to declare the price and yet it proceeds to do so would not make the applicant ineligible for the transaction based assessment. Even the Supreme Court in the case of Jayanti Food Processing (P) Ltd has observed that if there is no requirement under SWM Act or the rules made thereunder for declaration of MRP on the packages, then there would be no question of applicability of Section 4 A of the Central Excise Act, 1944. Even if the assessee voluntarily displays on the pack the MRP, that would be of no use if otherwise there is no requirement under SWM Act and the rules made thereunder to declare such a price. 18. In view of the aforesaid analysis the question whether or not the goods would require to be assessed to additional duty of customs on the basis of transaction value as prescribed under the main sub-section (2) of Section 3 of the CTA, 1975 or on the basis of the maximum retail 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in rule 2 A to be those consumers who buy packaged commodities directly from the manufacturers / packers for service industry like transportation (including airways, railways), hotel or any other similar service industry. The applicant has informed vide its letter dated 4th Feb., 2011 that it "understands" that the customers in this category would purchase the equipment for their own use and not for resale or trading. There is no declaration from the applicant as regards the proposed use to which these equipments would be put to by the buyers. Since these equipments are not meant for service industries like transportation, hotel or any other similar service industry in the hands of Government departments or other large customers, these buyers cannot be categorized as "institutional consumers" for the purposes of the packaged commodities. Likewise the term "industrial consumers" under rule 2 A refers to those consumers who buy packaged commodities directly from the manufacturers/ packers for using the product in their industry for production, etc. The Government departments and other large customers cannot be categorized as industrial consumers also because they are not goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Packaged Commodities Rules. Consequently the goods would need to be assessed to additional custom duty on the basis of retail sale price indicated thereon as stipulated in the proviso to sub-section (2) of Section 3 of CTA, 1975, that is MRP based assessment. In the case of goods that are intended to be distributed as free samples, since no sales are involved, there would be no need for declaration of retail sale price in terms of Rule 6 (1) (f) of the Packaged Commodities Rules and consequently such free samples also would be assessed to additional duty of customs on the basis of transaction value method. E. Free Replacement: The imported equipment is proposed to be used as free replacement under warranty arrangements. In the case of such goods since no sale is intended, the goods will not be required to bear the declaration under Rule 6(1) (f) of the Packaged Commodities Rules. Consequently the assessment to additional duty on such goods would be on the basis of the aggregate of value of imported goods determined under sub-section (1) of Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment has by notification no. 19/2006-Cus dated 1/3/2006, directed that all goods specified in the First Schedule to the CTA, 1975 be liable to the said additional duty at the rate of 4% ad valorem. However, by a notification no. 29/2010-Cus dated 27.2.2010; the following goods have been exempted from the levy of this duty, namely: "All pre-packaged goods intended for retail sale 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 package therefore the retail sale price of such article". In view of the aforesaid exemption goods imported by the applicant which are required to bear a declaration under the provisions of SWM Act and the Packaged Commodities Rules would be exempt from the levy of SAD; all other imported articles would be leviable to SAD. 22. Accordingly in conclusion the multi-functional devices and printers classifiable under heading 8443 31 90 and 8443 32 90 respectively of the First Schedule to the Customs Tariff Act, 1975 and used for the following business activities details of which have been specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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