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TMI Blog2016 (2) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate with Shri C. Nand Gopal Prithviraj Chaudhari, Advocate ORDER PER: M.V. RAVINDRAN This appeal is filed by the Revenue against Order-in-Original No. 05/CEX/2010 dated 5.3.2010 passed by the Commissioner of Central Excise), Pune-I. 2. The relevant facts that arise for consideration, after filtering out the unnecessary details, based upon information, officers of Directorate General of Central Excise Intelligence (DGCEI), Pune visited the factory of the respondent on 17.9.2008/18.9.2008. After recording statements of various individuals and responsible officers of the respondent, it was noticed by the officers that respondents were undervaluing the products which are sold to Salon by resorting to discharge the duty liability on the said products which are termed as technical products (hereinafter referred to as products) without assessing them under the provisions of Section 4 of the Central Excise Act and assessing the same under the provisions of Section 4A of the Central Excise Act, 1944. On completion of the investigation, a show-cause notice dated 19.6.2009 was issued to the respondent directing them to show cause as to why differential Central Excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules), he would submit that the adjudicating authority had laid undue emphasis on the said Rules and erred in not appreciating the facts that such rule cannot be invoked in reverse, as the said rule provides that where institutional or industrial customers purchase package commodities directly from the manufacturers or packers, the provisions of Chapter II would not apply. That does not mean that where institutional or industrial customer buy packaged product from dealers, there is requirement to declare MRP on the package. (iii) It is his submission that the issue involved in this case is for two periods, one prior to 15.1.2007 and subsequent to 15.1.2007, as the provisions of Rule 34 were deleted by an amendment dated 17.7.2006 in the said Rules, he would then take us through the definition of words Dealers, pre-packed commodity, retail dealer, retail package, retail sale, wholesale dealer and wholesale package from the said Rules and submit that the products did not pass test of any of the definition of retail package, as the said products are cleared by the respondent for the consumption of professionals in salon and hence, it is not a retail sale or a retail package. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld usage, with no intention of resale and as a natural person who uses product for personal rather than business purposes. It is his submission that in the instant case the salons are using and consuming the technical products to provide various services to their customers, and hence they cannot be called as consumer. (vii) The adjudicating authority has not appreciated the fact that under the provisions of said Rules, there is no such thing as retail products, as terms used therein are retail package and retail sale and the products in question can be sold in retail or not, is a question which remained unanswered by the adjudicating authority. (viii) The reliance placed by the adjudicating authority on the opinion of the Deputy Controller of Legal Metrology is also not correct as the said opinion was taken without informing the facts of the case to Legal Metrology Department. It is his submission that the products sold by salons are treated as retails product and thus they are to be exclusively used by salon would be technical products not intended for sale and would be covered by the provisions of Section 4 of the Central Excise Act and not Section 4A as being follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol over the distribution of such technical professional product, has specifically formulated a policy by which these products can be procured only by the professional salons from the specific dealers and the company representatives certify and scrutinize such sale transaction. It is his submission that the entire activity was known to the department when they cleared the goods to the dealers, who in turn sold to the salons and that there is no dispute as the respondent had affixed the MRP/RSP on such goods. 4.1 After taking us through the order of the Commissioner, he would submit that (i) Company has not wrongly assessed the technical product under provisions of Section 4A of the Central Excise Act as these technical products in retail package are sold through distributors to be consumed by the Salons and Beauty Parlors and such packages were indicating the RSP at which the same can be sold. It is his submission that provisions of Rule 2(q) read with Rule 6 of the said Rules would mean that sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals. The salons use the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckage and sold to Jet Airways under a contract for consumption of passengers, who are flying and the bottles did not contain label of MRP but contain a declaration especially packed for Jet Airways, such packed bottle are liable to be duty as per Section 4A of the Central Excise Act and not under Section 4 of the Central Excise Act. It is his submission that the issue involved in this case is identical to the case which has been decided by the Apex Court where water bottles were directly sold to the consumers i.e. Jet Airways. (v) It is his further submission that the Apex Court in the same judgement has taken a similar view in respect of the goods which is purchased by the company for supply to their subsidiary while providing taxable services, upheld the contention that affixing of MRP on the goods and valuation in terms of Section 4A of the Central Excise Act is correct. (vi) It is submitted that the provisions of rules relating to exemption from declaration of retail sale price were not applicable to the technical products prior to 14.1.2007 as sale to salons were retail sale as it is specifically mentioned on the packages and the literature thereunder for prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submission that they may serve letter dated 9.3.2009 vide which the Legal Metrology Department had opined that the technical professional products are covered under rule but was later withdrawn on 23.5.2010 only on the insistence of the Department especially the DRI. It is his submission that it is left to imagination as how the Legal Metrology Departments letter dated 9.3.2009 stands to be withdrawn under pressure of DGCEI. (ix) He would submit that the extended period cannot be invoked in this case as during the relevant period, the appellant had discharged the duty liability based upon the understanding of the law under the provisions of Section 4A of the Central Excise Act. It is his submission that if the Department had any reason to doubt the same, they should have checked up with the respondent earlier. It is his further submission that method or rule as adopted by the respondent was not suppressed as full co-operation was extended to the authority during investigation. Further the issue that respondent could have had a bona fide belief, supported by various judgments and clarifications. (x) It is his further submission that the show-cause notice has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and retail products. The technical products are those which are sold to salons through dealers for their exclusive use and are indicating MRP/RSP on them, and the retail products are those which are sold to salons for resale to the customers. It is undisputed that the professional technical products bear the endorsement For use of Salon and by Salon of each of brand of the professional technical products and were cleared from the factory premises on discharge of Central Excise duty as per the provisions of Section 4A of the Central Excise Act under a belief that the products manufactured by the respondent and cleared to salon are covered under the MRP/RSP regime. It is also undisputed that the professional technical products, as a matter of policy, are only sold to salons and beauty parlors and are not allowed to be sold to retailers for direct sale to consumers. The products are purchased by the salon and beauty parlors through the dealers of the respondent. 6.3On ground of such factual matrix, it is necessary to reproduce relevant provisions of rule 2 of said Rules which are as under: - (o) retail dealer in relation to any commodity in packaged form means a dealer wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. If the same institutions or industry procure them from dealers, the products would still be subject to the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and the Maximum Retail Price (MRP) would still have to be printed on these goods, whether they are consumed by the industry, service sector or otherwise. This interpretation is not only applicable with the introduction of Rule 2A with effect from 14/1/2007, but was also applicable in terms of Rule 34 as has been held by the Bombay High Court in the case of Larsen Toubro Ltd., Petitioners Vs. The Union of India Others, Respondents 2008 (XCI) GJX-811-BOm. In this case the company was supplying switch gears through their dealers to the customers. The issue was whether the switch gears which were mainly used by large residential complex, commercial buildings and industries and which could be installed by licensed electrical contractors only were meant for retail sale and whether the switch gear products were governed by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 or whether they were assessable under Section 4. These products also bore the declaration as specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner are accepted then firstly it would have to be read that chapter II speaks of two kinds of industrial on institutional: consumers. One covered by the explanation to Rule2A to whom the chapter would not apply and the second category covered by the proviso to rule 2(p) to whom also the chapter would not apply. Such a construction would defeat Rule 2A(b). The explanation only excludes a class of consumers who in the absence of the explanation or Rule 2A would be consumers. The industrial or institutional consumers for the purpose of Rule 2(p), As an illustration. If the packaged c6mmodity purchased cannot be directly installed by the Co-operative Housing S9ciety on the ground that such user is prohibited by the Electricity Rules, that\however, would only mean that a person qualified under the rules can Install the; same for the consumer who may hove purchased the package. There is, therefore, no prohibition on such society purchasing the product and installing it through a licensed person. They are the ultimate consumers. Similarly another consumer who is qualified may purchase the commodity and install the commodity directly. Such a consumer will not cease to be a consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt clearly states that that the Standards of Weight Measures Act, 1976 as well as the rules do not recognize professional products separately and since the commodities are sold through the dealers, the provisions are applicable. We find that the learned adjudicating authority in paragraph 43 has correctly analyzed the full impact of the clarification given by the Legal Metrology Department by recording that all the information as required was given by the respondent to the authorities i.e. Dy. Controller of Legal Metrology. We also find it so. It is surprising to note that the Revenue authorities are arguing against their own circular dated 28.2.2002 wherein Board has specifically clarified as regards to the dispute that may arise whether the product is covered under the provisions of RSP/MRP or otherwise. In paragraph 7 of the said Circular, CBE C has clarified as under: - 7. The Standards of Weights Measures Act, 1976, and the rules made there under, are administered by the State Governments. Instances of dispute could arise between the deptt. and the assessee as to whether, in respect of a particular commodity/transaction, the assessee is exempted from declaring the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led as 'to be sold only to professionals', there 'cannot be a conclusion that all professionals are not consumers. In fact, some of the products are authorized be sold by the salons to their customers. Therefore, there can-be no doubt in the case of these products that there is a retail sale. Merely because the products are sold with a qualification does not mean that there is no retail sale. Thus, the allegations in the show-cause notice in respect of the retail products sold by the salon to their clients clearly fail. There is a retail sale and the provisions of Section 4A are squarely applicable to these, products. In fact the decision of the Supreme Court in the same case in respect of the sale of mineral water in packs of 12 bottles is more 'applicable in this case. The Supreme Court held in the context of Rule 34, PC Rules prior to 14.01.2007, that 38 Jet Airways supplied the said bottles to their passengers and thus there is no further sale by the Jet Airways of these bottles. Therefore, it is obvious that after the first sale bottles go directly to the ultimate consumers. In our considered view the above said findings are correct from the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of apex Court is apt and contextually correct. 6.9 We find that the adjudicating authority was correct in coming to the conclusion in paragraph 51 that it is irrelevant as to who consumes the product. The only issue that is relevant whether they are sold in retail or consumed by industrial consumers. The findings recorded in para 51 are reproduced herein below: - 51. Further, as already stated earlier, the Standards of Weights and Measures Act has only two categories of products; either those which are sold in retail or those which are consumed by the industrial and institutional consumers. Thus all the products which do not fall within the purview of Rule 2A of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 would automatically fall in the category of retail products to which Section 4A applies. It is irrelevant as to who consumes them. Thus the attempt to identify whether the consumer is a service industry or, an ultimate consumer does not help the case of the department. As is already stated, since these products are sold through dealers for consumption by the salons and in some cases to their customers and provided none of them are directly so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P is the basis of valuation under Section 4A whereas, in the case of sale of goods, on the basis of contract price, Section 4A will not apply. In case of sale of goods by manufacturer at the contract price, affixation of MRP has no legal significance so far as valuation of goods is concerned. The valuation of goods for levy of excise duty, in a case where goods are sold to an institutional buyer under a contracted price, shall be governed by Section 4 of the Act and not under Section 4A. 3. The Revenue further relied upon few provisions under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as 'Rules') which, according to them, specifies that retail sale price has to be declared only in case the goods are intended for retail sale and not otherwise. The goods sold to institutional buyers at the contract price are not meant for retail sale. Such goods are sold to the institutional buyers and are not intended for sale directly to the consumers. The provisions of Section 4A, therefore, are not attracted as there is no requirement under the Rules to declare retail sale price on the packages meant for such sale. Thus, mere af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shoes in question which were supplied in packages to the aforesaid customers had MRP affixed on them. It was further found that clearances were not under Rule 34 of the Rules which exempts supplies of materials in bulk from the operation of Weights and Measures Act, meaning thereby it was obligatory and essential on the part of the respondent to affix MRP on the goods supplied. 11. It is also a matter of record that footwear is an item which is specified under Section 4A of the Act. 12. Once we find that the footwear is an item which is specified under Section 4A, which is covered by Weights and Measures Act and Rules, and MRP was affixed on the products supplied, which were not exempted under Rule 34of the Rules, the provision of Section 4A of the Act shall stand attracted. 13. The issue is no more res integra and has been elaborately dealt with by this Court in 'Jayanti Food Processing (P) Ltd. v. Commissioner of Central Excise, Rajasthan' [2007 (8) SCC 34 = 2007 (215) E.L.T. 327 (S.C)] in the following terms :- 32. It is true that if the unamended section is to be made applicable, the ice cream pack of four litres would certainly be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted the view expressed by the Tribunal that the words servicing any industry could not cover the present case and he further suggested that ice cream cannot be a raw material for any industry. He is undoubtedly right that ice cream cannot be termed as raw material for any industry. However, the words or for the purposes of servicing any industry are broad enough to include the transaction in question i.e., the sale of a pack of ice cream to the hotel industry. Hotel does not manufacture the ice cream and is dependent entirely upon the sale of ice cream to it by the assessee for ultimately catering the commodity in the package i.e., ice cream to the ultimate consumer. In our view this can be squarely covered in the term servicing any industry . The word service is a noun of the verb to serve . This Court in Coal Mines Provident Fund Commr. v. Ramesh Chander Jha in a different context, observed as under: (SCC p.592, para 7) 7. The word 'service' in Section 2(17)(h) must necessarily mean something more than being merely subject to the order of the Government or control of the Government. To serve means 'to perform function; do what is required for ..... 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