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TMI Blog2017 (10) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellants have correctly valued the goods under Section 4 - The very same issue has been considered by the Hon’ble Supreme Court in the case of Jayanti Food Processing (P) Ltd. [2007 (8) TMI 3 - Supreme Court], where it was held that SC prescribes the ruling for proper valuation in 14 different but identical appeals in a single judgement - appeal allowed - decided in favor of appellant. - E/922/07 - A/89723/17/EB - Dated:- 26-9-2017 - Mr. Ramesh Nair, Member (Judicial) And Mr. Raju, Member (Technical) Shri.Rajesh Ostwal, Advocate for appellant Shri.V.K.Shastri, Asst. Comm. (AR) for respondent ORDER Per: Ramesh Nair 1. The fact of the case is that the appellants are engaged in the manufacture of Maggie Noodles, Ketchups/sauce and Maggie extra taste falling under sub-heading 1902.00 and 2103.10 to the Schedule to CETA, 1985. The appellant has entered into an agreement with M/s.Tata Tea Ltd., for sale of Maggi Noodles of pack size 96* 100 gms to M/s.Tata Tea Ltd., who were to distribute the said pack free along with their final products Tata Tea by offering one pack of Maggie Noodles 96* 100 gms free with every pack of Tata Tea of a particular pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of promotional pack of Maggi Noodles, which are not sold as such, whereas the same is supplied free of cost either by the appellant or by Tata Tea Ltd. On the pack no MRP mentioned and the packs also bore the mention that Free not for sale . Therefore, the provisions of Standards of Weights and Measures Act, 1976 and Rules made there under do not apply in such supplies. Therefore, the valuation of such goods cannot be done under Section 4A of Central Excise Act, 1944. The appellants have correctly valued the goods under Section 4. The very same issue has been considered by the Hon ble Supreme Court in the case of Jayanti Food Processing (P) Ltd. (supra), relying the same this Tribunal also passed order dated 03/11/2016, findings of the same is reproduced below: 4. Since the language of Section 4A(1) of the Act specifically mentions that there would be a requirement under SWM Act or Rules made thereunder or under any other law to declare on the package of the goods the retail sale price of such goods for being covered by the Section, it would be better to see the various provisions of the said Act and the Rules made thereunder. Section 83 of the SWM Act empowers the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not directly sell such commodity to any consumer but distributes or sells such commodity through one or more intermediaries. Explanation : Nothing in this clause shall be construed as preventing a wholesale dealer from functioning as a retail dealer in relation to any commodity, but where he functions in relation to any commodity as a retail dealer, he shall comply with all the provisions of these Rules which a retail dealer is required by these rules to comply. Definition of wholesale package under Rule 2(x) is as under : wholesale package means a package containing - (i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer; or (ii) a commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer in smaller quantities; or (iii) packages containing ten or more than ten retail packages provided that the retail packages are labeled as required under the rules. Chapter II of these Rules is applicable to the packages intended for retail sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 4A as such packages are required to declare the retail sale price on the packages. The packages covered by Rule 29 would be outside the purview of the retail sales as under that Rule retail prices are not required to be mentioned on the package. However, again those packages which enjoy the exemption under Rule 34 shall also be outside the scope of Section 4A of the Act as the Rules do not apply to the said packages. 6. Shri Subba Rao, learned Advocate urged that where the goods are sold in bulk, Section 4A would not apply and the assessment would have to be done under Section 4 of the Act. We have already clarified above that it is not the nature of sale which is relevant factor for application of Section 4A but the applicability would depend upon five factors which we have enumerated in Para 2 above. 7. It was tried to be argued by Shri Joseph Vellapally, Senior Counsel that Section 4A was introduced for simplification and to reduce complications in valuing and assessing under Section 4 of the Act. According to the learned Senior Counsel once the goods are specified under the notification, that itself will be a deciding factor, for such goods to be value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the Tribunal has wrongly given a finding that the four litres pack would come under the definition of term retail package as it is produced and distributed for consumption by a group of individuals. Learned Counsel further urged that the Tribunal had erred in holding that the appellant is not entitled to exemption under Rule 34 of SWM (PC) Rules. Learned Counsel was at pains to point out that this pack which is manufactured by the appellant is also sold to Hindustan Lever Limited who in turn supplies the same to various dealers and ultimately from dealers the commodity reaches the consumers. According to the learned Counsel the Tribunal erred in holding that the ice-cream is not supplied to the hotel industry for servicing it. Learned Counsel criticized the order of the Tribunal and urged that after the order of the Tribunal was passed, the clarificatory Board Circular dated 28-2-2002 came into existence thereby binding the authorities under the Act and as such the appeal was liable to be allowed. 11. As against this Shri Subba Rao supported the order of the Tribunal and pointed out that actually the MRP was displayed on the four litres pack which suggests that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firstly the assessee could not be said to be a retail dealer as contemplated in Rule 2(o) of the SWM (PC) Rules nor could the package be described as retail package to be covered under Rule 2(p). Learned Counsel firstly suggested that the assessee was not directly selling the package to the consumer, he was in fact supplying the package to the intermediary for being sold to the hotel industry. Learned Counsel, therefore, argues that there was no connection in between the assessee and the consumer nor was the package meant to be sold as a package . The counsel is undoubtedly right as Rule 2(o) contemplates the sale of commodity in a packaged form directly to the consumer. The definition also includes a wholesale dealer provided again that the package is to be sold to the consumer directly as a package. That is not a case here as the 4 litre pack is not meant to be sold to the consumer directly. We would have to essentially go through to the definition of retail package and one look at Rule 2(p) would show that in order to be covered under that definition such package must have been intended for retail sale for consumption by an individual or a group of individuals. In our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment was as under : 2A. The provisions of this Chapter shall apply to all pre-packed commodities except in respect of grains and pulses containing quantity more than 15 kg. It is true that if the unamended section is to be made applicable, the ice-cream pack of four litres would certainly be covered under Section 2A. However, Rule 3 explains that provisions of Chapter II would apply to packages intended for retail sale and expression package wherever it occurs in the chapter shall be construed accordingly. It is, therefore, clear that the package which was sold by the assessee could not be termed as retail package nor the sale thereof be termed as a retail sale and as such there was no requirement of mentioning the retail sale price on that package. All this has been completely missed in the order of the Tribunal. 15. On the other hand the package in question would certainly come within the definition of wholesale package as defined in Rule 2(x)(ii) as it contained the commodity (ice-cream) and was sold to intermediary (Hotel) for selling the same to the consumer in small quantities. Then Rule 29 would apply to such package which does not require the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent context, observed as under : The word service in Section 2(17)(h) must necessarily mean something more than being merely subject to the orders of Government or control of the Government. To serve means to perform functions; do what is required for . [Emphasis supplied] A hotel is a hospitality industry and undoubtedly supplies food and eatables to the consumers. Therefore, to supply the ice-cream to such a hotel would be doing what is required for the hotel. In that sense the supply by way of sale of ice-cream which is ultimately sold to the 'ultimate consumers would, no doubt, be covered in the term servicing the hotel industry . Even otherwise the word service as per Concise Oxford English Dictionary means : (i) perform routine maintenance or repair work on (a vehicle or machine); (ii) provide a service or services for; It is an act of helpful activity - help, aid or to do something. It also includes supplying of utilities or commodities. In that view we are not prepared to give a narrow interpretation to the term service any industry . We, therefore, accept the arguments advanced by Shri Ravinder Narain that the package sold by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er chocolate in terms of Section 4 of the Act after filing the due declaration on the premise that since the chocolates were being sold to M/s. Pepsico, this was not a retail sale and on such chocolates supply there was no requirement to display the maximum retail price and as such the chocolates could not be covered under Section 4A and would eventually be assessable under Section 4 of the Act. However, the Department did not accept this and it issued a show cause notice dated 14-8-2001 raising a demand of ₹ 48,95,370/- along with the proposal to impose penalty upon the appellant with interest. This proposal was contested by the assessee on the aforementioned plea that it was not required to print the MRP under the provisions of SWM Act and the Rules made thereunder. The Commissioner did not accept this and confirmed the demand. The appellant having failed in its appeal before the Tribunal has now approached this Court by way of this appeal. 21. The Tribunal came to the conclusion that the duty was rightly demanded in terms of Section 4A of the Act. 22. At the outset the learned Counsel Shri Lakshmi Kumaranan accepted the position that when such chocolates are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the chocolate which accompanied the bottle. He further submits, relying on Section 2(v) of the SWM Act that there is no sale of the chocolate to the consumers as it is offered free as a gift by Pepsi, which purchased the same from the assessee on contract basis. 25. As against this the learned Counsel Shri Subba Rao supported the order of the Tribunal and pointed out that this could be viewed as a retail sale . He adopted the reasoning given by the Tribunal on the definition of retail sale holding that the transaction in the present case amounting to retail sale since the chocolates were meant for distribution for consumption by an individual or group of individuals by retails sale and therefore, covered in SWM (PC) Rules. 26. At the outset Shri Lakshmi Kumaran invited our attention to the notification dated 28-2-2002 bearing No. 625/16/2002-CX. He pointed out that by that notification clarification was issued regarding various queries raised expressing the doubts about the assessability of the commodities under Section 4A or Section 4 of the Act. A reference is made to Para 1, Entry 4 of which is as under : Items supplied free with another consumer item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eant for the advertisement of Pepsi and the MRP is not printed on the chocolate. It may be a move on the part of the Pepsi for advertising its product but that cannot be said to be binding vis-a-vis Nestle. What is required is the requirement under the Rules of printing the price. Therefore, the true test is not as to whether the price is printed on the labels of the accompanying product like Pepsi but whether there was a requirement under the SWM Act or the Rules made thereunder to print the MRP on the wrappers of KITKAT chocolates. The reason given by the Tribunal in Para 10 for distinguishing the earlier judgment in Pepsi Food's case, therefore, has to be ignored as not relevant to the controversy. Once that position is clear, we are left with the notification alone and the aforementioned ruling in Pepsi's case. If the ruling has not been challenged by the Department, the same becomes binding as against the Department. Similar is the situation of the circular. The circular becomes binding as held in the case of Dhiren Chemical Industries (supra). 27. The Tribunal in Para 8 of its judgment has observed : Once the goods are specified items under Section 4A(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be lowered on the ground that they have actually been sold at a lower rate. In our opinion the thrust of the Explanation I is not as the Tribunal has shown but is more on as to what retail price should be. The explanation provides that the retail price , i.e., the maximum price would include all taxes, local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertisements, delivery, packing, forwarding and the like. The further thrust of the explanation is on the notion that the price is the sole consideration of such sale. The Tribunal has mixed up Explanation I with Explanation II which is not permissible. This was not a case under Section 4A, Explanation II(b) because we do not find different sale prices declared on the different packages of the chocolates. The case of the assessee has been consistent from the beginning that these chocolates were sold to Pepsi under a contract for a particular value and the said chocolates were to be offered as a free gift to the one who purchased a particular bottle of Pepsi (1.5 litres). The Tribunal has further expressed that the argument that the bar of KITKAT was not to be sold by Pepsi in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument was that there appears such declaration on the package of KITKAT and secondly it was for the purpose of servicing Pepsi thereby satisfying both the conditions for applicability of Rule 34(a). The Tribunal has rejected this argument in a very casual manner by observing : Admittedly, the situation in the present case is not covered by any of the conditions noticed in the said Rule 34. Learned Counsel Shri Laxmi Kumaran pointed out that there was no question of the application of SWM (PC) Rules apart from any other reasons, because of the applicability of Rule 34. We accept the argument. After-all if the contract of the chocolates was for the purpose of advertising of a particular product of the particular industry, it would be covered within the expression servicing any industry . We have already dilated upon the expression servicing any industryin the earlier part of our judgment. Those observations would similarly apply to the present appeal also. With the result this appeal has to be allowed by setting aside the order of the Tribunal. We accordingly allow this appeal without any order as to costs. Civil Appeal Nos. 2150-2151 of 2004 Civil Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Department averred that since this was a wholesale transaction, the duty was assessable on the contract price and not on the MRP. Before the Tribunal Revenue relied upon various provisions and more particularly on Rules 2(q), 2(x), 3, 6(1)(f), etc., of the SWM (PC) Rules. A reference was made to the Board Circular dated 28-2-2002 also. There was a difference of opinion amongst the two Members of the Tribunal in Appeal Nos. E/701/2002 E/962 of 2002 (Civil Appeal Nos. 2150-51 of 2004 before this Court) as to the applicability of Section 4A vis-a-vis Section 4A of the Act to the transactions. The matter, therefore, was considered by the third Member who came to the conclusion that the only applicable provision would be Section 4A. The Third Member found that the goods were cleared with the MRP having been declared on the package. The third Member of the Tribunal further observed that unless the packages themselves were exempt under the SWM (PC) Rules, the assessment would have to be under Section 4A and that the goods were sold in bulk under contract cannot be the criteria. 33. Learned Counsel Shri Subba Rao, however, reiterated his argument that since the goods were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there will be a requirement under the Rules as provided in Section 4A(1) of the Act for printing the MRP on the package. Shri Subba Rao argued that the transaction between the assessee companies and DoT, MTNL BSNL did not satisfy the requirement of definition of retail sale as there was no retail sale agency or other instrumentalities involved in the said transaction. We are afraid the specific language of retail sale is not being perceived properly. The retail sale does not have to be only through the retail sale agencies or other instrumentalities . One look at the definition of retail sale , as provided in Rule 2(q) is sufficient to justify this inference. The argument is, therefore, rejected. According to Shri Subba Rao further the package would not be a retail package as contemplated in Rule 2(p) as the DoT, MTNL BSNL cannot be viewed as an individual or group of individuals. We are afraid again the unamended definition of Rule 2(p) is not read properly. When a retail package containing any commodity is produced, distributed, displayed, delivered or stored for sale for consumption by an individual or group of individuals, it would be a retail package . In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract price, they would be liable to be proceeded against by the Department in accordance with law. We leave the question on the basis of this assertion. However, we must reiterate that we do not find any such reiteration in the order of the Tribunal. We, therefore, leave it to the Revenue Department to ascertain this position and to proceed against the erring assessees, if any. 34. Lastly Shri Subba Rao, by way of almost a desperate argument tried to rely on Rule 34 of the SWM (PC) Rules suggesting therein that the Rules did not apply as the transactions in the sets of telephone instruments was covered under Rule 34 of the SWM (PC) Rules. We do not accept the argument for the simple reason that there does not appear any factual assertion on the part of the Department that the packages contained a declaration that they were specially packed for a particular industry for servicing the same. In the absence of this factual background the applicability of Rule 34 is completely ruled out. We, therefore, dismiss all the appeals of the Department subject to the observations which we have made as regarding the printing of MRP and also as regards the payment of duty on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us by the learned Counsel appearing for the assessees that the duty has been paid not on the contract price but on the MRP. However, we leave it open to the Department to take an action in accordance with law if it is found that the duty is paid on the contract price and not on MRP. Needless to mention that reasonable opportunity would be given to the assessees to put their say in case the Department decides to proceed against the assessees on this ground. However, the appeals filed by the Revenue would have to be dismissed and are accordingly dismissed. In the facts and circumstances of the case there will be no order as to costs. Civil Appeal No.498/2006 36. This appeal relates to the manufacture and sale of Electric Filament Lamps. The Tribunal has allowed the claim of the assessee relying on the decision in ITEL Industries Pvt. Ltd. v. CCE reported in [2004 (163) E.L.T. 219]. A perusal of the order of the authorities below suggest that this case is identical with the case involving the manufacture and sale of telephones by ITEL. It is admitted position that the goods here were sold with the MRP declared on the packages as per the SWM (PC) Rules. We see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld want it under Section 4A of the Act. 38. The factual scenario is that though the MRP was declared on the package of 12 bottles, the bottles did not have any MRP instead it was written : (a) not for re-sale; (b) specially packed for Jet Airways. No retail price was written on 200 ml. Bottle. There is further no dispute that the assessee had entered into a contract with Jet Airways dated 13-2-2002 and the contracted price of sale for the goods was ₹ 2.61. It was the condition in the contract that each bottle to be supplied shall have a printed label specially packed for Jet Airways . On the basis of these facts Shri Subba Rao urged that this case, if it was identical with Jayanti Foods case, then it was bound to be held that the MRP based assumption could not be the correct assessment and it should be under Section 4 of the Act. The contention is incorrect and as in fact the package cannot be viewed as a wholesale package . It does not come within the definition of Rule 2(x)(i) as the package was not intended for sale, distribution or delivery to an intermediary. On the other hand it is sold directly to Jet Airway and the Jet Airways supplied the said bottles to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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