1. These are two appeals. Appeal No. E/701/2002 is filed by the appellants, M/s. ITEL Industries Pvt. Ltd. whereas the appeal No.E/902/2002 is filed by Revenue, against the impugned order passed by the Commissioner of Customs and Central Excise (Appeals), Cochin, who while confirming the demand has dropped the penalty proceedings under Section 11AC even though Section 11AC was invoked in Show Cause Notice No. 2/2000-01 for period 1-3-2000 to 31-8-2000 while in subsequent notice for period 1-9-2000 to 31-1-2001 it was not invoked.
2. M/s. ITEL Industries Pvt. Ltd., Palakkad (formerly Tata Telecom Ltd.) are manufacturers of Telephone Instruments falling under Chapter 85 of the Central Excise Tariff Act, 1985 and clearing the same by resorting to MRP based assessment under Section 4A of Central Excise Act. They cleared push button Telephones to the DOT and MTNL on contract price and they are alleged to have claimed 40% abatement from the contract price to arrive at the assessable value. The contract price is much lower than the normal retail price. DOT and MTNL in turn provide these instruments to their subscribers on rental basis. The ownership of the instruments remained with DOT/MTNL, as no further sale took place.
3. These products falling under sub-heading 8517.00 are specified vide Notification No. 9/2000-CE. (NT) dated 1-3-2000 for the year 2000-2001, subsequently for the year 2001-2002 by Notification No. 5/2001, dated 1-3-2001 and thus, with effect from 1-3-2000, Electronic Push Button Telephones manufactured by the appellants were made liable to be valued for assessment with reference to the Retail Price under Section 4A of the Central Excise Act, 1944.
4. The Department contested the assessments so made, vide the following show cause notices :- The Dy. Commissioner confirmed the demands along with appropriate interest under the Central Excise Act, 1944 and penalty was also imposed under Rule 173Q of the Central Excise Rules, 1944 on the appellants. In appeal, the Commissioner (Appeals) framed issue as to whether clearance of Telephone Instruments to DOT/MTNL should be assessed under Section 4A or under Section 4 of the Central Excise Act, 1944. The Commissioner (Appeals) had recorded the oral submission and reiterated the allegation that the appellant had availed 40% from the contract price, which is stated by the appellants to be contrary to facts on record according to them, they had availed abatement of 40% on the Retail Price declared and not from the contract price. Therefore, Retail Price based assessment was not found to be applicable and assessment so required to be made as per values to be determined as per Section 4 of the Central Excise Act, 1944. Accordingly the lower authorities denied the abatement as claimed from the contract price and determined duty on the contract price itself. Hence this appeal.
(a) Both the lower authorities have failed to note that the abatement was not availed on the contract price but availed on the Maximum Retail Price (hereinafter referred to as MRP) declared on the package.
(b) The Telephone Instruments have been notified under Section 4A of the Central Excise Act, 1944 in relation to which the assessments are to be made as provided under Section 4A(2) which reads as under :- "(2) where the goods specified under Sub-section (1) are excisable goods and chargeable to duty of excise with reference to value, then, notwithstanding anything contained in Section 4, such value shall be seemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette." (c) Merely because bulk supplies/sales are made to DOT/MTNL by itself would not cause the assessments to be made, outside the purview of Section 4A of the Central Excise Act, 1944. Once the goods have been notified under that section vide notification 9/2000, dated 1-3-2000 and 5/2001, dated 1-3-2001. Merely because instruments are lent to the subscribers of the telephone services of DOT/MTNL by itself will not be a ground to hold that such instruments will not be entitled to the assessment under Section 4A. (d) Merely because the DOT/MTNL remain the owner of the instruments by itself will not be a cause to deny assessment under Section 4A and finding of the Commissioner (Appeals) on this account are contrary to the provisions of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as PC Rules) and in particular, Rule 2(q) of the said rules which defines retail sale.
(e) In this case there is a sale to the DOT/MTNL for consumption by a group of individuals namely subscribers and others and therefore the sale effect by the appellants to DOT/MTNL cannot be outside the purview of the definition of retail sale under Rule 2(q) of PC Rules which do not exempt the appellants.
(f) The only exception to Chapters 2 & 3 is provided by Rule 34(a) and the order of the Commissioner (Appeals) is contrary to ratio of the Allahabad High Court in AIR 1992 ALL. 41 (43). The findings of the Commissioner, the appellant was not required to declare the MRP on the clearance to DOT/MTNL is contrary to the provisions of PC Rules. The CBEC Board Circular No. 6/44/00-CXI, dated 28-2-2002 cannot create liability on the appellants in view of the Supreme Court decision in Cannanoor Spinning & Weaving Mills Ltd. v. CCE - 1978 (2) E.L.T. (J375) (S.C.) = AIR 1970 SC 1950.
(g) No penalty on the appellants under Rule 173Q was called for any absence of mens rea for evading duty and imposition of such penalty was contrary to the law settled by the Supreme Court in Hindustan Steels v. State of Orissa [1978 (2) E.L.T. J159] and the decision of the Supreme Court in Akbar Baduriddin Jiwani v. CC [1990 (47) E.L.T. 161]. Since the demand was confirmed on Circular and that itself clearly shows that there was a doubt in the minds of the Department in imposition of penalty under Rule 173Q read with Rule 210 of the Central Excise Rules, 1944 was not called for.
(h) The Id. Sr. Advocate for the appellants submitted that the decision in the case of Bharati Systel Ltd., [2002 (145) E.L.T. 626 (Tri - Del.) was not applicable in their case since the Circular was against the provisions of law and in view of the submissions made by him in reiterating the grounds taken by the appellants.
6. The Departmental Representative for Revenue made the following submissions :- (a) The issue involved in the appeal is applicability of Section 4A of CEA, 1944 for Telephone sets supplied to DOT/MTNL on contract price. It has been contended by the party that the decision of Hon'ble Tribunal in the case of M/s. Bharati Systel Ltd., (2002 (145) E.L.T. 626 (Tri. - Del.) is not applicable to this case on the grounds that their case is distinguishable and the CBEC circular dated 28-2-2002 is against provisions of the law. It has also been contended that as per Standards of Weights & Measures Act, 1976 there is no need for sale in retail as per definition of 'retail sale' under Rule 2(q) of Standard Weights & Measures (Packaged Commodities) Rules, 1977. Telephone sets are specified under Section 4A and as per second proviso to Section 4A, Telephone sets are covered for valuation under Section 4A irrespective of whether they are 'sold or not' or sold in bulk or retail".
(b) At the outset it is submitted that the facts in the case of M/s.
Bharati Systel Ltd., and the present case are identical, in the sense in both cases Telephone instruments are cleared in bulk to DOT/MTNL and who in turn provide the instruments to their customers.
No retail sale is involved in both the cases. The Hon'ble Tribunal has upheld the views of the Board's Circular (supra). It cannot be said that though the Board's circular is wrong, it has been accepted by the Tribunal.
(c) In any case the Board's circular is perfectly in tune with the legal provisions of the Standard Weights & Measures Act, 1976. Rule 2(q) of Standard Weights & Measures (Packaged Commodities) Rules, 1977 defines retail sale as :- "retail sale in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consume." As per the above definition there has to be sale to an individual or group of individual or any other consumer DOT/MTNL is neither an individual, group of individual or consumer. The rule necessary requires sale to the individual/consumer arid not sale to bulk purchaser who does not sell further. That is to say there has to be retail sale though may be through distributor or retail sale agency.
This argument is fortified by the definition of the wholesale package at Rule 2(x) which is as under :- (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.
(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.
(iii) Packages containing ten or more than ten retail packages provided that the retail packages are labelled as required under the rules.
From the above Rule it is clear the packages will be containing retail packages though not intended for sale direct to single consumer but sold/distributed or delivered through bulk purchaser.
(d) Further as per Rule 3 (of Chapter II) of the rules ibid the Chapter applies to packages intended for retail sale.
"The provision of this Chapter shall apply to packages intended for retail sale and expression "package", wherever it occurs in this Chapter shall be construed accordingly".
The marking of MRP (Maximum Retail Price) is prescribed under Rule 6 (Chapter II) of the Rule, 1977 ibid.
(1) Every package shall bear thereon or on a label securely affixed thereto a definite, plain and conspicuous declaration, made in accordance with the provisions of this chapter as to :- (a) the name and address of the manufacturer or where, the manufacturer is not the packer, the name and address of the manufacturer and packer.
(b) The common or generic name of the commodity contained in the package.
(c) The net quantity, in terms of the standard unit of weight or measure, of the commodity contained in the package or where the commodity is packed or sold by number, the number of the commodity contained in the package; (d)The month and year in which the commodity is manufactured or pre-packed; Section 4A will apply to such goods where retail sale price has to be declared on the package.
"Section 4A - Valuation of excisable goods with reference to retail sale price - (1). The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standard Weights & 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 goods, to which the provisions of Sub-section (2) shall apply." In the present case there is no requirement under the Rules, 1977 ibid to mark the MRP on the bulk clearances. The telephone set is neither sold nor distributed/delivered to any consumer. It is only installed by DOT/MTNL at the subscribers place. The telephone remains the property of the DOT/MTNL. Hence question of affixing MRP does not arise in such a case. As such Section 4A itself not applicable. Question of reading 2nd proviso to Section 4A does not arise.
(e) In this regard relevant extract of Board's Circular dated 28-2-2002 (Para 4) is reproduced for ease of reference.
"The basic issue therefore, is to determine the circumstances in which Section 4A of the C.E. Act can be applied. The wordings of Section 4A(1) makes it very clear that it will apply only to such goods" .... In relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 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 goods ....". In other words, if there is no statutory requirement under the provisions of Weights and Measures Act to declare the retail sale price on the packages, Section 4A will not apply. As for example, in respect of bulk sale of ice-cream to hotels/restaurants which are not meant for retail sales as such, the provisions of the Weights and Measures Act will not apply. Chapter V of the Weights & Measures (Packaged Commodity) Rules, 1977 mentions the instances where MRP is not required to be printed on the packages. Thus, in these cases valuation will have to be done under Section 4 of the C.E. Act, 1944".
Hence the Board's circular dt. 28-2-2002 is perfectly in tune with the provisions of the Standards of Weights & Measures Act, 1976 and the decision of the Hon'ble Tribunal in the case of M/s. Bharti Systel Ltd., will apply to the present case.
(f) Reliance is also placed on the Hon'ble CEGAT's judgment in the case of M/s. Trishul Research Lab. (P) Ltd. reported in 2002 (144) E.L.T. 204 (Tri. - Del.) wherein it has been held that "soaps packed under a special contract for the hotel Industry and were not required to bear the maximum retail price declaration on the retail package fall outside the purview of Section 4A of CEA, 1944 and are liable to be assessed under the provisions of Section 4 ibid.
(g) In any case, if the above arguments are not acceptable, the case requires to be referred to Larger Bench in view of the Tribunal cited supra, as there is no other decision of Superior Court in the matter.
(a) That instructions in Para 3 of Board's Circular No. 625/16/2002, dated 28-2-2002 are in conflict with the provisions of Para 2 & Para 4 thereof, which talk about resort to valuation under Section 4, only in such cases where MRP is not required to be printed. In the case of Telephones sold in bulk to DOT/MTNL, there is no exemption from the printing requirement of MRP. Para 4 of the Circular in this case when considered would render eligible assessments to be only under Section 4A in light of the fact that no exemption from requirement of MRP printing of the Telephones under the Weights & Measures Act and the Rules framed thereunder especially Chapter V has been brought out in the order. Assessments under the Central Excise Law cannot be regulated by any intended sale/use of the exigible goods. Arguments on Rule 3 of the Standard & Measures (Packaged Commodity) Rules, 1977 would therefore not assist Revenue as is being pleaded before us by the Id. SDR.CCE v. Trishul Research Lab (P) Ltd. (2002 (144) E.L.T. 204 (Tri. - Del.) relied by Revenue and Para 4 of that report, it is apparent that in that case it was the Revenue's case that soaps were not packed for retail sale and did not bear declaration of Retail Sale Price on the Retail Package. No such material or pleading are made in this case. Therefore this decision cannot help the Revenue's case in the appeal before us.
(c) The plea of the appellants that they cannot be forced to be assessed under the circular, by resorting to Section 4 of the Central Excise Act, 1944 & the provisions of Section 4 (2) cannot be ignored and has force, in view of the settled law on the subject as cited by the appellants' learned Advocate, Circular of Central Board cannot override provisions of Act [Kerala Financial Corporation - 210 ITR (129) (S.C.)]. Directions of Board not binding on Collector sitting as quasi judicial authority 1978 (2) E.L.T. (J 345) (S.C.) = (AIR 1969 S.C. 48) & Bengal Urban Corporation - 1993 (66) E.L.T. 13 (S.C.) and full bench decision in UCO Bank case 1999 (111) E.L.T. 673 (S.C.), when Section 37B of the Central Excise Act, 1944 prescribes - 'no such orders or direction shall be issued so as to interfere with discretion of the Commissioner of Central Excise (Appeals) in exercise of his appellant functions. We also rely upon on CCE v. Kores (India) Ltd. (1997 (89) E.L.T. 441 (S.C.); Indian Rayon & Industries Ltd, 1994 (73) E.L.T. 25 (Del.) & Birla jute & Industries - 1992 (57) E.L.T. 674 (Cal.), to conclude that Board's Circulars cannot bind an assessee to a particular assessment. They only bind the department.
(d) The decision in the case of Bharti Systel Ltd., 2002 (145) E.L.T. 626 (T) in Para 6 thereof records the Tribunal findings as - "... Revenue cannot be heard to contend that the Circular dated 28-2-2002 is not binding on it. It is not the case of the assessee that a benefit has been granted to it for the first time under the circular. It is relying on the circular in support of its stand that the law that is applicable to the facts of the case is Section 4 and not Section 4A. Therefore there is no merit in the contention that assessee cannot rely on a recent circular." Observing the above findings, we concur with the Id. Sr. Advocate that in Bharti Systel case (supra) the Revenue's argument was contrary to what has been made before us. That case has been decided on the applicability of Circular when claimed and not after considering the provisions of Section 4A(2) of the Central Excise Act, 1944 and the fact that there was no exemption for MRP markings as required on the Telephones. Thus this decision will not cause a bar to grant of Section 4A assessment in the case before us, when Telephones are notified under Section 4A. (e) It is found that the charge in the notices and as recorded by the Commissioner (Appeals) is regarding the claim of abatement of 40% from the Contract Price and this, if true on facts, it is not permissible. The abatement, as notified, is permissible from the MRP declared. The matter is therefore required to be sent back to the original authority to verify the actual quantum of abatement permissible from MRP and thereafter determine short levy of duty if any.
(f) In view of the facts of this case, we do not find any case or cause to invoke the penal liabilities, as we find that the Commissioner has held "It is essentially, a question of interpretation of law as to whether Section 4 or Section 4A would be applicable...." and not sustained the penalty under Section 11AC. We concur with the same. Therefore we cannot uphold the Revenue's appeal on the need to restore the penalty under Section 11AC as arrived at by the Original Authority. As regards the penalty under Rules 173Q & 210, we find the Commissioner (Appeals) has not given any finding why he considered the same as correct and legal in Para 8 of the impugned order. Imposition of penalty under Rules 173Q & 210 on matters of interpretation, without specific and valid reasons, is not called for.
(g) In view of our findings, we find no reason to refer the matter to a Larger Bench.
8. In view of our findings, the orders are set aside and the appeal of Revenue is dismissed while that of the assessee is remitted back before the Original Authority to re-determine the duty if any as above.
9. [Contra per : G.A. Brahma Deva, Member (J)]. - I have carefully gone through the proposed order written by my Id. Brother Shri S.S. Sekhon, Member (Technical). While concurring with the view taken by him in dismissing the appeal filed by the Revenue, with respects, I am unable to agree with his conclusion in allowing the appeal filed by the assessee (M/s. ITEL Industries Pvt. Ltd.) on the issue that clearance of telephone instruments to DOT/MTNL should be assessed under Section 4A of the Central Excise Act, 1944. Hence, this separate order.
10. I am not going to repeat the facts of the case since they were neatly narrated in the proposed order written by my Brother.
11. The short point to be considered in the appeal filed by the assessee is whether clearances of telephone instruments to DOT/MTNL should be governed under Section 4 or under Section 4A of the Central Excise Act, 1944 while determining the assessable value.
12. The Central Board of Excise has issued a Circular No.625/16/2002-CX., dtd. 28-02-2002 (F.No. 6/44/2000-CX.1) in consultation with the Ministry of Law clarifying that the valuation of telephone instruments supplied in bulk to telephone department will be done as per Section 4 of the Central Excise Act, 1944 and the instruments sold in the market, with printed MRP, would be assessed under Section 4A of the Act. The relevant clarification is in Para 3 of the said Circular and same is reproduced as below : - "3. In respect of telephones falling under Heading 85.17 and notified under Section 4A it was noticed that the manufacturers also make bulk supplies of telephone instruments to the Deptt. of Telecommunication (DOT) and the MTNL, who in turn provide these instruments, on rental basis, to the telephone subscribers. The ownership of the telephone instruments remains with the telephone deptt. and there is, therefore, no retail sale involved. The manufacturers also sell the instruments in the open market on which MRP is printed. The issue, therefore, was how to value the telephone sets, which were sold by the manufacturer in bulk to the telephone deptt. The matter was referred to the Ministry of Law, who have opined that valuation of telephone instruments supplied in bulk to telephone deptt. will be done as per Section 4 of the Central Excise Act, 1944 and the instruments sold in the market, with printed MRP, would be assessed under Section 4A of the Act. The Ministry has accepted the opinion of the Law Ministry." 13. It was submitted on behalf of the party that Section 4A(1) refers to Standards of Weights and Measures Act, 1976 and the rules made thereunder mainly Weights and Measures (Packaged Commodity) Rules, 1977, if the retail sale price on the package has to be declared under Standards of Weights and Measures Act or Packaged Commodity Rules, the Central Government can notify such goods on the MRP. Telephone sets have been notified in the official gazette under Section 4A(1) of the Act. It was contended that once the goods have been notified in the official gazette under Section 4A(1), the assessable value will be based on the retail sale price such abatement as may be allowed by the Central Government in the said Notification. It was also argued that once the goods have been concluded under Section 4A(1), then the assessable value will be based only on the MRP irrespective whether the goods are sold in wholesale retail or distributed as free gifts or even if they are captively consumed.
14. It was submitted on behalf of the Revenue that the issue involved herein has been covered by the decision of the Tribunal in the case Bharti Systel Ltd. - 2002 (145) E.L.T. 626. It was also submitted that in both the cases, telephone instruments are cleared in bulk to DOT/MTNL and who in turn provided the instruments to their customers.
No retail sale is involved in both the cases. The Tribunal has upheld the appeal in view of the Board's Circular.
15. It has been contended by the party that the decision of the Tribunal in the case of Bharti Systel Ltd. (supra) is not applicable in this case on the ground that their case is distinguishable and the CBEC Circular dtd. 28-2-2002 is against the provisions of law. It was also argued that the Tribunal has not gone into the scope of Section 4 and Section 4A, the provisions of Standards of Weights and Measures Act, 1977 and the decision of the Supreme Court on the scope of Circulars that are issued by CBEC.16. I have carefully considered the matter. In the case of Bharti Systel Ltd. (supra), it was argued on behalf of the Revenue that even though the adjudicating authority is bound by the Circular, it is open to the Revenue to contend before this Tribunal for a position that the assessment has to be made in the case of party under Section 4A of the Act. It was further contended that the Circular, which came only on 28-2-2002, can be relied on by the assessee in order to justify his actions taken by the issue of the Circular. The Tribunal did not accept the contention of the Revenue in that case and considering the very Circular, upheld the validity of the Circular holding that sale of telephone sets to the DOT are to be assessed under the provisions of Section 4 of the Central Excise Act, 1944 and not under Section 4A.Para 6 of the said decision is as under :- "6. We do not find any merit in the objection raised by the Id.
Departmental Representative. The binding nature of the Circular issued by the CBEC has been considered repeatedly by the Apex Court and it has been held that the Revenue cannot be heard to contend against a view taken in such circulars. According to the Apex Court such view will prevail over even a view taken by the Court or statutory provision. Revenue cannot challenge the position taken in the Circular even though it is open to challenge in the hands of the assessee. Following decisions of the Supreme Court are on the same issue. Paper Products Ltd. v. CCE reported in 1999 (112) E.L.T. 765 (S.C.) and CCE, Vadodara v. Dhiren Chemical Industries reported in 2002 (139) E.L.T. 3. In the light of the binding pronouncement of the Apex Court, the Revenue cannot be heard to contend that the Circular dtd. 28-2-2002 is not binding on it. It is not the case of the assessee that a benefit has been granted to it for the first time under the Circular. It is relying on the circular in support of its stand that the law that is applicable to the facts of the case is Section 4 and not Section 4A. Therefore, there is no merit in the contention that assessee cannot rely on a recent circular." While deciding the issue in favour of the assessee, it was specifically observed therein that it is not the case of the assessee that a benefit has been granted to it for the first time under the Circular, it is relying on the Circular in support of its stand that the law that is applicable to the facts of this case is Section 4 and not Section 4A.Although there is some force in the arguments advanced on behalf of the assessee in the instant case, that the Circular is in conflict with the provisions of Section 4A, since the very Circular has been considered by the Tribunal in the aforesaid case and validity of the same was upheld, though in different context, I am of the view that as per judicial discipline, the point at issue has to be resolved by the Larger Bench. Accordingly, I propose to recommend the case to the Larger Bench to resolve the issue.
17. In view of the difference of opinion between the two Members of the Bench who heard the matter, Registry is directed to place this file before the Hon'ble President to refer it to a third Member to resolve the issue according to law.
"Whether clearances of telephone instruments to DOT/MTNL should be assessed under Section 4A of the Central Excise Act, 1944 and appeal deserves to be allowed accordingly as per Member (Technical).
Case requires to be referred to the Larger Bench in view of the earlier decision of the Tribunal in the case of Bharti Systel Ltd. (supra) as per Member (Judicial)." 17. [Per : C.N.B. Nair, Member (T)]. - I have perused the records and have heard both sides.
18. Issue raised is about the Central Excise valuation of telephone instruments sold to DOT under a contract by a manufacturer i.e., whether value should be fixed under Section 4 or Section 4A of the Central Excise Act, 1944. The submission on behalf of the appellant manufacturer is that there is no provision under Sections 4 or 4A of the Central Excise Act that clearances of telephone instruments to DOT/MTNL would be excluded from the provisions of Section 4A and that they would be valued under Section 4, It is pointed out that Section 4A applies to valuation of "specified goods" and for valuation under that Section, who the buyer is, is entirely irrelevant. Learned Counsel for the appellants has submitted that once goods are specified, Section 4 has no application for their valuation in view of the following non-obstante clause in Sub-section (2) of Section 4A :- "Notwithstanding anything contained in Section 4, such value of specified goods shall be deemed to be the retail sale price declared on such goods less such amount of abatement".
According to the learned Counsel, exception can arise only in cases where the consignments/supplies of specified goods in question are excluded under Rule 34 of Packaged Commodities Rules from the requirements of Standards of Weights and Measures Act, 1976 and Packaged Commodities Rules. Learned Counsel has pointed out that supplies in the present case were not under Rule 34 since the telephone instruments in question had their MRP indicated on them. Learned Counsel has further pointed out that, whether the goods in fact were sold in retail, is also irrelevant for valuation under Section 4A inasmuch as the definition of "retail sale" under Rule 2 of Packaged Commodities Rules included "distribution or delivery through the retail sales agencies or other instrumentalities for consumption by an individual." Thus, retail sale was not a requirement to attract the Rules. He further submitted that introduction of such criteria would only unnecessarily complicate the valuation process inasmuch as, often, the specified goods are sold to institutions who purchase them for free distribution among shareholders, staff members etc. He has also pointed out that the simplication of valuation process sought to be achieved by the introduction of Section 4A would be eroded if more and more categories of disposals are kept outside the purview of assessment under that Section.
19. With regard to the decision of this Tribunal in the case of M/s.
Bharati Systel Ltd. the learned Counsel has pointed out that this decision has only followed the well settled proposition that an assessee is entitled to benefit under a Circular of the Board, irrespective of whether the clarification contained in the circular is legally sound or not. According to him, this decision is no authority on the valuation issue at hand. He mentioned that another decision of the Tribunal in the case of Jayanti Food Processing Pvt. Ltd. [2002 (141) E.L.T. 162] would be more appropriately attracted to the facts of this case. The learned Counsel has pointed out that in this decision the Tribunal has considered in detail the requirements under Standards of Weights and Measures Act and Packaged Commodities Rules, particularly the scope of exemption under Rule 34 and has held that specified goods, to which exemption under Rule 34 of Package Commodities Rules did not apply, would be liable to be valued under Section 4A of the Central Excise Act. Learned Counsel pointed out that Rule 34 stated that nothing contained in these rules (Packaged Commodities Rules) shall apply to any package containing a commodity if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry.
Learned Counsel pointed out that, in the present case, the facts pointed to the contrary position. There was no marking on the packages that the packages of the phones in question had been specifically packed for exclusive use in any industry or for the purpose of servicing any industry. Instead, the phone sets were packed like other telephone sets which were for sale to general public. The contract between the parties also did not provide for any such packing.
20. Learned SDR has submitted that since the Division Bench of the Tribunal had already upheld the valuation of sales of telephone instrument to DOT/MTNL under Section 4 of the Central Excise Act (M/s.
Bharati Bystel Ltd.) in conformity with Circular No. 625/16-CX., dated 28th February, 2002 of the Board, this case is also required to be decided following that decision. He also submitted that sale in retail was a requirement for valuation in terms of Section 4A of the Act.
According to him, the goods which are sold in bulk for further retail sale would be liable to valuation under Section 4A, and not the goods which are sold in bulk for consumption or distribution. He pointed out that the decision in Jayanti Food Processing Pvt. Ltd. case is of no application to cases where there was no resale of the goods.
21. The difference of opinion in the present case has arisen in view of Tribunal's decision in Bharati Systel Ltd. What came up for decision in that case was whether the demand raised contrary to Circular No.625/16-CX., dated 28th Feb. 2002 was required to be set aside and the Tribunal held that Circulars are binding on the Revenue. In doing so, the Tribunal was following a well settled legal principle (Hiren Chemical Industries - 2002 (139) E.L.T. 3). The opposite is the issue raised in the present appeals. It is being contended that since the demand is in conformity with a Circular of the C.B.E.& C., the same is to be confirmed by the Tribunal. This proposition cannot be accepted.
It is well settled that an assessee can challenge a decision rendered in accordance with a Circular of the Board and that the Tribunal would not be bound by the Circular in deciding such an appeal. An additional material which has come up during the hearing before me is the decision of this Tribunal in the case of Jayanti Food Processing Pvt. Ltd. In that decision, after considering in detail the provisions of Standards of Weights and Measures Act, 1976 and Packaged Commodities Rules, the Tribunal came to the conclusion that if the packages in question are not exempt under Rule 34, the goods will be liable to be valued under Section 4A and not under Section 4 of the Central Excise Act. Rule 34 reads as under:- "34. Exemption in respect of certain packages - (1) Nothing contained in these rules shall apply to any package containing a commodity if- (a) the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry." 22. It is clear that a manufacturer is exempt from the provisions of rules only if the packages satisfy the above requirement. Not otherwise. In the instant case, Revenue has no case that the telephone instruments sold to DOT were cleared as indicated in the above rule.
Instead, they were packed and cleared like any other instruments in consumer packing with MRP marked. The sale and purchase were also not on an understanding between the parties that the transaction is exempt under Rule 34 since it was to service an industry. Section 4A contains no exception in respect of specified goods based on category of buyer.
Therefore, unless packages themselves are exempt under Packaged Commodities Rules, their assessment will have to be under Section 4A.That the goods are sold in bulk under a contract cannot be the criterion. If such a view is taken, most consignments will go out of Section 4A, because sale to first tier of trade of goods covered by Packaged Commodities Rules take place in wholesale quantities. Further, there is no requirement under Section 4A or under Packaged Commodities Rules that goods covered by this provision should actually be sold in retail. The definition of 'Retail Sale" under Rule 2 specifically covers "distribution disposal" other than through sale also. The amplitude and coverage of the Packaged Commodities Rules extend to goods packed for disposal other than through sale also. Section 4A's scope is the same as the scope of goods covered by Standards of Weights and Measures Act, 1976 or Rules made thereunder. The non-obstante clause in Sub-section (2) of Section 4A ("notwithstanding anything contained in Section 4") makes it abundantly clear. The decision of this Tribunal in Jayanti Food Processing Pvt. Ltd. is also to the effect that if packages in question are not excluded under Rule 34, the goods would be liable to valuation in terms of Section 4A.23. In view of the above, I am of the opinion that, since consignments in question were cleared to DOT in terms of the requirements under Standards of Weights and Measures Act and Packaged Commodities Rules, they were required to be valued under Section 4A and not under Section 25. By majority it is held that clearances of telephone instruments of DOT/MTNL should be assessed under Section 4A and not under Section 4 of the Central Excise Act, 1944 and appeals are allowed accordingly.
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