1. The stay application and appeal (E/280/2006) have been filed in respect of OIA No. 129/2005 dated 30-12-2005 passed by the Commissioner of Central Excise (Appeals-II), Hyderabad. The stay application is allowed and the appeal is taken up for regular hearing along with another appeal (E/965/2005) filed against the OIA No. 94/2005 dated 29-7-2005 passed by the same Commissioner (Appeals), wherein full stay and waiver of pre-deposit have been granted. Since, the issues involved in both these appeals are one and the same, we are passing a common order.
2. The appellants manufacture Caram Eclairs and Choco Eclairs for ITC Limited. Each piece of the above weighs approximately 5.5 gms, and is classifiable under Central Excise Tariff heading 1804.00. These goods are notified both under Section 4A of the Central Excise Act, 1944 and the Standards of Weights and Measures Act, 1976. The appellants are of the view that there is no requirement of affixing MRP in terms of Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rule 1977 [SWM (PC) Rules in short] as the unit net weight of the product is approximately 5.5 gms. Moreover, they claimed that their product is packed in wholesale package and meant for wholesale dealers as per Rule 29 of the SWM (PC) Rules. Hence, they are not required to affix the MRP on the said packages in view of the clarification given by the Central Board of Excise & Customs vide their Circular No.625/16/2002-CX dated 28-2-2002 and letter No. F.341/64/97-TRU dated 11-8-1997. In other words, according to the appellants, Section 4A is not applicable to the said goods. Each piece weighing around 5.5 gms.
is twist wrapped separately with printed laminated film. The individual pieces are packed into 0.825 Kg. Pet jars or 0.220 Kg. Poly bags. Each piece carries a marking on the wrapper "MRP Re. 1/-". As regards Pet Jars/Poly Bags, there is a marking "Rs. 1 per unit" and "wholesale pack. To be opened and sold loose." However, Revenue did not subscribe to the views of the appellant. According to the Revenue, the packages appear to be squarely covered under the provisions of Rule 6(1) of SWM (PC) Rules necessitating the declaration of MRP on the individual packages under Rule 6(l)(f) of SWM (PC) Rules. Thus, the provisions of Section 4A will be attracted. Both the lower authorities held the view that Section 4A is attracted. The appellants strongly challenge the findings of the lower authorities armed with a decision of the Mumbai Tribunal in the case of M/s. Swan Sweets Pvt. Ltd. and Ors. v. CCE, Rajkot and Gwalior Final Order No. A/218-227/WZB/2006/C-III S/122-123/WZB/2006/C-III dated 15-1-2006 2006 (198) E.L.T. 565 (T).
2. S/Shri B.V. Kumar and B. Venugopal, the learned Advocates appeared for the appellants and Shri R.K. Singla, the learned JCDR, for the Revenue.
(i) Though the goods are notified under Section 4A of the Central Excise Act 1944, the impugned goods are not meant for retail sale in the form in which they are cleared. To put it differently, the poly bags/pet jars are wholesale packets. They are to be sold in wholesale only as mentioned in the packages themselves. Since these packages are not meant for the ultimate consumer, there is no requirement for the appellants to print the MRP on the packages.
Once there is no requirement to print the MRP, the assessment should be done only under Section 4 and not 4A. Relying on the following Circulars, he urged that even if a commodity is notified under Section 4A and if there is no statutory requirement under the law for declaring the MRP on the packages cleared by the manufacturer, then the assessments have to be done under Section 4 and not under Section 4A. (ii) Individual 'Eclairs' weighing 5.5 gms/4 gms. are twist wrapped.
Individual 'Eclairs' are packed into Pet Jars, weighing 825/720 gms.
These Pet Jars (15/12) are put in a carton and cleared. Alternately, individual 'Eclairs' weighing 220 gms/412.5 gms/420 gms are packed into Poly Bags. These Poly Bags (72/32/32) are put in a Carton and cleared. The said Cartons containing either 15/12 Pet Jars or 72/32/32 Poly Bags are cleared on payment of duty under Section 4 to the Regional Depots of ITC. From the Regional Depots of ITC, the said Cartons are sold to Wholesale Dealers, who in turn sell the same to the Sub-Distributors. The Sub-Distributors in turn sell a few Pet Jars or a few Poly Bags to the Retailers, depending on their requirement. It is the Retailers who display the individual units of 'Eclairs' in Pet Jars/Glass Jars and sell to the ultimate consumers and not the appellants.
(iii) After referring to the definition of "Wholesale Package" in Rule 2(x) of the SWM (PC) Rules, the learned Advocate submitted that in the instant case, the cartons containing 15 pet jars or 72 poly bags are wholesale packages and are required to be assessed under Section 4, since they are sold in wholesale, and are not sold to the ultimate consumer. It was further pointed out that any package containing 10 or more than 10 retail packages would come within the meaning of a wholesale package, provided that the retail packages are labeled as required under the Rules.
(iv) After taking us through the definition of 'multi-piece package' and 'retail package', 'retail sale' and 'retail sale price' in the above rules, the learned Advocate stated that a harmonious construction of the three definitions would show that a unit package which is consumed by the ultimate consumer, is a retail package; and a package, intended for retail sale and which contains two such unit packages but not more than 9 such unit packages, is a multi-piece package. If a package contains ten or more such retail packages, it is a wholesale package. Since the Pet Jars/Poly Bags are not intended for retail sale and not purchased by retail customers/ultimate consumers, there is no requirement for assessment under Section 4A. (v) The intention of the manufacturer with regard to the goods manufactured by him and the marketing pattern followed is important to decide assessment of the goods. The learned Advocate relied on the decision of the Apex Court in the case of American Home Products Corporation v. Mac Laboratories Pvt. Ltd. wherein it was held that the intention of the manufacturer with regard to the goods manufactured by him and the marketing pattern he would follow, is important.
(vi) The individual pieces of Eclairs weighing 5.5 gms. clearly fall within the exemption provided under Rule 34(b) of the SWM(PC) Rules for the following reasons: (a) The net weight of each piece of confectionery in the package is 5.5 gms/4 gms., which is less than the weight specified in Rule 34(b), i.e., 10 gms.
(b) Based on the reference made by ITC explaining the marketing pattern of the confectionery manufactured and sold, the Department of Legal Metrology, Bangalore, had confirmed that the individual confectionery is required to be sold by weight.
(c) In terms of the National Industrial Classification, confectionery is required to be packed and sold by weight, viz., Kgs. and not by numbers.
(d) The new 8 digits Central Excise Tariff also mentions 'weight' as the unit of measurement, against confectionery items falling under Chapter 17.
(vii) Further, the learned Advocate relied on the following case-laws: Ana bond Ltd. v. Dy. CCE, Chennai-I Division, Chennai-II Commissionerate 2002 (48) RLT 237 (CCE(A) 4. The learned JCDR urged that all the requirements for assessment under Section 4A are satisfied in the present case. First, the commodity is notified under the Standard of Weights and Measures Act, 1976. Under Section 4A(1) of the Central Excise Act also, the impugned commodity is notified. The Pet Jars/poly Bags, by no stretch of imagination, can be called as wholesale package. In this view of the matter, they are not exempted from marking the MRP on these packages.
Hence, assessment under Section 4A, as held by the lower authorities, is in order.
5. We have gone through the records of the case carefully. An identical issue came up before the CESTAT, West Zonal Bench at Mumbai in the case cited supra by the learned Advocate for the appellants. The Tribunal has come to the conclusion that the packages under which the impugned products are sold by the appellants clearly fall within the exemption provided under Rule 34(b) of the said Rules as each individual piece weighs less than twenty grams. The reasoning adopted by the Tribunal is that the impugned goods are required to be packed and sold by weight viz. Kilograms and not by numbers. For arriving at this conclusion, they have also relied on the National Industries classification wherein it is mentioned that for the impugned items, the unit of quantity is kilogram. The whole thrust of the appellants' case is that the Pet Jars/Poly Bags containing individual pieces constitute a wholesale package. A wholesale package is not intended for sale to the ultimate consumer. Therefore, there is no requirement of printing the MRP on the wholesale package. That apart, it was submitted that the individual piece weighs less than 5.5 gms. and hence, there is no requirement for affixing MRP in terms of Rule 34(b) of SWM(PC) Rules, 1977. When there is no legal requirement for printing the MRP, assessment should be done only under Section 4 of the Central Excise Act and not under 4A as contended by the Revenue. We do not agree with the stand of the appellant that the Pet Jars and Poly Bags are wholesale packages. 150 pieces of Eclairs are put in each Pet Jar. The weight comes to 825 gms.
The weight of the Poly Bag is 220 gms. It is very difficult to hold that a Pet Jar weighing 825 gms. or a Poly Bag of 220 gms. is a wholesale package. In any departmental store, these Pet Jars/Poly Bags are available for the purchase of retailers. It is not necessary that the ultimate consumer would purchase only one piece. There does not appear to be any bar for selling the Pet Jars/Poly Bags to ultimate consumers. Normally, one purchases one jar or poly bag for consumption of a family. By no stretch of imagination, it can be held that the purchase of a Pet Jar or a Poly bag by an individual constitutes a wholesale purchase. The appellants submitted that they clear the goods in Cartons, each Carton contains 15 Pet Jars or 72 Poly Bags. One of their arguments is that neither these Cartons nor the individual Pet Jar or Poly Bag is meant for the ultimate consumer. It was urged that the intention of the manufacturer is important and the same is that only the single piece is meant for the ultimate consumer. We find that this line of argument is very much repugnant to common sense and also does not reflect the correct legal position. In our view, the Poly Bag or the Pet Jar answers correctly to the description of 'multi-piece package' as defined in the SWM(PC) Rues, 1977. According to Rule 2Q), "multi- piece package" means a package containing two or more individually packaged or labelled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole." It is clear that a 'multi-piece package' is intended for retail sale. In the present case, the Pet Jar contains 150 individual pieces.
5.1 We should also note the definition of 'retail sale'. According to Rule 2(q) "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 consumer. Therefore, it is very clear that "retail sale" can be for consumption by an individual or a group of individuals. To argue that only sale of individual piece is retail sale is not in accordance with the above mentioned definition of 'retail sale'. Thus, the purchase of a Poly Bag or a Pet Jar can be held as a retail purchase and hence the transaction constitutes a retail sale.
5.2 Coming to Rule 34(b), we find that the exemption is applicable when the net weight or measure of the commodity is twenty grams or twenty millilitres or less, if sold by weight or measure. When the Poly Bag or Pet Jar is sold in retail, the factual position is its weight is more than twenty grams. Therefore, the exemption would not be applicable to the Poly Bag or the Pet Jar. Hence, there is a requirement of printing the MRP on the Pet Jar or poly Bag. Once this is accepted, the assessment has to be necessarily under Section 4A as held by the lower authorities. The appellants are confusing the issue saying that the Cartons containing Pet Jars/Poly Bags are not meant for ultimate consumers and hence, there is no requirement for printing the MRP. This amounts to obfuscation of the issue. No manufacturer clears the goods directly to the ultimate consumers. The form in which the goods are cleared by the manufacturer is not a relevant factor for deciding whether the impugned goods should be assessed under Section 4 or 4A.The above view is supported by the findings of the CESTAT in the case of BPL Telecom (P) Ltd. v. CCE, Cochin 2004 (168) E.L.T. 251 (Tri.-Bang.) in paragraph 6, as given below: 6. We have perused the records and have considered the submissions made by both sides. The appellant manufactures telecom instruments and sells those instruments to several parties including DOT/BSNL.
Telecom instruments are covered by the provisions of Packaged Commodities Rules. A major requirement under this Rule is that maximum retail price should be affixed on the goods in question.
There is no dispute that the telecom instruments involved in the present dispute were cleared in terms of Packaged Commodities Rules.
It is also specifically noted that "MRP has been declared on the individual cartons". Telecom instruments are specified goods under Section 4A of the Central Excise Act also. Section 4A specifically excludes the application of provision of Section 4 of the Central Excise Act to goods specified under Section 4A. In these circumstances, we are of the view that telecom instruments in question fell for valuation under Section 4A. They were so valued and duty paid at the time of their removal from the factory. That they were sold in wholesale to a big customer like DOT/MTNL/BSNL against contract prices is altogether irrelevant for the purpose of their excise valuation. In fact, sale at contract price in wholesale cannot constitute the distinguishing criterion for valuation under Section 4A or Section 4 because it is normal that all goods, irrespective of whether then fall for valuation under Section 4A or Section 4 of the Central Excise Act, enter trade through wholesale sale at agreed prices. It is also no requirement under Packaged Commodities Rules or under Section 4A of the Central Excise Act that goods covered by those provisions should actually be sold in retail.
This is made clear by the definition of 'retail sale' under Rule 1 of Packaged Commodities Rules. The definition makes it clear that 'retail sale' includes "distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual.
In view of the above observations, with due respect, we do not agree with the findings of the Mumbai Bench.
5.3 The appellants have argued that since each individual piece is less than 5.5 gms, there is no requirement for printing the MRP on the individual unit by virtue of Rule 34(b). They have produced a letter from Controller of Legal Matrology, Bangalore, to the effect that as per Sub-rule 12(2) of Standards of Weights & Measures (P the individual sugar boiled confectionery (Pillow packed and twist wrapped) has to be sold by weight. Armed with this clarification, they argued that Rule 34(b) applies to these individual pieces and therefore, they are exempted from printing the MRP. Once they are exempted, they go out of Section 4A. This is not acceptable for the following reason: (i) Individual Confectionery may be exempted under Rule 34(b) because the weight is less than twenty grams. But, the Poly Bag weighing 220 gms. or the Pet Jar weighing 825 grms. are definitely not exempted under Rule 34(b). The said packages are actually 'Multi-piece package' as defined in the Rule. Once this position is accepted, there is a requirement to print the MRP as per Rule 6.
When the MRP is required to be printed on the packages, assessment has to be done only under Section 4 or 4A. In other words, the exemption from Rule 34(b) for individual pieces is not relevant for the assessment of the goods under Section 4 or 4A as the Pet Jar/Poly Bag, being multi-piece packages, should necessarily have the MRP printed on them.
6. Since there is a difference of opinion between the two Benches on identical issue, the matter is referred to the Hon'ble President for constituting a Larger Bench to answer the following questions: (i) Whether the Pet Jars/Poly Bags containing individual pieces of Eclairs weighing less than 5.5 gms. each should be considered as a 'wholesale package' as contended by the appellants and agreed by the Mumbai Bench or Whether they should be considered as 'multi-piece package' as per the views of this bench? (ii) Whether the exemption under Rule 34(b) of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 available for individual pieces is relevant for deciding if the assessment has to be done under Section 4 or 4A of the Central Excise Act? (iii) Whether the assessment of the impugned products should be done under Section 4 or Section 4A of the Central Excise Act?