| SooperKanoon Citation | sooperkanoon.com/41604 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | Jan-25-2006 |
| Judge | S T S.S., T Anjaneyulu |
| Appellant | Swan Sweets Pvt. Ltd., Makson |
| Respondent | Commissioner of Central Excise, |
Makson Confectionary Pvt. Ltd. (hereinafter referred to as appellants), who are engaged in the manufacture of confectionary, falling under sub-heading 1704.90 and 1804.00 of the Central Excise Tariff Act, 1985.
They manufacture and sell confectioneries of various brands and names on outright basis to M/S. Nestle India Ltd. (hereinafter referred to as 'NIL') and M/s. Hindustan Lever Limited (hereinafter referred to as 'HLL').
1.2 The manner of packing/selling the sugar confectionary (e.g. Toffy Max Caramel/Chocolate) is described as under: a) Individual Toffy Max Caramel/Chocolate is wrapped in a printed plastic film. The weight of the individual Toffy Max Caramel/ Chocolate is about 4 gms., including the weight of the wrapper.
b) The Toffy Max Caramel/Chocolate are thereafter packed in wholesale pack. The wholesale packs either in the form of plastic jar or plastic bag.
c) The weight of the wholesale package is around 500 gms. in the case of Poly Bag and around 1 kg. in case of jar.
d) The MRP printed on the individual Toffy Max Caramel/ Chocolate is 0.50 Paise.
e) The whole sale pack in which the individual Toffy Max Caramel/Chocolate are packed carries, inter alia, the following declaration on it:MRP 50 paise per piece (inclusive of all taxes)Net Weight 500 g (125 Units)Without affecting the Net Weight, occasionally, there could bevariation in the number of units.
1.3 The valuation and assessment of sugar confectionary falling under Heading 17.04 and 18.04 was brought under the MRP based assessment under Section 4A of the Central Excise Act, 1944 by Union Budget 2002.
There has been an ongoing dispute between the appellants and the Department about the valuation of the confectionary. According to the appellants, there is no statutory requirement under the Standards of Weights and Measures Act, 1976 and the Rules made thereunder, to declare the MRP on the wholesale package. It was also the contention of the appellants that there is no requirement under the law to declare MRP on the individual sugar confectionary, since the weight of the individual confectionary is less than 10 gms. as provided in Rule 34 of the 1977 Rules made under the 1976 Act. However, according to the Department, the valuation of sugar confectionary has to be done in terms of Section 4A of the Act.
1.4 Show Cause Notices, identically worded, were issued, contending that the valuation of confectionary cleared by the appellants should be determined as per Section 4A of the Central Excise Act, 1944 as the goods wore as confectionary is cleared by the appellants in multi-piece pack.
1.5 The appellants replied the Notices and took the stand that the product was sold in wholesale by them and not in retail and there was no statutory requirement under the relevant laws to declare and affix MRP (Maximum Retail Price) on each piece of the confectionary sold.Therefore, the determination and payment of the duty as effected under Section 4 was correct in law. The lower authorities did not accept the contentions and confirmed the demands. Hence the present appeals.
1.6 Appeal No. E/2653/04 of Ms. Swan Sweets Pvt. Ltd. was also heard along with the above appeals of M/s. Makson Confectionary as in this case also individual confectionary, packed in wrappers and falling under Chapter 17 and 18 of CETA 1985 was cleared in jars, boxes and pouches, each containing individual pieces less than 12 gms. by weight, which were not required to declare MRP, considered to be exempt from operation of the provisions of the Standards of Weights and Measures Act, 1976 in terms of Rule 34(1)(a) of the Standards of Weights and Measures (Package Commodities) Rules, 1977. (hereinafter referred to as MRP Rules for short) framed under the said Act and therefore not covered by the valuation formula prescribed vide Section 4A of the Central Excise Act, 1944 and these are not assessable under the provisions of the Notification No. 13/2002-C.E.(N.T.) thereunder.
1.7 Appeal Nos. E/2041 and 2042/04 of M/s Cadbury (India) Ltd. were also heard, along with the above appeals, as these cases were also on identical nature and issues.
2.1 The issue in these cases is whether the confectionary cleared in separate individual pieces, each piece being exempt from the operation of the MRP Act and the Rules thereunder in terms of Rule 44(1)(b) of the MRP Rules when such individual pieces are cleared in whole packs of jar, boxes or pouches, as per the definition of Wholesale Package (Commodity) vide Rule 2(x) of the Standards Weights and Measures (Package Commodities) Rules, 1977 and the package being cleared not being covered as a multi piece package under Rule 2(j) of the MRP Rules and their assessment, therefore, under Section is correct.
2.2 All these appeals are being disposed of by this common order as the issue being the same.
2.3 Valuation under Section 4A of the Central Excise Act, 1944 can be resorted to when the commodity is notified under Section 4A(1) and there is a statutory requirement to affix MRP under MRP Act and the Rules. On perusal of the statutory provision, it is found - (1) These rules may be called the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
(3) They shall apply to commodities in the packaged form which are or are intended or likely to be - (i) sold, distributed or delivered or offered or displayed for sale, distribution or delivery, or "3. Chapter to apply to packages intended for retail sale - The provisions of this Chapter shall apply to packages intended for retail sale and the expression "package", wherever it occurs in this Chapter, shall be construed accordingly".
(iii) Chapter 11 pertains to provisions applicable to packages intended for retail sale. Under Chapter 11, Rule 3 states that whenever the packages are intended for retail sale, the provisions of Chapter 11 will apply. It is under Chapter 11 the PC Rules specify the declaration of MRP. Since for every package sold in the market declaration of MRP is required, declaration of MRP is required to be affixed or indicated on the package only when such package is intended for sale in retail sale.
2.4 CBEC vide following circulars has clarified that even if the commodity is notified for the purposes of Section 4A(1), if there is no statutory requirement under the law i.e. MRP Rules for declaring MRP on the packages cleared by the manufacturer, then, the assessment will be done under Section 4 and not under Section 4A.In all these circulars, it has been clarified that valuation under Section 4A will be restored to only when there is a statutory requirement for declaring the MRP on the packages by the manufacturer and such commodities are notified by the Government under Section 4A(1). It has also been clarified that even if an item is notified under a Notification issued under Section 4A(1), if there is no statutory requirement to affix MRP, then Section 4A cannot be resorted to. It is an obvious fact that in the trade all items are ultimately meant for sale to customers. The question is, whether in the form in which the goods are cleared are meant for retail sale or not? It is only such packs, which are intended for retail sale, are to be affixed with MRP and only in respect of such commodities, Section 4A will be applicable, if notified by the Government, for the purposes of Section 4A. The view of lower authorities that the moment the goods are notified under Section 4A(1), then the goods are liable to duty with reference to the MRP, cannot be upheld.2.5 In Chapter 11 of the MRP Rules, Rule 2A states that provisions of the chapter shall apply to pre-packaged commodities except in respect of grains and pulses containing a quantity more than 15 kg. Rule 3 further clarifies that the provisions of this chapter shall apply to packages intended for retail sale and the expression "package", wherever it occurs in this chapter, shall be construed accordingly.
Rule 4 mandates that no person shall pre-pack or cause or permit to be pre-packed any commodity for sale, distribution or delivery unless the package in which the commodity is pre-packed bears thereon, or on a label securely affixed thereto, such declarations as are required to be made under these Rules. "Retail sale" has been defined under Rule 2(q) as under: (q) retail sale", in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities or consumption by an individual or a group of individuals or any other consumer.
The declaration to be made on every package intended for retail sale is prescribed in Rule 6 which is as under: (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, of the packer or with the written consent of the manufacturer, of the manufacturer; (b) the common or generic names of the commodity contained in the package; Explanation:- Generic name in relation to a commodity means the name of the genus of the commodity, for example, in the case of common sale, sodium chloride is the generic name.
(c) the net quantity, in terms of the standard unit of weight of 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.
(f) where the sizes of the commodity contained in the package are relevant, the dimensions of the commodity contained in the package and if the dimensions of the different pieces are different, the dimensions of each such different piece; (2) Where a commodity consists of a number of components and these components are packed in two or more units, for sale as a single commodity, the declaration required to be made under Sub-rule (1) shall appear on the main package and such main package shall also carry information about the other accompanying packages.
(r) "retail sale price" means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and where such price is mentioned on package, there shall be printed on the packages the words "Maximum or max. retail price... inclusive of all taxes or in the form MRP Rs.... Incl. of all taxes".
Explanation : For the purposes of the clause "maximum price" in relation to any commodity in packaged form shall include all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be.
If the plastic jar or plastic bag, in which the Toffees are packed, are packages intended for retail sale, the law requires that the Maximum Retail Price (inclusive of all taxes) of the said jar or bag is to be printed on them. Since the appellants never intended the jar or bag to be sold to the retail consumers as such, the Maximum Retail Price for the bag or jar is not printed on the bag or jar. What is required to be printed on the bag or jar is the MRP for individual Toffee. Thus, the appellants are not printing any price for the whole package. The information given on the bag or jar is only for the dealers or distributor, who handle the said bags or jars in the distribution channel. If the appellants had intended the bag or jar to be sold to the retail consumers, they would have printed the price of the bar or jar at one place in a "definite, plain and conspicuous" manner as Rule 6 requires. The PC Rules use the expression "intended for retail sale" at numerous places in order to define whenever and wherever a particular set of information is required to be given on a package.
Whether a packaged commodity is intended for retail sale or not will depend on the persons who organize the distribution and sale of the product and on none else. The Supreme Court in American Home Products Corn. v. Mac Labs. Pvt. Ltd. 41. Intention is a state of mind. No person can make out the state of mind of another person. Nonetheless courts are often called upon for various purposes to determine the state of a person's mind. The courts can only do so by deducing the existence of a particular state of mind from the facts of a case. Section 14 of the Indian Evidence Act, 1872, provides as follows: 14. Facts showing existence of state of mind, or of body, or bodily feelings. - Facts showing the existence of any state of mind, such as intention, knowledge, good faith, negligence, rashness, ill-will or good-will towards any particular person, or showing the existence of any state of body or bodily feeling, are relevant, when the existence of any such state of mind or body or bodily feeling is in issue or relevant.
Explanation 1 - A fact relevant as showing the existence of a relevant state of mind must show that the state of mind exists, not generally', but in reference to the particular matter in question.
Clearances are to be thus regulated. Taking the case of Toffy Max Caramel/Chocolate manufactured on behalf of NIL, it is found that the individual Toffy Max Caramel/Chocolate weighs about 4 gms, which is meant for retail sale in trade. The retail packs of Toffy Max Caramel/Chocolates are packed in wholesale package and each wholesale package weight would vary from 500 gms. to 520 gms. Such wholesale packages are cleared by the appellants to wholesale traders who in turn sell the packs to retailers. The retail traders break open such wholesale pack for retail sale. Therefore, the packs in which the appellants clear the Toffy Max Carmel/Chocolates are wholesale packages which are meant for the convenience of distribution in the trade and are not intended for retail sale to the ultimate consumer. Since per capita consumption of confectionary in India is 300 gms. per annum as submitted by the appellants and nothing contrary is shown. Therefore, it is not normal intent and feasible for a consumer to consume about 500 gms. of confectionary of the same flavor on one consuming occasion.
Rule 2(p) of the Packaged Commodities Rules defines retail packages to mean - a package containing any commodity which is produced, distributed, displayed, delivered or stored for sale through retail sale agencies or other instrumentalities for consumption by an individual or group of individual.
It is the contention of the Revenue that retail sale shall mean sale of any commodity packed in packages meant for retail sale and retail sale does not mean that sale of a single individual item. That cannot be accepted in view of the above.
2.6 Perusal of the MRP (Act & Rules) reveals that declarations on the wholesale packs under clearance are required to be made as prescribed under Rule 29, which reads as under: (1) Every wholesale package shall bear thereon a legible definite, plain and conspicuous declaration as to - (a) the name and address of the manufacturer or where the manufacturer is not the packer; (c) the total number of retail packages contained in such wholesale package or the net quantity in terms of the standard units or weight, measure or number of the commodity contained in wholesale package.
The above requirement is duly complied, by the appellants for the 'wholesale pack' and is not in contrary. As a matter of absolute precaution in such cases even the maximum price worked out is also declared, which was not a statutory requirement. The appellants have also declared on the wholesale pack that number of units would vary occasionally without affecting the net weight declared on the wholesale pack. In this view of the matter, the finding of the Commissioner (Appeals) that the term 'intended for retail sale' appearing in the MRP Rules applies to the product itself cannot be accepted as the provisions of MRP Act and Rules applies to a person who intends sale of a commodity notified only in retail. The Commissioner held that just by writing on the 500 gms. package 'wholesale pack', it will not render such a pack as a wholesale pack, since such packs would be available in retail and would be purchased by the ultimate consumer. There is no basis to uphold this finding as arrived at by the Commissioner (Appeals). The Commissioner (Appeals) refers to a purchase of 500 gms.
pack by a parent to distribute the Toffy Max Caramel/Chocolate to children at School or in neighbourhood to celebrate the birthday of a son. Such occasional purchase, if they shall take place, would not be a normal intended sale of Toffy Max Caramel/Chocolate. Therefore, 500 gms. pack of individual toffees in jar, box or pouch would not be a normal sale and will not cause for assessments for Central Excise purposes under Section 4A.2.7 The findings and the view of the Revenue that product removed is a multi-pack also cannot be accepted, since the term 'multi-pack' is a work of art in MRP Rules and has to be interpreted in the fashion provided thereunder. It is relevant to note that the definition of 'wholesale package' has undergone various changes. Rule 2(x) or the MRP Rules was amended on 17.08.1999 vide the Standards of Weights and Measures (Packaged Commodities) (Second Amendment) Rules, 1999, wherein in Rule 2, Clause 10, after Sub-clause 2, the following sub-clause was inserted.
(iii) more than ten packages where total value of the retail packages exceed Rs. 100/- The above clause was amended once again vide Notification No. GSR.631 (E) dated 21.07.2000 and the amended clause reads as under: (iii) packages containing ten or more than ten retail packages provided that the retail packages are labeled as required under the Rules.
A reading of these amendments, will make it very clear that the same were arrived with a view to remove doubts with regard to the definition of 'Wholesale packages' and to determine when the package is whole pack and when it would be a retail pack. If the package contains ten or more than ten retail packs irrespective of the value of such retail pack, that would be covered under the definition of 'whole packs'. In view of the above, entire basis of the Department that the whole packs in question, which contain more than 10 Toffees, are "Multi-Piece Packs" cannot be upheld. The view that the said packs are 'multi piece packs' are also not correct, because 'multi piece' packages have been defined in Rule 2(j) of MRP Rules and the packs in question do not satisfy the definitions when read with whole sale pack definition. According to the definition, both the individual pieces as well as the package as a whole must be intended for retail sale. In this case, the container pack (i.e. the plastic jar or the plastic pouch containing 500 gms. or so of the Toffees) is not intended for retail sale. Only the individual Toffee placed inside such wholesale packs (jar, polybags) are intended and meant for retail sale. Therefore, the wholesale packs in this case are not multi-piece package. They would, therefore, exclude the application of Section 4A of the Central Excise Act, 1944.
2.8 The reliance of the Commissioner (Appeals) on the decision of the Madras High Court in the case of M/s Varica Herbs v. CBEC is not well founded. In para 15 of this report, the Hon'ble High Court has held that the article in that case (i.e. herbal powder) was not sold either by weight or by measure, the exemption under Rule 34 of MRP Rules was not applicable. It is pertinent to note that in the present case that is not the position. Further the High Court has held that in the very case exemption under Rule 34 was not applicable to multi-piece pack. In the present case, the pack is not found to be a multi-piece pack. Therefore, the decision in the case of M/s. Varica Herbs of Hon'ble Madras High Court is not applicable to the facts of this case.
2.9 No statutory requirement to declare MRP on such individual packs of the products involved herein, which are below 10 gms. weight individually, has been shown to us. Confectionary cleared from the appellants' factory have discharged duty under Section 4 of the Act on the packs intended for retail sale, which are below 10 gms. in weight in jars, boxes, polybags/polyethylene bags, etc., in which the individual packs are kept/placed at the time of clearance, which are below 10 gms. are wholesale bags, which are not intended for retail sale. In fact, the Commissioner (Appeals) admits purchases by individuals of such bags to be an isolated rare occasion as recorded by him and not a norm. Such packs are not required to declare MRP on them.
Reading of Rule 34 under Chapter V of the MRP Rules is as under: 34. Exemption in respect of certain packages - Nothing contained in theses rules shall apply to any package containing a commodity if - (b) the net weight or measure of the commodity is twenty grams or twenty milliliters or less, if sold by weight or measure.
(Provided that the declaration in respect of maximum retail price and net quantity shall be declared on packages containing 10 g to 20 g or 10 ml to 20 ml).
The above would indicate that if the net weight of an individual package is 10 gms., there is no legal requirement for MRP declarations on such packs. In the present case, the individual packs are not found to be more than 10 gms. The exemption vide Rule 34(1)(b) is available for exemption from MRP declaration on the individual packs and if there is a voluntary disclosure/ declaration of MRP either on such individual confectionary packs or on the whole packs, Section 4A of the Central Excise Act and assessment thereunder cannot be restored to as clarified vide CBSE Circular dated 31.07.1998.
2.10 Since confectionary/candy is sold by weight or measure and not by numbers, 6th Schedule to MRP Rules is not specified; this Schedule prescribes the manner in which the commodities intended to be sold by number should be packed. This would go to indicate that the confectionary is not intended to be sold in number. The case of the appellants is also that. In fact this plea has been accepted by the Id.
Commissioner of Central Excise (A). Therefore/the finding of the Commissioner (A) that the assessee cannot take shelter under Rule 34 from the applicability of Section 4A of the Central Excise Act cannot be upheld in this case.
a)Letter dated 20.08.2003 addressed to Maharashtra Jarda Manufacturer's Association. In this it was clarified by the Legal Metrology Department that when a package contains ten or more numbers of retail packages, it will be treated as wholesale package.
It has further been clarified that if the individual retail pack contains less than 10 gms., there is no need to MRP. In this case, the wholesale package contained number of individual packs of Jarda.
b) Letter dated 22.08.2003 addressed to Swadesh Chewing Tobacco Industry to the above effect in respect of chewing tobacco/khaini.
and submit, in view of the above, the interpretation being granted to a package containing individual packages of less than 10 gms. not requiring a declaration of MRP has to be upheld.2.12 The following additional submissions are made as regards the product of HLL.
(i) Individual units of sugar confectionary weighing 4 gms. approx.
are packed in individual packages either with a wrapper around the confectionary or in the form of pillow packs/sachets and sealed.
(ii) The retail packages of confectionary as described above are then packed into one of the following containers: (a) Wholesale jars containing about 720 grams and above, containing 216 to 250 pieces of confectionary approximately.
(b) Wholesale pouches containing about 500 grams containing about 125 pcs. of sugar confectionary of the same flavour, which are clearly wholesale packages. These pouches are primarily used to refill jars lying with the retails.
(iii) The appellants sell to HLL and others in bigger wholesale cartons containing about 36 poly bags/42 poly bags. These cartons are primarily meant for large wholesalers.
(iv) HLL and others in turn sell the wholesale cartons containing the wholesale pouches to their Redistribution Stockists, who are large wholesalers of various foods and other products.
(i) Large wholesalers who cover territories such as rural, up-market, villages and small hamlets in the country. Such wholesalers buy the wholesale cartons and the sell the wholesale pouches to retailers in small and remote towns who in turn open the wholesale pouches and sell the said confectionary loose, in retail sales.
(ii) The Redistribution Stockist of HLL and others sell the wholesale cartons to retailers who have the option to either buy the wholesale carton as such or depending upon their requirement, but only the required number of wholesale pouches.
(iii) Such retailers then open these wholesale pouches and display the individual pieces of confectionary either in glass or pet jars or any other transparent container for the benefit of the consumers in their retail shops. The consumers will then have the option of buying one or two or more toffees of their preferred flavours. These retailers normally open one or two retail packs per day and buy wholesale pouches depending upon the beat plan of the Salesman of the Redistribution Stockist, who visits the market once or twice a week depending upon the business in that market.
(iv) The marketing pattern of the impugned goods explained above would clearly establish that these impugned pouches are really wholesale packages, which are meant for ease of distribution to the retail trade and are not intended for retail sale to the ultimate consumer.
The appellants submit that the impugned packages in the form of 'pouches' and 'jars' are in fact 'wholesale packages' coming within the meaning of Rule 29 of the Standards of Weights and Measures (Packager Commodities) Rule, 1977. The appellants further submit that the issue of goods sold in wholesale packs, sold to retailers and the applicability of MRP on such wholesale packs was considered by the Central Board of Excise & Customs vide CBEC Circular No. F.No.341/64/97-TRU dated 11.08.1997. In this Circular, it was clarified that MRP is not required to be affixed on the clearance of goods in wholesale packs. Further, in Circular No. 411/44/98-CX dated 31.07.1998, the CBEC had taken cognizance of the practice of sale to retailers in wholesale packs and had clarified that in case MRP is not required to be affixed statutorily, then the same are liable to be assessed under Section 4 of the Central Excise Act, 1944. The Central Board of Excise & Customs had once again vide Circular No.625/16/2002-CX dated 28.02.2002, clarified that Section 4A of the Central Excise Act, 1944 is applicable in respect of those cases only where the manufacturer is legally obliged to print the MRP on the packages of the goods, under the provisions of the Standards of Weights and Measures Act, 1976 or the Rules made thereunder or any other law for the time being in force. In the light of the clarifications given in the above Circulars, the appellants submit that the CBEC had recognized the practice of sale of goods both under MRP as well as to buyers in bulk and the decision of the Ld. Commissioner (Appeals) to bring such clearances of wholesale packs within the ambit of retail packs for charging duty on the basis of MRP and the requirement of declaring the MRP on individual packages under Rule 6(1)(f) of the SWMR, is not tenable.
(b) The appellants further submit that the valuation under Section 4A cannot merely be resorted to because of the production of goods are notified under the Notification issued under Section 4A(1), but is applicable only when there is a statutory requirement to affix MRP under the Standards of Weights and Measures Act, 1976 or Rules made thereunder. In this connection, the kind attention is invited to the crucial wordings in Section 4A, which are set out hereinbelow: i. Section 4A would be applicable to any goods, only if 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 price of such goods.
ii. Where the goods specified under Sub-section (1) are excisable goods and are chargeable to duty with reference to value, then notwithstanding anything contained in Section 4, such value shall be deemed to be the retail price declared on such goods, less such amount of abatement.
In other words, before Section 4A is made applicable, the sine qua non is that on the impugned goods the retail price is required to be declared on the package, 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. In the instant case, the impugned goods are bulk packs and are not meant for retail sale and the same are very clearly marked on the packages themselves as "WHOLESALE PACKS". Further attention is also drawn to the Explanations appended to Section 4A of the Central Excise Act, 1944. Explanation 1 appended to the Section 4A reads as follows: For the purpose of this section, 'retail sale price' means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes....: Here again, the words of paramount importance are "sold to the ultimate consumer". The appellants submit that, the goods cleared by them in bulk are sold to HLL/Nestle and others, who in turn sell the same to Wholesale Dealers and then they sell to sub-distributors. These sub-distributors sell the goods to retailers and not to ultimate consumers. The appellants submit that a 'retailer' should not be equated of confused for a 'consumer'. Therefore, the decision to assess the impugned goods which are not sold to the ultimate consumer on the basis of MRP is contrary to the provisions of Section 4A of the said Act itself. Further, the term 'consumer' has not been defined either in the Central Excise Act, 1944 or in the Central Excise Tariff Act, 1985.
In the absence of the statutory definition of the word 'Consumer', it is necessary to understand the meaning of the term as defined in the dictionaries and as interpreted by the Courts, from time to time. The word 'Consumer' is defined in Black's Law Dictionary as follows: One who consumes. Individuals who purchase, use, maintain and dispose of products and services. Users of the final product.
The word "Consumer" has been defined in the book - Words and Phrases of Excise and Customs - 2nd Edition by S.B. Sarkar of Centax Publications Pvt. Ltd., New Delhi-110 003, as follows: Consumer means user of an article (Opp. Producer). Purchaser of goods or services. 'Consumer goods' means those used directly (especially domestically) not in manufacturing etc. - (page 256).
The Pocket Oxford English Dictionary defines the word "Consumer" as follows: One who consumes, esp. One who uses a product; person who buys or uses goods or services.
As explained above, in the instant case, the impugned wholesale packages containing the confectionary are sold to a retailer, who in turn sells individual pieces of the said confectionary to the ultimate consumer. In other words, the wholesale packages containing the confectionary are not sold directly to the ultimate consumer.
Therefore, the decision to assess the impugned goods which are not sold to the ultimate consumer on the basis of MRP is contrary to the provisions of Section 4A of the said Act itself. Further, the definition of 'wholesale packs' as given in the Explanations appended to Section 4A, also verbatim finds place in Notification No.5/2001-C.E.(N.T.) dated 01.03.2001 (or for that matter the previous Notification issued under Section 4A of the said Act) under which the goods as well as the abatements to which the provisions of Section 4A would apply are specified thereby making it abundantly clear that the provisions of Section 4A would apply only for goods 'sold in retail' and to the 'ultimate consumer'. The crucial test, therefore, for determining whether the assessment are required to be done under Section4A is, whether the subject goods are required to declare the MRP under the Standards of Weights and Measures Act, 1976, or the Rules made thereunder. Wholesale packages are defined under Rule 2(x) of the Standards of Weights and Measures (Package Commodities) Rules, 1577 and need to bear a declaration as defined under Rule 29, ibid.
iii. package containing 10 or more than 10 retail packages provided that the retail packages are labeled as required under the rules.
29. Declaration to be made on every wholesale package -- (1) Every wholesale package shall bear thereon a legible, definite, plain and conspicuous declaration as to - (a) the name and address of the manufacturer or where the manufacturer is not the packer, of the packer; (c) the total number of retail packages contained in such wholesale package or the net quantity in terms of the standard units of weight, measure or number of the commodity contained in wholesale package.
Reading together the above two provisions, the stipulation under Rule 29(3) is that all packages numbering above the threshold limit of quantity of 10 numbers of such pouches/packages, therefore, are clearly exempt from the declaration of MRP. Any declaration of a recommended price is merely an advice to the wholesale trade or a voluntary declaration and cannot form the basis of valuation of these packages under Section 4A of the Central Excise Act, 1944. The status of such wholesale pouches of 500 gms. and that of the wholesale jars of 720 gms. as 'wholesale packages' is, therefore, very clear. The appellants further submit that while sugar confectionary is chargeable to duty on a MRP basis under the provisions of Section 4A, it is very clear that even under Section 4A, the declaration of MRP must be mandated by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
It is clear from the provisions of Rule 29 ibid, that wholesale packages need not bear the MRP. As explained above, the impugned goods are not normally purchased by an 'ultimate purchaser' as it is not feasible for such a consumer to consume candies of the same flavour on one consuming occasion. It is further submitted that small packages of confectionery weighting less than twenty grams if sold by weight are clearly exempt from the provisions of Standards of Weights and Measures (Package Commodities) Rules, 1977 under Rule 34(1)(b) read with Rule 2(x). As such, they need not bear thereon a maximum retail price. Under Rule 2(j) of the Standards of Weights and Measures (Package Commodities) Rules, 1977, "multi-piece packages" has been defined as follows: multi-piece package" means a package containing two or more individually packaged or labeled pieces of the same commodities of identical quantity intended for retail sale, either in individual pieces or the package as a whole" Illustration : a package containing "5 toilet soap cakes net weight 20 g each, total net weight 100 g" is a Multi-piece package.
Under Rule 2(p) of the Standards of Weights and Measures (Package Commodities) Rules, 1977, "Retail package" has been defined as follows: Retail package" means a package containing any commodity which is produced, distributed, displayed, delivered or stored for sale through retail sale agencies or other instrumentalities for consumption by an individual or a group of individuals, individually packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole.
A careful reading of the above definitions would show that in the case of multi-piece package such a package should contain two or more individually packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole. In the case of a wholesale package, inter alia, it should contain 10 or more than ten retail packages provided that the retail packagers are labeled as required under the Rules. 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 which contains two such unit packages but not more than 9 such unit packages, is a multi-piece package; and if a package which contains ten or more such unit packages, is a wholesale package. The appellants, therefore, submit that these packages need to have only the declarations required to be made for a wholesale package as stipulated in Rule 29 of the said Rules. Any declaration of a recommended price is merely an advice to the wholesale trader and cannot form the basis of valuating of these packages under Section 4A of the Central Excise Act. Hence a declaration made under Rule 17(1) of the SWMR of certain additional details in respect of the impugned packages such as sale price and the number of individual pieces of the commodity contained in such packages is not tenable. It is, therefore, the submission of the appellants that these poly packs and pet jars weighing 500 gms. and 720 gms. and above are clearly "wholesale packages" as they are not purchased by retail customers/ultimate consumers. The decision in the impugned Order-in-Appeal that the exemption given in Rule 34(1)(b) of the PCR would not be available to the impugned products as the same are being sold in pieces/numbers and not by weight is completely misplaced in as much as the impugned products, as explained above, are cleared from the appellants' factory either in pouches of 500 gms. and in jars of 720 gms. and above which are sold in the wholesale market as such, which is a mandatory requirement that as per the National Industrial Classification, the sugar confectionary is required to be sold in Kgs., i.e. by weight.
This clearly shows that the impugned goods are sold by weight in the market and not by pieces/numbers. The appellants submit that, the net weight of each piece of confectionary in the package is 3.3 gms., which is less than the weight specified in Rule 34(1)(b) and the packages are sold by weight as a wholesale package, which is an admitted position.
In this connection, the appellants refer to and rely upon the decision of the Hon'ble Tribunal in the following cases.Krafetch Products Inc. v. CCE, Vapi Anabond Ltd. v. Dy. CCE, Chennai-I Division, Chennai-II Commissionerate 2002 (48) RLT 237 [CCE (A)] (c) Without prejudice to the above, the appellants would like to refer to the National Industries Classification with reference to the following:NIC/Prod. Code Description Unit of Qty.2092 Mnf. Of Sugar, Confectionary, Chewing/ Kg.
Bubble Guim209201002 Confectionary (Except Chocolates and chocolate preparations) Kg.209201010 Confectionary Excl. Chocolates, Toffees & Chewing Gums.
Kg.209202009 Chocolates Kg.209205008 Toffees Kgs.209207000 Sugar Candy Kg.
It can be seen from the above that the impugned goods are required to be packed and sold by weight, viz. Kgs. and not by numbers. Under the circumstances, the packages under which the impugned products are sold by the appellants clearly fall within the exemption provided under Rule 34(1)(b) of the Said Rules.
2.13 These submissions before the Commissioner (A) have not been considered or referred to and therefore his order cannot be upheld. We find no reason to discard the same to uphold the order of the CCE (A).
2.14 In this view of the matter, the proposals to resort to assessments under Section 4A of the Central Excise Act of the packs cleared in these cases and therefore determine duty amount paid cannot be upheld.3.1 Since due duty demands are not being upheld, the penalties, as arrived at, cannot be sustained. The appeal Nos. E/419, 420, 512, 526, 527, 1519 & 1520/05 are to be allowed after setting aside the order.
3.2 For similar reasons as arrived at herein above, the appeal No.E/2653/04 of M/s. Swan Sweets Pvt. Ltd. is also to be allowed since their individual packs therein are also less than 10 gms. each.
3.3 Similarly, for the same reasons as aforesaid, the appeal Nos.
E/2041 and 2042/04 of M/s Cadbury (India) Ltd. are also allowed in the above terms.