Commissioner of Central Excise Vs. Urison Cosmetics Ltd. - Court Judgment

Excerpt:
1. this bench has been constituted to reconsider the earlier decision of the tribunal in the case of c.c.e., daman v. kraftech products inc. in view of the majority order in this case opining that such a reconsideration is necessary in the light of decision of the honourable high court of madras in the case of varnica herbs v.c.b.e.,& c., new delhi 2004 (163) k.l.t. 160 (mad.). we have heard both sides at length.2. the dispute relates to method of valuation applicable to the impugned goods, namely 'godrej' brand hair dye in pack of 3 sachets of 3 gms each. it is the contention of revenue that such packs are required to be valued on the basis of maximum retail price (mrp) under section 4a of the central excise act, 1944 (cea) whereas respondents "argue that they have correctly valued.....

Judgment:
1. This Bench has been constituted to reconsider the earlier decision of the Tribunal in the case of C.C.E., Daman v. Kraftech Products Inc.

in view of the majority order in this case opining that such a reconsideration is necessary in the light of decision of the Honourable High Court of Madras in the case of Varnica Herbs v.C.B.E.,& C., New Delhi 2004 (163) K.L.T. 160 (Mad.). We have heard both sides at length.

2. The dispute relates to method of valuation applicable to the impugned goods, namely 'Godrej' brand hair dye in pack of 3 sachets of 3 gms each. It is the contention of Revenue that such packs are required to be valued on the basis of maximum retail price (MRP) under Section 4A of the Central Excise Act, 1944 (CEA) whereas respondents "argue that they have correctly valued the goods under Section 1 of CEA as Section 4A does not apply to such goods.

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 Standards of Weights and 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.

(2) Where the goods specified under Sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in Section 4, such value shall be deemed 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 Gazatte.

(3) The Central Government may, for the purpose of allowing any abatement under Sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.

Explanation 1- For the purposes 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 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, and the price is the sole consideration for such sale.

Explanation 2. - Where on any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section.

(ii) In relation to such goods there must be a legal requirement to declare the retail sale price on the package under the provisions of the Standards of Weights and Measures Act, 1976 (SWMA) or rules made thereunder or under any other law.

5. It is not in dispute that the impugned goods have been specified under a notification. The dispute relates to whether there is a legal requirement to declare the retail sale price on the package of the impugned goods. The respondents claim that the impugned goods being less than 10 gms by weight are exempted from such requirement under Rule 34 of the Standards of Weights and Measures (Packaged Commodity Rules, 1977 (SWMR) which reads as under: (1) Nothing contained in these rules shall apply to any package containing a commodity if- (b) the net weight or measure of the commodity is ten grams or ten millilitres or less, if sold by weight, or measure; 6. We note at this stage that the following earlier decisions of the Tribunal have consistently held similar goods to be eligible for exemption under Rule 34 of SWMR and hence not subject to Section 4A of CEA:Kraftech Products Inc. v. C.C.E., Vapi 2004 (173) E.L.T. 508 (Tri-Mumbai) We also note that the decisions at (i) and (ii) above were rendered without noticing the order of the Honourable High Court of Madras in Varnica (supra), whereas the decision at (iii) above has noticed but distinguished Varnica (supra).

7. It has been argued on behalf of the respondents before us that Varnica (supra) dealt with the competency of CBE&C to issue a circular on a matter covered under the SWMA and rules made thereunder, hence the view expressed therein to the effect that the goods such as the impugned goods are "not intended to be sold either by weight or by measure" is merely a casual remark and not a decision on an issue raised before the Honourable High Court. We find it difficult to accept this contention of the respondents as we note that not only the competency of CBE&C was an issue in Varnica (supra) but also the question of exemption under Rule 34 of SWMR as is clear from paragraph 13 of Varnica (supra).

8. It has also been argued on behalf of the respondents that the impugned goods in Varnica (supra) in any case were not eligible for exemption under Rule 34 of SWMR as the total weight in that case was 6 x 8 gms = 48 gms for every multi-pack. Hence, it is contended that the decision in the case of Varnica (supra) is distinguishable and not applicable to the present case where the total weight is below 10 gms Here again, we are unable to accept such argument as the Hon'ble Madras High Court has clearly noticed that the weight of the individual pouch in that case to be less than 10 gms and has then proceeded to hold that exemption under Rule 34 of SWMR is not applicable as the impugned goods are not intended to be sold either by weight or by measure.

9. For better appreciation we reproduce below the relevant paragraph 15 of the decision in Varnica (supra): 15. A perusal of these provisions makes it clear that articles kept in separate pouches by the petitioner can be termed as multi piece package and such pouches can be sold individually in single piece or together in a mono carton of six pouches. The contention of the petitioner that exemption under Rule 34 would be applicable is not acceptable. Even though the net weight is less than 10 grams, it is evident that article is not intended to be sold either by weight or by measure as contemplated under Rule 34(b). The contention that clarification issued by the respondent No. 1 has the effect of whittling down the exemption granted under Section 34 is not at all acceptable.

10. It is thus clear that the basis of Varnica (supra) denying exemption under Rule 34 of SWMR is the observation that "...it is evident that article is not intended to be sold either by weight or by measure...." Unfortunately, Varnica (supra) does not spell out the reason as to why the article is not intended to be sold by weight except saying that it is evident.

11. The respondents have stated before us that the impugned goods, namely hair dyes are cosmetics, in the form of powders. It is their case that the commodity in question is the 'hair dye' and not the 'sachets' which are mere packages. Section 2(b) of SWMA refers to the commodity which is packaged. Section 6 of SWMA defines base unit of mass as the kilogram. Section 39 of SWMA requires quantities and origin of commodities in packaged form to be declared. Definitions of 'multi-piece package', 'pre-packed Commodity' 'Pre-packed commodity', 'quantity', 'retail package' etc, under SWMR refer to the commodity contained in the packages. Rule 6(c) of SWMR requires net quantity of the commodity contained in the package or the number of the commodity contained in the package to be declared. Rule 11 of SWMR requires net quantity of the commodity contained in a package excluding the weight of wrappers etc. to be declared. In view of these provisions, we find substance in the contention of the respondents that the commodity contained in the packages is not the sachets but hair dyes in powder form, which can be sold by weight alone. The contention of the department that in a multi piece package the number of sachets can be counted and that the same is sold by number is not acceptable as the commodity referred to under SWMA and SWMR is what is contained in a package and not the packages themselves.

12. The respondents further point out that the Fifth Schedule to SWMR lists commodities with reference to exception under Rule 12(2) of SWMR.At serial No. 25 of the Table in the said Fifth Schedule cosmetics are listed which are required to be sold by weight or volume and the declaration is also required to be made by weight or volume. This provision further substantiates the claim of the respondents that the hair dye in powder form which is a cosmetic is required under law to be sold by weight and are so sold. Hence, in respect of packages of hair dyes with net weight less than 10 gms, the exemption under Rule 34 from all the provisions of SWMR is applicable since the same is sold by weight.

13. With great respect, we have considered the contrary observation of the Honourable Madras High Court in Varnica (supra) to the effect that hair dyes are not intended to be sold either by weight or by measure and we find that the said observation has been made unsupported by any reasoning and without noting the specific provisions of SWMA, SWMR and particularly the aforecited Fifth Schedule to SWMR which specifically requires cosmetics such as hair dyes to be sold by weight or volume. We find merit in the submissions made by the learned Advocate Shri Ravindran on behalf of the respondents that such a decision, which has been rendered per incuriam without noticing the specific legal requirement to sell cosmetics by weight or volume, can not be followed as a binding precedent. Learned advocate Shri V. Sridharan intervenes to argue that in Writ Petiton Nos. 2627 and 2628 of 1998, in the cases of Alfa Packaging v. CBE&C and Unique Healthcare v. CBE&C, the Honourable High Court of Bombay has noted the provisions of Rules 12 and 34 of the SWMR as well as the provisions of the Fifth Schedule thereto and observed inter alia that exemption is limited only to quantity which is less than 10 gms.

14. The learned advocates appearing for the respondents also rely on Municipal Corpn. of Delhi v. Gurnam Kaur , in para 11 of which the Hon'ble Supreme Court holds as follows: Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das case (Writ Petition Nos. 981-82 of 1984) and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it.

It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavements or public streets, and without any citation of authority. Accordingly, we do not propose to up hold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the court on the question whether or not any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn., explains the concept of sub silento at p. 153 in these words.

[emphasis supplied].

A decision passes sub silento, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour, but point B was not argued or considered by the court.

In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silento.

...Precedents sub silento and without argument are of no moment.

This rule has ever since been followed. One of the chief reasons for the doctrine of precedent is that a matter that has once been fully argued and decided should not be allowed to be reopened. The weight accorded to dicta varies with the type of dictum. Mere casual expressions carry no weight at all. Not every passing expression of a judge however eminent, can be treated as an ex cathedra statement, having the weight of authority.

15. Considering submissions from both sides as well as the cited case laws, we are of the opinion that in view of specific legal requirements under the SWMR that cosmetics are to be sold by weight or volume, quantities of cosmetics weighing less than 10 gms, even though contained in multi pack sachet's, will be exempt under Rule 34 of SWMR and consequently Section 4A of the CEA will not have any application to such multipacks. We are also of the view that the observation of the Honourable Madras High Court in Varnica (cited supra) to the effect that hair dyes are not intended to be sold by weight or measure can not be taken as a binding precedent as it has been rendered per incuriam without noticing the legal provisions to the contrary which require such goods to be sold by weight or volume.

16. The appeal is returned to the referring Bench for disposal with our views as above.