Case: M/S. Jayanti Food Processing (P) Ltd Vs. Commnr. Of Central Excise, Rajasthan

In the appeals filed by the Assessees, Jayanti Foods and Nestle India the Tribunal has accepted the contention of the Department that these Assessees should be assessed under Section 4A while the contention of the Assessees is that they should be assessed and taxed under Section 4 of the Act. In the appeals filed by the Department pertaining to sale of Telephone Instruments, the contention of the Department is that they should also be taxed and assessed under Section 4 and not under Section 4A of the Act as ordered by the Tribunal. Similar is the case in respect of appeals pertaining to the sale of Refrigerators where the Tribunal has ordered the assessment under Section 4A of the Act. In the case of sale of Bottled Mineral Water while the Tribunal has ordered the assessment under Section 4, the Department suggests that the assessment should be under Section 4A of the Act. Lastly CA 498/2006 pertain to the sale of Electric Filament Lamps where the assessment is ordered under Section 4A of the Act. In short unless an authoritative interpretation is handed out, it will not be possible to settle the issues between the assessees and the Department. In respect of some of the items, as the assessment under Section 4A is less, the same is being insisted upon by the Assessee while in some cases the assessment being more beneficial under Section 4, the Assessees insisted on the assessment under Section 4 of the Act. Eventually the stand of the Department is to the contrary. All these appeals, therefore, would depend upon the interpretation of the scope of Section 4A which is inextricably connected with the provisions of PC Rules under the SWM Act.The assessee is engaged in manufacturing of Ice-cream falling under Sub-heading 2105 of the Central Excise Tariff Act, 1985. It used to supply the ice-cream in four litres pack to the Catering Industry or as the case may be hotels, the hotel used to sell the said ice-cream in scoops. The assessee used to specifically display on the said packs thatpack was not meant for retailThe ice-cream contained in the said pack of four litres used to be sold in unpacked form by the hotel to which the said ice-cream used to be supplied. The contention of the assessee, therefore, was that since the pack which could be described as the bulk pack of four litres, was not meant to be sold in retail, it was bound to be treated as a wholesale transaction and as such the assessee was not required under SWM Act and the Rules made thereunder to print the Maximum Retail Pricereferred to aswhich was a pre-condition for application of section 4A of the Act for the purposes of valuation and assessment. The further contention of the assessee is that the assessee is entitled to exemption under Rule 34 of the SWM (PC) Rules. This stand was not accepted by the Assessing Authority or the Appellate Authority who held that the valuation would have to be under Section 4A and not under Section 4 of the Act (perhaps because that would yield more revenue). The Tribunal has upheld those orders dismissing the appeals filed by the present appellant. That is how the matter has come before us.This takes us to the next appeal which is filed by Nestle India Ltd. The appellant M/s.Nestle India Ltd., are engaged in the manufacture of wafers covered with milk chocolate under the brand nameng under Chapter 19 of Central Excise Tariff Act, 1985. This product is a specified product under the provisions of Section 4A and is included in the notification and accordingly the duty was being paid on the said Chocolate in terms of Section 4A based upon theafter claiming the deductions on account of abatements. M/s.Nestle India entered into a contract with M/s.Pepsico India Holdings Ltd., where the agreed price of the KITKAT packet was Rs.4.80 and the chocolate so purchased at that price by M/s.Pepsico was meant for free supply of the same along with one bottle of Pepsi of 1.5 litres in pursuance of their Sales Promotion Scheme. The appellant cleared the disputed goods after payment of duty at Rs.4.80 per chocolate in terms of Section 4 of the Act after filing the due declaration on the premise that since the chocolates were being sold to M/s.Pepsico, this was not and on such chocolates supply there was no requirement to display the maximum retail price and as such the chocolates could not be covered under Section 4A and would eventually be assessable under Section 4 of the Act. However, the Department did not accept this and it issued a show cause notice dated 14.8.2001 raising a demand of Rs.48,95,370/- along with the proposal to impose penalty upon the appellant with interest. This proposal was contested by the assessee on the aforementioned plea that it was not required to print the MRP under the provisions of SWM Act and the Rules made thereunder. The Commissioner did not accept this and confirmed the demand. The appellant having failed in its appeal before the Tribunal has now approached this Court by way of this appeal.The next group of appeals that we take into consideration is in relation to the sale of telephones by the companies like ITEL, BPL Telecom, Himachal Exicom and Uniword Telecom. In all the cases the Tribunal has found in favour of the assesses holding on the facts that the assessment should be under Section 4A and not under Section 4. The Revenue pleaded that the assessment should be under Section 4 of the Act (perhaps for attracting more revenue). In arriving at this conclusion, the Tribunal took note of the factual situation that all the telephone instruments were specified goods under Section 4A of the Act and that all the telephone instruments were packed and every package declared the MRP thereupon.32. It is an admitted case that all these telephone manufacturing companies sold the instruments (Push Button Telephones) to Department of Telecommunications (hereinafterreferred to as, Mahanagar Telephone Nigam Limited (hereinafterreferred to as) and Bharat Sanchar Nigam Limited (hereinafterreferred to as. The purchaser did not sell these instruments to the general public but instead provided the instruments on rental basis or otherwise to their customers, meaning thereby that there was no further sale of these instruments. The product falls under sub-heading 8517 and is covered under Notification No.9/2000-CE (NT) dated 1.3.2000 and subsequently by Notification No.5/2001 dated 1.3.2001. It was, therefore, an admitted position that from 1.3.2000 Electronic Push Button Telephones manufactured by the assesses were specified goods and were bound to be valued for assessment with reference to the retail price under Section 4A of the Act. It is also an admitted position that on all the telephone pieces sold to DoT, MTNL and BSNL, as the case may be, the assesses had declared the MRP. The assesses got the advantage of the abatement and because of that they were required to pay lesser duty under Section 4A as compared to the duty chargeable under Section 4 of the Act on the basis of contract price. The abatement was 40% on the retail price.These appeals filed by the Revenue Department are against the Electrolux Kelvinator Ltd., and Electrolux India Ltd.,. These cases pertain to the valuation of the Refrigerators manufactured by the assesses. It is a common plea that after the manufacture of these Refrigerators, they are sold to the Bottling Companies like Pepsi, Coca Cola and other soft drink manufacturers under the contract. It is further admitted position that all the Refrigerators which are sold are packed in a package declaring the MRP on them. The MRP and the contract price are different. It was the claim of the assesses that they have paid the duty under Section 4A(1) of the Act on the MRP. The goods are specified goods under Section 4A(1) of the Act. However, because of the abatements they have to bear lesser duty which abatements are not available to the contract price. Therefore, if the duty is assessed on the basis of the contract price under Section 4 of the Act, the duty would be more than the duty paid under Section 4A(1) of the Act. The Tribunal, in all the three cases, has held in favour of the assesses holding that these cases would be governed by the decision of the Tribunal in ITEL Industries Pvt. Ltd. vs. CCE reported in [2004 (169) ELT 219 ] in which case the sale of telephones by the telephone manufacturing companies to DoT, MTNL & BSNL was considered and it was held that the duty will be under Section 4A of the Act and not under Section 4. Relying on that decision, the Tribunal in Civil Appeal No.2877/2005 has held in favour of the assessees. It is also held by the Tribunal that Rule 34(a) of SWM (PC) Rules would not be attracted in these cases. In short the Tribunal has held that these cases are identical with the cases involving the sale of telephone.This appeal relates to the manufacture and sale of Electric Filament Lamps. The Tribunal has allowed the claim of the assessee relying on the decision in ITEL Industries Pvt. Ltd. vs. CCE reported in [2004 (169) ELT 219 ]. A perusal of the order of the authorities below suggest that this case is identical with the case involving the manufacture and sale of telephones by ITEL.These appeals are in respect of Mineral Water bottles. The manufacturer used to pack 12 200ml. bottles in a single package and used to mention the MRP on the said package. The assessee was paying the duty under Section 4A(1) of the Act. The Tribunal, relying on the judgment in Jayanti Food Processing Pvt. Ltd. vs. CCE, Jaipur [2002 (141) ELT 162] held that the assessment was bound to be under Section 4A(1) and not under Section 4 of the Act as the package amounted to ain view of the provisions of Rule 2(p) of the SWM (PC) Rules. On that basis the Tribunal came to the conclusion that the valuation was bound to be under Section 4A(1) and not under Section 4 of the Act. Aggrieved by that, the Department has come up before us in the present appeals.

Reasoning:
Thus, viewed from the plain language of the Section, where the goods are excisable goods and are packaged and further such packages are required to mention the price thereof under the SWM Act, Rules made thereunder or under any other law and further such goods are specified by the Central Government by notification in the Official Gazette, then the valuation of such goods would be on the basis of the retail sale price of such goods and only to such goods the provisions of sub-section (2) shall apply whereby it is provided that the value of such goods would be deemed to be the such retail price declared on the packages. Of course, the assessee shall be entitled to have a reduction of abatement as declared by the Central Government by the notification in the Official Gazette.When we read these Rules along with provisions of Section 4A of the Act, it would be clear that where there is a general exemption like Section 34 under the SWM (PC) Rules such goods and/or packages of such goods shall not be covered by Section 4A (1) and (2) of the Act. However, all such packages which are covered under Chapter II, more particularly under Rule 6(1)(f), Rules 15, 16 and 17, would be governed under Section 4A as such packages are required to declare the retail sale price on the packages. The packages covered by Rule 29 would be outside the purview of the retail sales as under that Rule retail prices are not required to be mentioned on the package. However, again those packages which enjoy the exemption under Rule 34 shall also be outside the scope of Section 4A of the Act as the Rules do not apply to the saiddo not think that merely because the assessee displayed the MRP on the four litres pack, that would negate the case of the appellant altogether. We have already shown in the earlier part of the judgment the conditions required for application of Section 4A. The plain language of Section 4A(1) unambiguously declares that for its application there has to be theunder the SWM Act or the Rules made thereunder or any other law to declare the MRP on the package. If there is no such requirement under the Act and the Rules, there would be no question of application of Section 4A. Thus if the appellant is successful in showing that there is no requirement under the SWM Act or the Rules made thereunder for declaration of MRP on the package, then there would be no question of applicability of Section 4A(1) & (2) of the Act. Even if the assessee voluntarily displays on the pack the MRP, that would be of no use if otherwise there is no requirement under the SWM Act and the Rules made thereunder to declare such acounsel is undoubtedly right as Rule 2(o) contemplates the sale of commodity in a packaged form directly to the consumer. The definition also includes a wholesale dealer provided again that the package is to be sold to the consumer directly as a package. That is not a case here as the 4 litre pack is not meant to be sold to the consumer directly. We would have to essentially go through to the definition ofnd one look at Rule 2(p) would show that in order to be covered under that definition such package must have been intended for retail sale for consumption by an individual or a group of individuals. In our view these two definitions would have to be read together to properly understand the scope thereof. In order that the package should be properly described as a, the sale has to be through theor consumption by an individual or a group of individuals. In the present case, admittedly, the sale of the package was only to the hotel. It may be that the hotel may ultimately sell the commodity therein, i.e., the ice-cream (not the package) to the individuals or the group of individuals. This was not a sale in favour of an individual or group of individuals. We would have to understand the scope of the termused in Rule 2(o) to be the individual or group of individuals who consume the commodity. It is undoubtedly true that for a sale being ait need not contain material for the consumption of a single individual only, it can be for a group of individuals also. However, a hotel to which the package is supplied cannot be covered in the termor group ofas contemplated in Rule 2(p) defining. We have already explained earlier that the nature of sale is of no consequence. The material consideration is that such sale should be in aand there should be a requirement in the SWM Act or the Rules made thereunder or any other law for displaying the MRP on such package. We find the requirement to be only under Rule 6(1)(f) which applies tont for. What is required to be printed under Rule 6(1)(f) is theof the package.is defined under Rule 2(r) and it suggests that themeans the maximum price at which the commodity in packaged form may be sold to the ultimate consumer. The Rule further suggests the manner in which theshall be mentioned on the package. It is the case of the appellant that the four litres pack was not meant to be sold as the package to the ultimate consumer and the sale was only to the intermediary or as the case may be, to the hotel. If that was so, then there is no necessity much less under Rule 6(1)(f) to mention theon theis, therefore, clear that thewhich was sold by the assessee could not be termed asor the sale thereof be termed as and as such there was no requirement of mentioning theon that package. All this has been completely missed in the order of the Tribunal.15. On the other hand the package in question would certainly come within the definition ofas defined in Rule 2(x)(ii) as it contained the commodity (ice-cream) and was sold to intermediary (Hotel) for selling the same to the consumer in small quantities. Then Rule 29 would apply to such package which does not require the price to be displayede. What is required to be stated is (a)name and address of the manufacturer (b) identity of commodity and (c) total number of retail packages or net quantity. Shri Ravindra Narain is quite justified inrelying on Rule 2(x) and Rule 2(q). The Tribunal does not refer to these vitalis undoubtedly right that the ice-cream cannot be termed asor any industry.However, the wordsfor the purposes of servicing anyare broad enough to include the transaction in question, i.e., the sale of a pack of ice-cream to the retail industry. Hotel does not manufacture the ice-cream and is depended entirelythe sale ofice-cream to it by the assessee for ultimately catering the commodity in the package, i.e. ice-cream to the ultimate consumer. In our view this can be squarely covered in the termThe wordis a noun of the verbt is an act of helpful activity - help, aid or to do something. It also includes supplying of utilities or commodities. In that view we are not prepared to give a narrow interpretation to the termWe, therefore, accept the arguments advanced by Shri Ravinder Narain that thesold by the assessee to the hotel was, apart from being for the exclusive use of the hotel was, alsothe purpose of servicing thatIf that is so, then the SWM (PC) Rules would not apply at all.This takes us to the last argument regarding the applicability of the Circular dated 28.2.2002. However, it is not necessary for us to delve on that issue in view of the findings which we have recorded earlier holding that the assessment would have to be under Section 4 of the Act and not under Section 4A. In fact the tenor of the notification is to the same effect. However, considering the fact that the notification came after the order of the Tribunal and further it was sought to be explained by the subsequent notification dated 17.1.2007, we are not going into thatis no doubt that the judgment of the Tribunal cited supra was attempted to be distinguished in the impugned judgment of the Tribunalnd that there appeared a price printed on labels affixed on Pepsi bottle and sold by M/s.Varun Beverages indicating that KITKAT worth Rs.12 is given free with the said Pepsi Bottle. In our view this printing of the pricels of Pepsi would be of no consequence for the simple reason that it is clearlyhe advertisement of Pepsi and the MRP is not printede. It may be a movert of the Pepsi for advertising its product but that cannot be said to be binding vis-à-vis Nestle. What is required is the requirement under the Rules of printing the price. Therefore, the true test is not as to whether the price is printedls of the accompanying product like Pepsi but whether there was a requirement under the SWM Act or the Rules made thereunder to print the MRPrs of KITKAT chocolates. The reason given by the Tribunal in para 10 for distinguishing the earlier judgment in Pepsicase, therefore, has to be ignored as not relevant to the controversy. Once that position is clear, we are left with the notification alone and the aforementioned ruling incase. If the ruling has not been challenged by the Department, the same becomes binding as against the Department. Similar is the situation of the circular. The circular becomes binding as held in the case of Dhiren Chemical IndustriesTribunal has even erred in holding that the circular dated 28.2.2002 is not applicable to the present case. A cursory glance at the circular would suggest that it is applicable to the present case where two commodities have been sold as a marketwas rightly contended before the Tribunal that the thrust of Section 4A ises and notty and it is only where the goods are sold in the packages that the sectiond. The submission was undoubtedly right. The Tribunal, while rejecting this submission, has clearly ignored the language of Section 4A(1) of the Act.29. It was then suggested that the free gift by Pepsi to its customers would amount to distribution and would, therefore, be amounting tond the package of KITKAT would be. However, what is material is the definition ofThe requirement of Rule 6(1)(f) is specific. It requires the retail sale price of the package be printed or displayede. If there is no sale involved of the package, there would be no question of Rule 6(1)(f) being attracted. There is a clear indication in the definition ofas provided in Rule 2(r) which clearly explains that the MRP means the maximum price at which the commodity in packaged formto the ultimate consumer. Thus, the definition ofin Section 2(v) of the SWM Act becomes relevant. Therefore, unless there is an element of sale, as contemplated in Section 2(v), Rule 6(1)(f) will not be attracted and thus such package would not be governed under the provisions of SWM (PC) Rules which would clearly take such package out of the restricted arena of Section 4A(1) of the Act and would put it in the broader arena of Section 4 of thethrust of the argument was that there appears such declarationthe package of KITKATand secondly it was for the purpose of servicing Pepsi thereby satisfying both the conditions for applicability of Rule 34(a). The Tribunal has rejected this argument in a very casual manner bythe situation in the present case is not covered by any of the conditions noticed in the said Ruleaccept the argument. After-all if the contract of the chocolates was for the purpose of advertising of a particular product of the particular industry, it would be covered within the expressionWe have already dilateding anyin the earlier part of ourhave already explained earlier the scope of Section 4A suggesting that the Section would apply to the package if it is required under SWM Act and the Rules made thereunder to declare the MRP thereon. We are not in a position to accept the arguments of learned counsel that merely because there is a bulk sale to DoT, MTNL and BSNL, the assessment should be under Section 4 of the Act. We again mention it at the cost of repetition that the nature of sale is not important, what is important is the requirement of printing the MRPpackages. It was not and indeed cannot be disputed that these telephones are also sold in the retail market in the same form and the same package and that there is a requirement of printing the MRP on each package of the Push Button Telephone. Learned counsel Shri Subba Rao also did not dispute before us the necessity of printing the MRPthe package ofeach telephone which is sold in the market. If that is so, the package would be covered under the relevant SWM (PC) Rules. We do not find anything in the SWM (PC) Rules that where a customer purchase a large number of packages, such bulk purchase itself rules out the applicability of the SWM (PC) Rules. Under Rule 2A, as it then stood, it was provided that Chapter II apply to all pre-packaged commodities. Rule 3 thereof provided that the provisions of Chapter apply to the packages intended forch would mean that the sale would be for consumption by an individualor group ofindividual or any other consumer. There can be no doubt that the telephone instruments were to be used by the consumers. Therefore, the telephones were sold to these three instrumentalities, there is no escape from the fact that these telephones were meant to be ultimately used by the consumers and it is only with that object that the said telephones were purchased by the three instrumentalities from its manufacturers. Therefore,the sale ofthe telephone instruments would be covered in the term. Rule 6 is thereafter very clear which requires every package to make certain declarations including the declaration of theon thepackage. There is also no dispute that the said declaration was indeed madethe package ofeach piece of telephone. If this be so, then it is obvious that Rule 6 could apply and there will be a requirement under the Rules as provided in Section 4A(1) of the Act for printing the MRPe. Shri Subba Rao argued that the transaction between the assessee companies and DoT, MTNL & BSNL did not satisfy the requirement of definition ofas there was no retail sale agency or other instrumentalities involved in the said transaction. We are afraid the specific language ofis not being perceived properly. Thees not have to be only through theor otherOne look at the definition of, as provided in Rule 2(q) is sufficient to justify this inference. The argument is, therefore,are not prepared to accept a bald statement made before us that the packages did not have the MRPm as from the orders of the Tribunal we do not find such factual position emerging. That was the most relevant factor and we are sure that the Tribunal could not have missed it. Again we do not find that such a factual position was canvassed before the Tribunal. We, therefore, reject this contention and accept the assertionrt of the counsel for the assessees that the MRP was displayed on each package. However, we leave it open to the Department to check this factual position again and the Department would be free to proceed if the MRP is not printedrt of any particularis no reference of this assertion even before the Tribunal. Instead we have the affidavits before us that in each case the duty has been assessed not