1. Dispute over whether chewing tobacco packed in poly packs within HDPE bags constitutes a group package for retail sale or a wholesale package under the Excise Act. (Para 1 , 2 , 8 )
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2024 Supreme(SC) 534
SUPREME COURT OF INDIA
ABHAY S. OKA, PANKAJ MITHAL, JJ.
Commissioner of Central Excise, Jaipur -II – Appellant
Versus
M/s Miraj Products Pvt. Ltd. – Respondent
Civil Appeal Nos.143-147 of 2010
Decided on : 08-07-2024
Advocates appeared:
For the Appellant(s) : Ms. Nisha Bagchi, Sr. Adv. Mr. Rupesh Kumar, Sr. Adv. Ms. B. Sunita Rao, Adv. Ms. Chinmayee Chandra, Adv. Mr. Siddhant Kohli, Adv. Ms. Aakansha Kaul, Adv. Mr. Shiv Mangal Sharma, Adv. Mr. Mukesh Kumar Maroria, AOR
For the Respondent(s): Mr. V Lakshmikumaran, Adv. Ms. Charanya Lakshmikumaran, Adv. Ms. Apeksha Mehta, Adv. Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Ms. Falguni Gupta, Adv. Mr. Aayuah Agrawal, Adv. Mr. M.P. Devanath, AOR Ms. Jyoti Pal, Adv.
For the Appellant(s) : Ms. Nisha Bagchi, Sr. Adv. Mr. Rupesh Kumar, Sr. Adv. Ms. B. Sunita Rao, Adv. Ms. Chinmayee Chandra, Adv. Mr. Siddhant Kohli, Adv. Ms. Aakansha Kaul, Adv. Mr. Shiv Mangal Sharma, Adv. Mr. Mukesh Kumar Maroria, AOR
For the Respondent(s): Mr. V Lakshmikumaran, Adv. Ms. Charanya Lakshmikumaran, Adv. Ms. Apeksha Mehta, Adv. Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Ms. Falguni Gupta, Adv. Mr. Aayuah Agrawal, Adv. Mr. M.P. Devanath, AOR Ms. Jyoti Pal, Adv.
The central legal point established in the judgment is the interpretation of the provisions of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977 and the application of Section 4A of the Central Excise Act to determine whether the goods were intended for retail sale.
Headnote:
Central Excise Act - Goods covered by Section 4 or Section 4A - Rule 34(b) of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977 - Summary: The court discussed the application of Section 4A of the Central Excise Act to goods sold by the respondent-assessee, focusing on the interpretation of the said Rules and the distinction between retail and wholesale packages. The court concluded that the goods subject to the show cause notices were not covered by Section 4A(1) of the Excise Act.
Fact of the Case:
The case involved the issue of whether the goods sold by the respondent-assessee were covered by Section 4 or Section 4A of the Central Excise Act, 1944. The respondent-assessee was alleged to have packed chewing tobacco in poly packs and HDPE bags intended for retail sale, leading to a demand for duty, interest, and penalty.
Finding of the Court:
The court analyzed the provisions of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977 and the application of Section 4A of the Excise Act. It found that the goods subject to the show cause notices were not intended for retail sale and, therefore, were not covered by Section 4A(1) of the Excise Act.
Issues: The main issue was whether the goods sold by the respondent-assessee were intended for retail sale, thereby attracting the application of Section 4A of the Excise Act.
Ratio Decidendi: The court's decision was based on the interpretation of the said Rules and the distinction between retail and wholesale packages. It emphasized that the specific case made by the respondent regarding the sale of HDPE bags containing 100 poly packs had been accepted by the Commissioner, leading to the conclusion that the goods were not intended for retail sale.
Final Decision: The appeals were dismissed with no order as to costs.
Legal Category Hierarchy
Table of Contents
2. Revenue contends poly packs are group packages intended for retail sale; assessee argues HDPE bags are wholesale packages sold to intermediaries, exempting them from Section 4A. (Para 5 , 6 )
3. The court found that HDPE bags containing multiple poly packs are wholesale packages sold to intermediaries, which do not require retail price declarations under the applicable Rules. (Para 11 , 12 , 13 , 14 , 16 , 17 )
4. Section 4A applies only if the package is of a nature that mandatorily requires a retail price declaration under the Standards of Weights and Measure Rules. (Para 15 , 17 )
5. Appeals dismissed; the Tribunal's judgment holding that Section 4A of the Excise Act was not applicable is upheld. (Para 18 , 19 )
6. When does Section 4A of the Excise Act apply to the valuation of excisable goods?
Section 4A applies when the Central Government notifies goods for which the Standards of Weights and Measure (PC) Rules or other laws require the declaration of the retail sale price on the package. (Para 9 , 10 , 15 )
7. What constitutes a retail sale under the Standards of Weights and Measure (PC) Rules, 1977?
Retail sale is the sale, distribution, or delivery of a commodity through retail agencies or other instrumentalities for consumption by an individual, group of individuals, or any other consumer. Sale to a dealer for further distribution is not a retail sale. (Para 11 )
8. What is the distinction between a group package and a wholesale package?
A group package is a package intended for retail sale containing two or more individual packages of similar but not identical commodities. A wholesale package contains retail packages intended for sale to an intermediary and not directly to a single consumer. (Para 12 , 13 )
9. Does mentioning the retail price on a package automatically trigger Section 4A of the Excise Act?
No. Section 4A is triggered only if the package is of such a nature that the law mandatorily requires the mention of the retail price. If the law does not require it, mentioning the price does not attract Section 4A. (Para 15 )
JUDGMENT :
ABHAY S. OKA, J.
FACTUAL DETAILS
1. These appeals take exception to the judgment and order dated 7th November 2008 passed by the Customs, Excise and Service Tax Appellate Tribunal (for short, ‘the Tribunal’). The issue involved, in short, is whether the goods sold by the respondent-assessee are covered by Section 4 or Section 4 A of the Central Excise Act, 1944 (for short, ‘The Excise Act’). The proceedings commenced based on the show cause notices issued to the respondent-assessee. The first show cause notice issued on 22nd April 2004, pertains to a brief period in April 2003. The second show cause notice is of 31st May 2004 covering the period from May 2003 till December 2003. By a notification dated 1st March 2002 issued under sub-section (1) of Section 4 A of the Excise Act, tobacco was notified by including the same at Sr.no.24A in the Notification with effect from 1st March 2003. The allegations made in both the show cause notices are similar. The show cause notice dated 22nd April 2004 was supplemented by an addendum dated 10th June 2004. The allegation against the respondent-assessee in the show cause notices was that the assessee was packing 33 pouches of 6 gms each of chewing tobacco and one pouch of 15 gms of chewing tobacco in a larger poly pack. It is alleged that MRP (maximum retail price) of Rs. 1 per pouch is mentioned on the pouches carrying a quantity of 6 gms, and MRP of Rs. 3 was mentioned on the pouch carrying 15 gms quantity. It is alleged that on the larger poly pack, a weight of 213 gms and MRP of Rs. 36 was mentioned. It is alleged in the show cause notice that the larger poly packs are group packages as defined in Rule 2(g) of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977 (for short, ‘the said Rules’). It is alleged that the group package made by the respondent was intended for retail sale. Further allegation in the show cause notice is that the weight of each group package exceeds 10 gms. Therefore, the group packages of the respondent-assessee are not covered by the exemption under Rule 34(b) of the said Rules. Reliance was placed on a decision of the Madras High Court in the case of M/s.Varnica Herbs v. Central Board of Excise & Customs, New Delhi, 2004 (163) ELT 160 (Madras).
Therefore, the respondent-assessee was called upon to pay duty on the poly pack sold by the assessee in the manner provided under Section 4A of the Excise Act. Apart from the differential duty, a demand was made for interest and penalty.
2. The respondent replied to the show cause notice by contending that 100 poly packs, each containing 33 small pouches of 6 gms each, and one pouch of 15 gms are being put into one HDPE bag (High-Density Polyethylene Bag). The quantity of 15 gms is kept in a zipper pouch, on which duty is paid under Section 4A of the Excise Act on MRP. A factual contention was raised in the reply by the respondent-assessee that it is not selling poly packs of 33 small pouches directly to the customers. It is stated that the assessee is clearing only HDPE bags containing 100 poly packs, and HDPE bags are being sold to distributors or dealers. Therefore, the assessee did not make a retail sale. It is contended by the respondent that poly packs containing 33 pouches of 6 gms quantity are not group packages within the meaning of Rule 2(g) of the said Rules, and the said poly packs and HDPE bags are wholesale packages as defined in Rule 2(x) of the said Rules. Therefore, the contention is that Section 4A will have no application.
3. After hearing the respondent, the order-in-original was passed by the Commissioner. By the said order dated 19th July 2005, the contentions raised by the respondent-assessee were rejected, and the demand made in the show cause notices was confirmed. The Commissioner referred to the declarations made on poly pack and held that it was in terms of Rule 16 of the said Rules, and Rule 16 is a part of Chapter II of the said Rules, which deals with retail sales. It
