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.

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 4A 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 4A 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 w