EXCISE Appeal No. 11559 of 2013-DB
[Arising out of Order-in-Original/Appeal No 17-18-CEX-DEM-JEWEL-COMMR-I-13 dated
07.03.2013 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-VADODARA
I]
Jewel Consumer Care Pvt Ltd
VERSUS
C.C.E. & S.T.-Vadodara-i
APPEARANCE:
Shri Abhay Y. Desai, Advocate for the Appellant
Shri. Tara Prakash, Deputy Commissioner (Authorized Representative) for the
Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
FINAL ORDER NO.A / 10219 /2023
DATE OF HEARING: 23.01.2023
DATE OF DECISION: 07.02.2023
RAMESH NAIR
The issue in the present case involved is that in respect of toothbrushes
supplied in bulk in the carton to the principal manufacturer for further supply as
under promotional scheme/ offer to supply the same free of cost with their
toothpaste is liable to be valued under Section 4A or Section 4 of Central Excise
Act, 1944.
Shri Abhay. Y. Desai, Learned Counsel appearing on behalf of the
appellant submits that the supply of tooth brush in loose form in bulk does not
require
compliance of
standards
of
weights
and
Measures
Act, 1976 and Rules made thereunder, for affixation of retail sale price therefore
the goods supplied by the appellant to their principal manufacturer M/s.
Hindusan Unilever Ltd.& Prime Healthcare Products is not Governed by Section
4A for the purpose of valuation. He further submits that the identical issue in
the case of similarly placed assessee M/s. Contemporary Targett Pvt Ltd this
Tribunal vide Final Order No. A/10837/2019 dated 13.05.2019 decided the issue
in favour of the assessee.
Shri Tara Prakash, Learned Assistant Commissioner (Authorized
Representative) appearing on behalf of the revenue reiterates the finding of the
impugned order.
We have carefully considered the submissions made by both the sides and
perused the records. We find that there is no dispute on the fact of the present
case that appellant are manufacturing tooth brush and supplying to their
principal manufacturer M/s. Hindusan Unilever Ltd. & Prime Healthcare
Products. In some of cases the tooth brush is packed in retail pack and MRP, is
affixed on it. On such goods, the appellant is discharging duty under section 4A
on MRP based valuation, on which there is no dispute. The other type of supply
is the tooth brush are packed in bulk quantity in loose form in a carton and
supply to their principle manufacturer. The principle manufacturer use this brush
for their promotional scheme and the same is packed in a combo pack of tooth
paste and this tooth brush. In this case, the tooth brush is not meant for retail
sale but it is for supply under promotional scheme. The appellant is also clearing
the said goods in bulk form in a carton. Therefore, as per standards of weights
and measure Rules, the appellant are not under legal obligation to affix the retail
sale price on this supplies. Therefore, the valuation of tooth brush when supplied
in bulk quantity in carton was rightly valued under Section 4 of the Central
Excise Act, 1944. This very issue has been considered by this Tribunal in the
case of . Contemporary Targett Pvt Ltd vide Final Order No. A/10837/2019 dated
13.05.2019, wherein the following order was passed:
4.We have considered the submission made by both the sides and
perused the records. We find that the facts is not under dispute that
the tooth brushes manufactured and supplied by the appellant were
cleared either in bulk form or combo pack or in naked condition that
means without any retail packing. Goods were supplied to tooth
paste manufacturer who in turn used these tooth brushes for making
a combo pack with tooth paste for free supply, therefore, the tooth
brushes cleared by the appellant wasneither sold as such in retail
either by the appellant or the buyers i.e. M/s Colgate Palmolive
(India) Limited, Oral care etc. In this identical fact the issue was
considered by the Hon‟ble Supreme Court in the case of Jayanti food
processing (P) Ltd. Vs Commissioner o Central Ex., Rajasthan-
2007
(215) ELT 327 (SC) wherein different appeals on the identical issue has
beendecided as under:-
Civil Appeal No. 1738 of 2004
“20. 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
name „KITKAT‟ falling under Chapter 19 of Central Excise Tariff Act,
- 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 the „retail sale price‟ after 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 wasRs. 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 litresin 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 a „retail
sale‟ andon 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 MRPunder 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 Tribunal came to the conclusion that the duty was rightly
demanded in terms of Section 4A of the Act.
- At the outset the learned Counsel Shri Lakshmi Kumaranan
accepted the position that when such chocolates are sold in the
market, they would undoubtedly be required to print the MRP on
each chocolate as the SWM (PC) Rules and more particular Rule
6(1)(f) would be applicable to them. Learned Counsel, however,
says that his contention is restricted only to the supply made by the
assessee to Pepsico. He points out that the said chocolates were not
being sold by the manufacturer in retail but were supplied to another
company under a contract and the purchaser company was not
to sell thesaid chocolates as the chocolates but to offer as a free
gift along with its product, namely, a 1.5 litres bottle of Pepsi.
Learned Counsel also criticized the order of the Tribunal. Learned
Counsel also relied on the aforementioned Board Circular dated 28-
2-2002.
- The Tribunal formulated a question as to whether the package
ofKITKAT sold by the appellant to M/s. Pepsico India Holdings Ltd.,
under a contract of Rs. 4.80 per KITKAT are required to be assessed
at that price in terms of Section 4 of the Act or the assessable value
of the same is required to be arrived at in terms of Section 4A of the
Act. The Tribunal whileaccepting the case of the Revenue simply
went on to hold that once the goodsare specified items under Section
4A(1) of the Act and are excisable goods, the chargeable duty would
be required to be assessed on the MRP. The Tribunal also recorded
that the only exception where a manufacturer can deviate from the
general rule of printing MRP on the package would be Rule34 of
SWM (PC) Rules. It further held that the said Rule did not apply to
the case of the assessee. The Tribunal also relied upon the first
Explanation to Section 4A of the Act and came to the conclusion that
even if a portion of goods is sold at a lower rate than the MRP affixed
thereon, the assessable value in respect of such percentage of goods
will not be lowered on that ground. The Tribunal also referred to the
advertisements issued by Pepsico wherein it was displayed that
KITKAT worth Rs. 12 will be given free with one
1.5 litres bottle of Pepsi. The Tribunal also held that the circular
dated 28-2- 2002 did not apply to the case of the assessee. Holding
thus, the Tribunal dismissed the appeal.
- Shri Lakshmi Kumaran firstly pointed out that the KITKAT
chocolatesold to Pepsico was for free distribution along with 1.5
litre bottle of Pepsiand, therefore, there is no MRP affixed on the
chocolate which accompanied the bottle. He further submits, relying
on Section 2(v) of the SWM Act that there is no „sale‟ of the
chocolate to the consumers as it is offered free as a gift by Pepsi,
which purchased the same from the assessee on contract basis.
- As against this the learned Counsel Shri Subba Rao supported
the orderof the Tribunal and pointed out 25. that this could be
viewed as a „retail sale‟. He adopted the reasoning given by the
Tribunal on the definition of
„retail sale‟ holding that the transaction in the present case
amounting to
„retail sale‟ since the chocolates were meant for distribution for
consumption by „an individual or group of individuals by retails sale‟
and therefore, coveredin SWM (PC) Rules.
- At the outset Shri Lakshmi Kumaran invited our attention to the
notification dated 28-2-2002 bearing No. 625/16/2002-CX. He
pointed out that by that notification clarification was issued
regarding various queries raised expressing the doubts about the
assessability of the commoditiesunder Section 4A or Section 4 of
the Act. A reference is made to Para 1, Entry4 of which is as under:
“Items supplied free with another consumer items as marketing
strategy.Example, one Lux soap free with on box of surf.”
Para 6 of the notification is as under :
“It is, therefore, clarified that, in respect of all goods (whether
notified u/s. 4A or not) which are not statutorily required to
print/declare the retail sale pric on the packages under the
provisions of the Standards of Weight & Measures Act, 1976, or the
Rules made thereunder or any other law for the time being in force,
valuation will be done u/s. 4 of the C.E. Act, 1944 (or under Section
3(2) of the Central Excise Act, 1944, if tariff values have been fixed
for the commodity). Thus, there could be instances where the same
notified commodity would be partly assessed on the basis of MRP
u/s. 4A and partly on the basis of normal price (prior to 1-7-2000)
or transaction value (from 1- 7- 2000), u/s. 4 of the C.E. Act, 1944.”
Learned Counsel very heavily relied on the last sentence of Para 6
of the notification and pointed out that the KITKAT chocolate though
a notified commodity, need not, in all cases be assessed under
Section 4A. According tothe learned Counsel stated that this had a
direct reference to Entry 4 in Para
1 of the Circular which we have extracted above. Our attention was
also invited to a ruling of the Tribunal reported in Commissioner of
Central Excise, Ludhiana v. Pepsi Foods Ltd. – 2005 (186) E.L.T. 603
wherein a view has been taken, relying on the aforementioned
circular, that the packet of Lays (Potato Chips) which was to be
supplied free along with Pepsi of 1.5 litre was boundto be assessed
under Section 4 and not under Section 4A of the Act. Learned
Counsel points out that this judgment is not challenged by the
Revenue and has become final. He further suggests that in keeping
with the law laid down by this Court in CCE, Vadodara v. Dhiren
Chemical Industries – 2002 (139)
E.L.T. 3 the Department cannot now turn back and take a contrary
stand. There is no doubt that the judgment of the Tribunal cited
supra was attempted to be distinguished in the impugned judgment
of the Tribunal on the ground 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 priceon the labels of Pepsi
would be of no consequence for the simple reason thatit is clearly
meant for the advertisement of Pepsi and the MRP is not printed
on the chocolate. It may be a move on the part of the Pepsi for
advertising itsproduct but that cannot be said to be binding vis
a-vis Nestle. What isrequired is the requirement under the Rules
of printing the price. Therefore, the true test is not as to whether
the price is printed on the labels of the accompanying product like
Pepsi but whether there was a requirement under the SWM Act or
the Rules made thereunder to print the MRP on the wrappers of
KITKAT chocolates. The reason given by the Tribunal in Para 10 for
distinguishing the earlier judgment in Pepsi Food’s case, 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 in Pepsi’s case.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. Thecircular
becomes binding as held in the case of Dhiren Chemical
Industries (supra).
The Tribunal in Para 8 of its judgment has observed :
“Once the goods are specified items under Section 4A(1) and are
excisable goods chargeable duty (sic) with reference value, then such
value shall be deemed to be the retail sale price declared on such
goods, less amounts of abatements etc. As we have already observed
that Weights & Measures Act requires chocolate manufactured by the
appellant to be printed with MRP on the same, we are of the view
that the duty of excise on such goods isrequired to be assessed in
terms of the MRP. The only exception where a manufacturer can deviate
from the general rule of printing of MRP on the package is Rule 34 of
Standards of Weights & Measures (Packaged Commodities) Rules,
1977.”
We are afraid the law is too broadly stated here. It may be that
chocolates manufactured by the appellant are required to bear the
declaration of MRPbut that cannot be true of all the chocolates. In this
the Tribunal has ignored Para 6 of the aforementioned circular dated 28-
2-2002 wherein it is specifically provided that there would be instances
where the same notified commodity would be partly assessed on the
basis of MRP under Section 4A and partly on the basis of normal price
prior to 1-7-2000 or transaction value from 1-7-2000. Again merely
because the goods are specified items under Section 4A(1), that by itself
will not be a be all and end all of the matter (sic) as before such goods
are brought in the arena of Section 4A(1), there would have to be the
satisfaction of a particular condition that the packages of such goods are
„required‟ under the SWM Act and the Rules made thereunder to
declare the MRP. The Tribunal has even erred in holding that the
circulardated 28-2-2002 is not applicable to the present case. A cursory
glance at thecircular would suggest that it is applicable to the present
case where two commodities have been sold as a market strategy.
- Shri Subba Rao also heavily relied on Para 9 of the impugned
judgmentand further relied on the first Explanation of Section 4A and
suggested that the „retail sale price‟ would be the maximum price at
which the excisable goods in packaged form may be sold to the ultimate
consumers and includes all taxes, local or otherwise. The Tribunal has
held, relying on the expression
„may be‟ in contradistinction to the expression „shall be‟ that even if a
portionof the goods are sold at a lower rate than the MRP affixed therein,
the assessable value in respect of such percentage of goods will not
be loweredon the ground that they have actually been sold at a lower
rate. In our opinion the thrust of the Explanation I is not as the Tribunal
has shown but is more on as to what retail price should be. The
explanation provides that the
„retail price‟, i.e., the maximum price would include all taxes, local or
otherwise, freight, transport charges, commission payable to dealers
and all charges towards advertisements, delivery, packing, forwarding
and the like. The further thrust of the explanation is on the notion that
the price is the soleconsideration of such sale. The Tribunal has mixed
up Explanation I with Explanation II which is not permissible. This was
not a case under Section 4A,Explanation 11(b) because we do not find
different sale prices declared on thedifferent packages of the chocolates.
The case of the assessee has been consistent from the beginning that
these chocolates were sold to Pepsi undera contract for a particular
value and the said chocolates were to be offered as a free gift to the one
who purchased a particular bottle of Pepsi (1.5 litres). The Tribunal has
further expressed that the argument that the bar of KITKAT was not to
be sold by Pepsi in the retail market but was to be given as a free gift,
would be of no consequence as even if the appellant itself intended to
give the bar of KITKAT as a free gift to its customers along with other
item, the appellant would not be in a position to claim that there is no
assessable value of the goods and as such no duty of excise shall be
charged on the same. The logic is clearly faulty. In the given
circumstances, the appellant would undoubtedly be assessable to duty
under Section 4 of the Act. It is not as if the appellant would be totally
exempt from paying „any‟ duty on such goods. It was rightly contended
before the Tribunal that the thrust of Section 4A is on the packages and
not on the commodity and it is only where the goods are sold in the
packages that the section would be attracted. The submission was
undoubtedly right. The Tribunal, while rejecting this submission, has
clearly ignored the language of Section 4A(1) of the Act. 28.
- It was then suggested that the free gift by Pepsi to its customers
wouldamount to distribution and would, therefore, be amounting to
„retail sale‟ and the package of KITKAT would be „retail package‟.
However, what is material isthe definition of „retail sale price‟. The
requirement of Rule 6(1)(f) is specific. It requires the retail sale price of
the package be printed or displayed on the package. 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 of „retail sale
price‟ as provided in Rule 2(r) which clearly explains that the MRP means
the maximum price at which the commodity in packaged form „may be
sold‟ to the ultimate consumer. Thus, the definition of „sale‟ in 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 the Act.
- Shri Lakshmi Kumaran lastly relied on Rule 34(a) of the SWM (PC)
Rules and pointed out that the case was completely covered under that
Rule since firstly the package in this case specifically declared that „it
was speciallypacked for Pepsi‟. The thrust of the argument was that
there appears such declaration on the package of KITKAT and 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 by observing :
“Admittedly, the situation in the present case is not covered by any of
the conditions noticed in the said Rule.”
Learned Counsel Shri Laxmi Kumaran pointed out that there was no
question of the application of SWM (PC) Rules apart from any other
reasons, because of the applicability of Rule 34. We accept 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 expression„servicing any industry‟. We have
already dilated upon the expression servicing any industry in the earlier
part of our judgment. Those observations would similarly apply to the
present appeal also. With the result this appeal has to be allowed by
setting aside the order of the Tribunal. We accordingly allow this appeal
without any order as to costs.
Civil Appeal No. 2877/2005
Civil Appeal No. 6168/2005
Civil Appeal No. 5840/2006
- These appeals filed by the Revenue Department are against the
Electrolux Kelvinator Ltd., and Electrolux India Ltd. These cases pertain
to thevaluation of the Refrigerators manufactured by the assessees. It
is a commonplea 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 assessees 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 assessees holding that these cases
would be governed by the decision of the Tribunal in 35. ITEL
Industries Pvt. Ltd. v. CCE reported in 2004 (163) E.L.T. 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. We have already approved the judgment of the Tribunal
pertaining to the sale of telephones in the earlierpart of this judgment.
We do not see any reason to take a different view in case of the
Refrigerators. It was feebly stated by Shri Subba Rao that the assessees
have paid the duty based on contract price and not on the MRP. Wedo
not think so as there is material placed before us by the learned Counsel
appearing for the assessees that the duty has been paid not on the
contract price but on the MRP. However, we leave it open to the
Department to takean action in accordance with law if it is found that
the duty is paid on the contract price and not on MRP. Needless to
mention that reasonable opportunity would be given to the assessees to
put their say in case the Department decides to proceed against the
assessees on this ground. However, the appeals filed by the Revenue
would have to be dismissed and are accordingly dismissed. In the facts
and circumstances of the case there will be no order as to costs.
- Though the Hon‟ble Supreme Court disposed of various appeals
under common order, however, the appeal No. 1738/2004 is on the
similar fact of the present case. Relying on the Hon‟ble Supreme Court
judgment the Mumbai Bench of the Tribunal in the case of Nestle India
Limited (Supra) also held that promotional pack of maggi noodles
supplied free with Packet of Tata Tea and such packs of maggi noodles
were not bearing MRP with declaration “free with Tata Tea”. Therefore,
provisions of Standards of Weights and Measures Act, 1976 and Rules
made there under would not apply on such supplies. As such valuation
of such goods cannot be done under Section 4A of Central Excise Act,
1944 and the appeal of the assessee was allowed. It can be seen that
from the above Hon‟ble Supreme Court judgment in the case of Jayanti
food processing (P) Ltd. (Supra) and Nestle India Limited (Supra) the
issue is no longer res integra as the identical facts are involved in the
present case, therefore, the tooth brushes supplied by the appellant
which is not for retail sale but for free supply by the tooth paste
manufacturer will not be valued under Section 4A in the hands of the
appellant. Accordingly, the value adopted by the appellant under
Section 4 iscorrect and legal which does not need any interference.
- Accordingly we set aside the impugned order and allow the appeal.
From the above decisions which has relied upon the Supreme Court judgment
in the case of Jayanti food processor, the issue is no longer res integra.
Accordingly, following the aforesaid decision and on the basis of our above
observation the impugned order is not sustainable. Accordingly, the same is set
aside, The appeal is allowed.
(Pronounced in the open Court on 07.02.2023)
RAMESH NAIR
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL
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