Jewel Consumer Care Pvt Ltd VERSUS C.C.E. & S.T.-Vadodara-i

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,

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 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.

21. The Tribunal came to the conclusion that the duty was rightly

demanded in terms of Section 4A of the Act.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

28. 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.

29. 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.

30. 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

35. 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.

3. 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.

2. 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