Full Judgment Text
2024 INSC 470
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 143-147 OF 2010
Commissioner of Central Excise,
Jaipur -II … Appellant
versus
M/s Miraj Products Pvt. Ltd. ... Respondent
J U D G M E N T
ABHAY S. OKA, J.
FACTUAL DETAILS
1. These appeals take exception to the judgment and order
th
dated 7 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
Signature Not Verified
nd
notice issued on 22 April 2004, pertains to a brief period in
Digitally signed by
ASHISH KONDLE
Date: 2024.07.08
17:39:20 IST
Reason:
st
April 2003. The second show cause notice is of 31 May 2004
Civil Appeal Nos.143-147 of 2010 Page 1 of 13
covering the period from May 2003 till December 2003. By a
st
notification dated 1 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
st
from 1 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
1
Herbs v. Central Board of Excise & Customs, New Delhi .
1 2004 (163) ELT 160 (Madras)
Civil Appeal Nos.143-147 of 2010 Page 2 of 13
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
th
passed by the Commissioner. By the said order dated 19
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
Civil Appeal Nos.143-147 of 2010 Page 3 of 13
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 was held
that a declaration on the poly packs confirms the requirement
of Rule 6 and Rule 16 of Chapter II of the said Rules, and
therefore, poly packs were intended for retail sale. The order
further records that the sale price was mentioned on the poly
pack, which was not the requirement of Rule 29 of the said
Rules, which deals with declarations on the wholesale
packages. However, the Commissioner held that the assessee's
HDPE bags, which contain 100 larger poly pack packages and
do not declare the sale price, would be wholesale packages.
The Commissioner rejected the respondent's contention that
the poly packs were not sold in retail by holding that whether
the manufacturer sold them in retail or not is relevant and
what is material is whether the goods were intended for retail
sale.
By the impugned judgment, the Tribunal held that the
4.
decision of the Madras High Court in the case of
Varnica
1
Herbs was not a binding precedent. The Tribunal relied upon
a decision of this Court in the case of Commissioner of
2
Central Excise, Vapi v. Kraftech Products Inc. . The
Tribunal proceeded to set aside the Commissioner's order.
2 (2008) 12 SCC 321.
Civil Appeal Nos.143-147 of 2010 Page 4 of 13
SUBMISSIONS
5. The learned counsel appearing for the appellant
submitted that the decision of this Court in the case of
2
Commissioner of Central Excise, Vapi , has no application
as the assessee in the said case was selling three sachets of 3
gms of hair dye in one pack. Learned counsel pointed out
that thus the total weight of the pack was 9 gms, which was
covered by the exemption under Section 34(b) of the said
Rules. The learned counsel pointed out that the weight of
poly packs and HDPE bags is much more than 10 gms in the
present case. Learned counsel submitted that what was
being sold by the respondent was a group package meant for
retail sale, and therefore, Section 4A was rightly applied by
the Commissioner. Learned counsel submitted that even
otherwise, as the poly packs are not sold by weight or
measure, Rule 34 (b) of the said Rules has no application.
Learned counsel submitted that the Tribunal had not
considered the factual position in this case, which the
Commissioner considered in detail. Learned counsel further
submitted that one pouch of 15 gms quantity of chewable
tobacco forms part of the poly pack on which the respondent
was admittedly paying duty in accordance with Section 4A of
the Excise Act. Learned counsel has taken us through the
relevant provisions of the said Rules.
6. The learned counsel representing the respondent
supported the impugned judgment and urged that the
principles laid down by this Court in the case of
Civil Appeal Nos.143-147 of 2010 Page 5 of 13
2
Commissioner of Central Excise, Vapi , will squarely apply.
It was submitted that HDPE bags containing 100 poly packs
containing 34 pouches was not meant for retail sale;
therefore, it cannot be treated as a group package, and it has
to be a wholesale package that is not meant for retail sale.
Learned counsel submitted that there is no need to interfere
with the impugned judgment, which takes the correct view.
CONSIDERATION OF SUBMISSIONS
7. It is not in dispute that the respondent is dealing with
th
chewing tobacco. From 7 April 2003, the respondent started
the practice of packing together 33 pouches of 6 gms each
and one pouch of 15 gms of chewing tobacco in a larger poly
pack. The Revenue contends that as the larger poly pack has
weight and MRP printed on it, the same was a group package
intended for retail sale. The case made out in the show cause
notices is that the poly pack contains a quantity of more than
10 gms of chewing tobacco, and therefore, exemption under
Rule 34(b) of the said Rules will not apply. As can be seen
from Clause (b) of Rule 34 of the said Rules, the exemption
will apply to any package containing a commodity if the net
weight of the commodity is 10 gms or less and if the same is
being sold by weight. The stand of the respondent-assessee in
reply to the show cause notices is that though the poly packs
may have MRP printed on it, it was never intended for retail
sale. Moreover, the respondent was packing 100 poly packs
in one HDPE bag, and the HDPE bags were sold to
distributors. The weight of the chewing tobacco in one poly
Civil Appeal Nos.143-147 of 2010 Page 6 of 13
pack or HDPE bag is more than 10 gms. Therefore, Rule
34(b) of the said Rules has no application.
8. As far as facts are concerned, even in the order-in-
original passed by the Commissioner, which was impugned
before the Tribunal and in particular, clause (d) of paragraph
16, it is accepted that the respondent is packing 100 poly
pack packages in one HDPE bag.
9. The real controversy is whether the commodity sold by
the respondent will attract Section 4A of the Excise Act. Sub-
section (1) of Section 4A of the Excise Act reads thus:
“Section 4A. Valuation of excisable
goods with reference to retail sale price.
–
(1) The Central Government may, by
notification in the Official Gazette, specify
any goods,
in relation to which it is
required, under the provisions of the
Standards of Weights and Measure (PC)
Rules, 1976 (60 of 1976) or the rules
made thereunder or under any other law
for the time being in force, to declare on
the package thereof the retail sale price
of such goods, to which the provisions of
sub-section (2) shall apply.”
(emphasis added)
10. In the facts of the case, chewable tobacco has been
notified under sub-section (1) of Section 4A. The question is
whether the provisions of the said Rules framed under the
Standards of Weights and Measure (PC) Rules, 1977, require a
declaration of retail sale on the packages of the respondent.
Civil Appeal Nos.143-147 of 2010 Page 7 of 13
In short, the controversy is whether the packages made by the
respondent-assessee are such that under the said Rules, there
is a requirement to declare the retail price of the goods on the
packages.
11. Now, we turn to the said Rules. Chapter II of the said
Rules deals with the provisions applicable to packages
intended for retail sale. Retail sale is defined in Rule 2(q) of
the said Rules, which reads thus:
“(q) “retail sale” in relation to a
commodity, means the sale, distribution
or delivery of such commodity through
retail sales agencies or other
instrumentalities for consumption by an
individual or group of individuals or any
other consumer;”
Therefore, to attract the definition of retail sale, a commodity
has to be sold, distributed, or delivered for consumption by an
individual, a group of individuals, or any other consumer.
Thus, the sale or distribution of a commodity to a dealer who,
in turn, sells the commodity to retail dealers will not be a
retail sale.
12. Rule 2(g) defines group package which reads thus:
"2(g) “group package” means a
package intended for retail sale,
containing two or more individual
packages, or individual pieces, of
similar, but not identical (whether in
quantity or size), commodities;
Explanation.- Commodities which are
generally the same but differ in weight,
Civil Appeal Nos.143-147 of 2010 Page 8 of 13
measure or volume, appearance or
quality are similar but not identical
commodities;”
Therefore, a package can become a group package, provided it
is intended for retail sale. In this case, there is no dispute that
the respondent's poly packs and HDPE bags contain more
than 2 individual packages of similar commodities but are not
identical in quantity. The question is whether the package
made by the respondent was intended for retail sale.
13. Rule 2(x) of the said Rule defines “wholesale package”,
which reads thus:
means a
“(x) “wholesale package”
package containing-
(i) a number of retail packages, where
such first mentioned package is
intended for sale, distribution or
delivery to an intermediary and is not
intended for sale direct to a single
consumer; or
(ii) a commodity sold to an intermediary
in bulk to enable such intermediary to
sell, distribute or deliver such
commodity to the consumer in smaller
quantities; or
(iii) packages containing ten or more
than ten retail packages provided that
the retail packages are labelled as
required under the rules."
14. Now, we turn to the order-in-original and the findings
recorded therein. The Commissioner held that Rules 6 and 16
Civil Appeal Nos.143-147 of 2010 Page 9 of 13
form a part of Chapter II of the said Rules and, therefore,
apply to the packages intended for retail sale. The
Commissioner found that the poly packs contained a
declaration in terms of both Rule 6 and Rule 16. The
Commissioner referred to the format of declaration to be made
under Rule 29, which is a part of Chapter IV of the said Rules,
which did not apply to packages intended for retail sale. The
Commissioner held that Rule 29 does not require a declaration
of sale price on the wholesale package. The Commissioner
found that the poly pack containing 33 plus one small
packages contained a declaration of the price. Therefore, the
Commissioner held that the poly packs were intended for retail
sale. Otherwise, there was no reason to mention MRP on the
poly packs. The Commissioner held that the intention to make
retail sale of the poly packs was clear, and, therefore, whether
poly packs were sold by way of retail sale was irrelevant.
15. As noted earlier, in view of sub-section (1) of Section 4A,
the question is whether there is any requirement in the said
Rules to declare the retail sale price of the commodity on the
package. What is relevant is whether the package is of such
nature that attracts any of the provisions of the said Rules,
which mandatorily require the mention of retail price on the
package. In case of a package that does not attract provisions
of the said Rules regarding mentioning the retail price, even if
the retail price is mentioned on the package, that itself will not
attract sub-section (1) of Section 4A of the Excise Act.
Civil Appeal Nos.143-147 of 2010 Page 10 of 13
16. However, on facts, we may not be required to deal with
the issue of whether a poly pack containing 33 plus one small
package was intended for retail sale. The reason is that the
specific case made out by the respondent in reply to the show
cause notices was that the respondent was selling HDPE bags
containing 100 poly packs containing 33 plus one smaller
pack has not been rejected by the Commissioner. In fact, the
Commissioner seems to have accepted the contention, as seen
from Clause (d) of paragraph 16 of the order-in-original. In
clause (d), the Commissioner held thus:
“(d) Further the intentions of the
assessee that HDPE bag is a wholesale
package and the larger polypack
packages are group packages intended
for retail sale is also expressed from the
fact that there is no requirement under
Rule 29 of the Standards of Weights &
Measures (Packaged Commodities),
Rules, 1977 of mentioning sale price or
unit sale price or the MRP on a
wholesale package whereas their larger
polypack package contains the
declaration "MAX UNIT SALE PRICE"
and they are not declaring sale price on
HDPE bag (it has also been admitted by
them in the reply to Show Cause Notice
that their HDPE bag is a wholesale
package), therefore, this larger polypack
package containing the declaration "MAX
UNIT SALE PRICE" cannot be considered
as a wholesale package but can be
considered only a group package intended
for retail sale. Only the HDPE bag of the
assessee, which contains 100 larger
polypack packages and does not
Civil Appeal Nos.143-147 of 2010 Page 11 of 13
contain declaration of sale price, would
be a wholesale package .”
( added)
emphasis
17. In so many words, the Commissioner held that an HDPE
bag containing 100 poly packs does not contain a declaration
of selling price and therefore, it would be a wholesale package.
There is no finding recorded that what is distributed or sold by
the respondent is a poly pack containing 33 plus one small
pack. The respondent’s case that 100 poly pack packages are
being put in one HDPE bag has been accepted by the
Commissioner. Therefore, the respondent is selling HDPE
bags containing 100 poly packs each to the distributors and
dealers. The said Rules do not require the display of price on
such HDPE bags. Even assuming that 100 poly packs were
retail packages, HDPE bags would be covered by the definition
of ‘wholesale package’ as defined in clause (iii) of Rule 2(x) of
the said Rules. Thus, the HDPE bags are not group packages
within the meaning of Rule 2(g).
18. Though the impugned judgment is not satisfactorily
worded, for the reasons which were recorded above, the
ultimate conclusion recorded in the impugned judgment that
Section 4A(1) of the Excise Act was not applicable to the goods
subject matter of the show cause notices, cannot be faulted
with. Hence, there is no reason to interfere with the
impugned judgment.
Civil Appeal Nos.143-147 of 2010 Page 12 of 13
19. Accordingly, the appeals are dismissed with no order as
to costs.
….…………………….J.
(Abhay S. Oka)
…..…………………...J.
(Pankaj Mithal)
New Delhi;
July 08, 2024.
Civil Appeal Nos.143-147 of 2010 Page 13 of 13