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CASE NO.:

Appeal (civil) 2819 of 2002

PETITIONER:

Jayanti Food Processing (P) Ltd

RESPONDENT:

Commissioner of Central Excise, Rajasthan

DATE OF JUDGMENT: 22/08/2007

BENCH:

Ashok Bhan & V.S. Sirpurkar

JUDGMENT:

J U D G M E N T

WITH

CIVIL APPEAL NOS.2150-2151 OF 2004

Commissioner of Central Excise, Calicut \005. Appellant

Versus

ITEL Industries Pvt. Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.1144 OF 2004

Commissioner of Central Excise, Calicut \005. Appellant

Versus

BPL Telecom Private Limited \005. Respondent

WITH

CIVIL APPEAL NO.1738 OF 2004

Nestle India Limited \005. Appellant

Versus

Commissioner of Central Excise, Goa \005. Respondent

WITH

CIVIL APPEAL NO.1385 OF 2005

Commissioner of Central Excise, Chandigarh \005. Appellant

Versus

Himachal Exicom Communication Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.2877 OF 2005

Commissioner of Central Excise, Nagpur \005. Appellant

Versus

Electrolux Kelvinator Ltd. \005. Respondent

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WITH

CIVIL APPEAL NO.3847 OF 2005

The Commissioner of Central Excise, Noida \005. Appellant

Versus

Uniword Telecom Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.6168 OF 2005

Commissioner of Central Excise, Nagpur \005. Appellant

Versus

Electrolux India Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.6425 OF 2005

Commissioner of Central Excise, Calicut \005. Appellant

Versus

ITEL Industries \005. Respondent

WITH

CIVIL APPEAL NOS.6559-60 OF 2005

The Commissioner of Central Excise, Ghaziabad \005. Appellant

Versus

Explicit Trading & Marketing (P) Ltd. \005. Respondent

WITH

CA 498 OF 2006

Commissioner of Central Excise, New Delhi \005. Appellant

Versus

Ramani Power Cables Pvt. Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.4754 OF 2006

Commissioner of Central Excise & Customs, Calicut \005. Appellant

Versus

BPL Telecom Ltd. \005. Respondent

WITH

CIVIL APPEAL NO.5840 OF 2006

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Commissioner of Central Excise, Nagpur \005. Appellant

Versus

Electrolux Kelvinator Ltd. \005. Respondent

V.S. SIRPUKAR, J

1. This judgment will dispose of in all 15 appeals. They can be

classified in two groups. Two appeals are filed by the Assessees

challenging the order of Customs, Excise & Gold (Control) Appellate

Tribunal (hereinafter referred to as \023the Tribunal\024), they being CA

2819/2002 filed on behalf of Jayanti Food Processing (P) Ltd., for

sale of Ice-creams and CA 1738/2004 filed on behalf of Nestle India

Limited pertaining to KITKAT Chocolates. The remaining appeals are

filed by the Commissioners of Central Excise from various places and

they are CA 2150-51/2004 and CA6425/2005 against ITEL Industries,

CA 1144/2004 and CA 4754/2006 against BPL Telecom Ltd., CA

1385/2005 against Himachal Exicom Communication Ltd. These

appeals by themselves formulate into one group relating to the sale of

telephone instruments by the assesses. CA 2877/2005,

CA6168/2005 and CA5840/2006 against Electrolux Kelvinator and

Electrolux India relate to the sale of Refrigerators. Further CA6559-

6560/2005 against Explicit Trading and Marketing Pvt.Ltd., pertain to

the sale of bottled mineral water. Lastly CA498/2006 against Ramani

Power Cables Pvt., Ltd. relate to the sale of Electric Filament Lamps.

2. All these appeals pertain to the interpretation of Section 4 and

4A of the Central Excise Act, 1944 (hereinafter referred to as \023the

Act\024) and the provisions of Standards of Weights & Measures Act,

1976 (hereinafter referred to as \023the SWM Act\024) as also the

Standards of Weights & Measures (Packaged Commodities) Rules,

1977 (hereinafter referred to as \023the SWM (PC) Rules\024). In the

appeals filed by the Assessees, Jayanti Foods and Nestle India the

Tribunal has accepted the contention of the Department that these

Assessees should be assessed under Section 4A while the

contention of the Assessees is that they should be assessed and

taxed under Section 4 of the Act. In the appeals filed by the

Department pertaining to sale of Telephone Instruments, the

contention of the Department is that they should also be taxed and

assessed under Section 4 and not under Section 4A of the Act as

ordered by the Tribunal. Similar is the case in respect of appeals

pertaining to the sale of Refrigerators where the Tribunal has ordered

the assessment under Section 4A of the Act. In the case of sale of

Bottled Mineral Water while the Tribunal has ordered the assessment

under Section 4, the Department suggests that the assessment

should be under Section 4A of the Act. Lastly CA 498/2006 pertain to

the sale of Electric Filament Lamps where the assessment is ordered

under Section 4A of the Act. In short unless an authoritative

interpretation is handed out, it will not be possible to settle the issues

between the assessees and the Department. In respect of some of

the items, as the assessment under Section 4A is less, the same is

being insisted upon by the Assessee while in some cases the

assessment being more beneficial under Section 4, the Assessees

insisted on the assessment under Section 4 of the Act. Eventually

the stand of the Department is to the contrary. All these appeals,

therefore, would depend upon the interpretation of the scope of

Section 4A which is inextricably connected with the provisions of PC

Rules under the SWM Act. We would, therefore, first explain the

interpretation and scope of Section 4A more particularly sub-sections

(1) and (2) thereof. Section 4A was added by Section 82 of the

Finance Act, 1997 (Act 26 of 1997) which amendment was with effect

from 14.5.1997. Section 4A, as it originally stood, and relevant for

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our purposes, is as under:

\023Section 4A. Valuation of excisable goods with

reference to retail sale price \026 (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 Measures

Act, 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.

(2) Where the goods specified under sub-section (1)

are excisable goods and are chargeable to duty of excise

with reference to value, then, notwithstanding anything

contained in section 4, such value shall be deemed to be

the retail sale price declared on such goods less such

amount of abatement, if any, from such retail sale price as

the Central Government may allow by notification in the

Official Gazette.

(3) The Central Government may, for the purpose of

allowing any abatement under sub-section (2) take into

account the amount of duty of excise, sales tax and other

taxes, if any, payable on such goods.

(4) If any manufacturer removes from the place of

manufacture any excisable goods specified under sub-

section (1) without declaring the retail sale price of such

goods on the packages, or declares a retail sale price

which does not constitute the sole consideration for such

sale, or tampers with, obliterates or alters any such

declaration made on the packages after removal, such

goods shall be liable to confiscation.

Explanation 1. For the purposes of this section, \023retail

sale price\024 means the maximum price at which the

excisable goods in packaged form may be sold to the

ultimate consumer and includes all taxes local or

otherwise, freight, transport charges, commission payable

to dealers, and all charges towards advertisement,

delivery, packing, forwarding and the like, as the case

may be, and the price is the sole consideration for such

sale.

Explanation 2 (a) Where on the package of any excisable

goods more than one retail sale price is declared, the

maximum of such retail sale price shall be deemed to be

the retail sale price for the purpose of this section.

(b) Where different retail sale prices are declared on

different packages for the sale of any excisable goods in

packaged form in different areas, each such retail sale

prices shall be the retail price for the purposes of

valuation of the excisable goods intended to be sold in the

area to which the retail sale price relates.\024

This Section was introduced with the sole idea to end the

uncertainty caused in determining the value of the goods under

Section 4 and then assessing the duty under that Section. Section 4

was the basic formula for valuation of excisable goods and for the

purposes of charging of the duty of excise. It provided the

mechanism of determining the valuation of the goods under various

circumstances, e.g., in the matter of wholesale trade or in the matter

of sales being at the different prices for different places of removal or

in case where the assessee sold the goods only to related persons,

etc. Section 4A of the Act, as would be clear from the language of

sub-section (1), linked the valuation of the goods to the provisions of

SWM Act or the Rules made thereunder by firstly providing that it

would be for the Central Government to specify any goods in respect

of which the declaration of price on the package was required under

the provisions of SWM Act, Rules made thereunder or any law for the

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time being in force. In short sub-section (1) was linked with the

packages of the goods in respect of which the retail sale price was

required to be printed under SWM Act and the Rules made

thereunder or any other law. Sub-section (2) then provides that such

specified goods where they are excisable goods would be valued not

on any other basis but on the basis of the retail sale price declared

on such packages. The Section also provides that the assessee

would be entitled to the deduction from such valuation the amount of

abatement provided by the Central Government by a notification in

the Official Gazette. In short after introduction of Section 4A, the

nature of sale lost its relevancy in the sense that the valuation did not

depend upon the factor whether it was a wholesale or sale in bulk or

a retail sale. The whole section covered the goods which were

packaged and sold as such with the rider that such package had to

have a retail price thereupon under the provisions of SWM Act, Rules

made thereunder or under any other law. Thus, viewed from the

plain language of the Section, where the goods are excisable goods

and are packaged and further such packages are required to mention

the price thereof under the SWM Act, Rules made thereunder or

under any other law and further such goods are specified by the

Central Government by notification in the Official Gazette, then the

valuation of such goods would be on the basis of the retail sale price

of such goods and only to such goods the provisions of sub-section

(2) shall apply whereby it is provided that the value of such goods

would be deemed to be the such retail price declared on the

packages. Of course, the assessee shall be entitled to have a

reduction of abatement as declared by the Central Government by

the notification in the Official Gazette. Even at the cost of repetition

the following would be factors to include the goods in Section 4A(1) &

(2) of the Act:

i) The goods should be excisable goods;

ii) They should be such as are sold in the package;

iii) There should be requirement in the SWM Act or the Rules

made thereunder or any other law to declare the price of

such goods relating to their retail price on the package.

iv) The Central Government must have specified such goods

by notification in the Official Gazette;

v) The valuation of such goods would be as per the declared

retail sale price on the packages less the amount of

abatement.

If all these factors are applicable to any goods, then alone the

valuation of the goods and the assessment of duty would be under

Section 4A of the Act.

3. It is not in dispute that all the goods with which we are

concerned in these appeals are excisable goods and they are

specified by the Central Government by issuing a notification in the

Official Gazette.

4. Since the language of Section 4A(1) of the Act specifically

mentions that there would be a requirement under SWM Act or Rules

made thereunder or under any other law to declare on the package of

the goods the retail sale price of such goods for being covered by the

Section, it would be better to see the various provisions of the said

Act and the Rules made thereunder. Section 83 of the SWM Act

empowers the Central Government to make Rules on the subjects

provided in Section 83(2). Accordingly, the Central Government

framed the Rules called \023The Standards of Weights and Measures

(Packaged Commodities) Rules, 1977\024. As would be suggestive

from the title itself, Rule 1(3) provided that these Rules would apply to

the commodities in packaged form which are, or are intended or likely

to be sold, distributed, delivered or offered or displayed for sale,

distribution or delivery, or stored for sale or for distribution or delivery

in the course of inter-State trade and commerce.

Definition of \023retail dealer\024 under Rule 2(o) is as under:

\023retail dealer\024 in relation to any commodity in packaged

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form means a dealer who directly sells such packages to

the consumer and includes, in relation to such packages

as are sold directly to the consumer, a wholesale dealer

who makes such direct sale.\024

Definition of \023retail package\024 under Rule 2(p) is as under:

\023retail package\024 means a package containing any

commodity which is produced, distributed, displayed,

delivered or stored for sale through retail sales, agencies

or other instrumentalities for consumption by an individual

or a group of individuals\024.

Definition of \023retail sale\024 under Rule 2(q) is as under:

\023retail sale\024, 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.\024

Definition of \023retail sale price\024 under Rule 2(r) is as under:

\023retail sale price\024 means the maximum price at which the

commodity in packaged form may be sold to the ultimate

consumer and where such price is mentioned on

package, there shall be printed on the packages the

words \023maximum or max. retail price\005 inclusive of all

taxes or in the form MRP Rs\005 incl., of all taxes\024.

Explanation: For the purposes of the clause \023maximum

price\024 in relation to any commodity in packaged form shall

include all taxes, local or otherwise, freight, transport

charges, commission payable to dealers, and all charges

towards advertisement, delivery, packing, forwarding and

the like, as the case may be.\024

Definition of \023wholesale dealer\024 under Rule 2(w) is as under:

\023wholesale dealer\024 in relation to any commodity in

packaged form means a dealer who does not directly sell

such commodity to any consumer but distributes or sells

such commodity through one or more intermediaries.

Explanation: Nothing in this clause shall be construed as

preventing a wholesale dealer from functioning as a retail

dealer in relation to any commodity, but where he

functions in relation to any commodity as a retail dealer,

he shall comply with all the provisions of these rules

which a retail dealer is required by these rules to comply.\024

Definition of \023wholesale package\024 under Rule 2(x) is as under:

\023wholesale package\024 means a package containing \026

(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

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(iii) packages containing ten or more than ten retail

packages provided that the retail packages are

labeled as required under the rules.\024

Chapter II of these Rules is applicable to the packages

intended for retail sale. Rule 3 provides that the expression

\023package\024 wherever occurring in the Chapter shall be construed as

\023packages intended for retails sale\024. Rule 6(1) provides for the

declaration to be made on every package and sub-rule (f) thereof is

as under:

\023(f) the retail sale price of the package\024

Rules 15 and 16 pertain to the declarations required to be made on

combination packages and group packages. A glance at these Rules

suggests that the sale price is required to be mentioned on both.

Rule 17 deal with multi-pieces packages also requiring to declare the

sale price on the same. Rule 23(1) and (2) provide as under:

\02323. Provisions relating to wholesale dealer and

retail dealer\024

(1) No wholesale dealer or retail dealer shall sell,

distribute, deliver, display or store for sale any commodity

in the packaged form unless the package complies within

all respects, the provisions of the Act and these rules.

(2) No retail dealer or other person including

manufacturer, packer and wholesale dealer shall make

any sale of any commodity in packed form at a price

exceeding the retail sale price thereof.

Explanation: For the removal of doubts, it is hereby

declared that a sale, distribution or delivery by a

wholesale dealer to a retail dealer or other person is a

\023retail sale\024 within the meaning of this sub-rule.\024

Chapter III deals with the provisions applicable to wholesale

packages. Rule 29 pertains to the declaration required to be made

on every wholesale package. Chapter V deals with the exemptions.

Rule 34 thereof is extremely important. It runs as under:

\02334. Exemptions in respect of certain packages

Nothing contained in these rules shall apply to any

package containing a commodity if, -

(a) the marking on the package unambiguously

indicates that it has been specially packed for the

exclusive use of any industry as a raw material or

for the purpose of servicing any industry, mine or

quarry\024.

5. When we read these Rules along with provisions of Section 4A

of the Act, it would be clear that where there is a general exemption

like Section 34 under the SWM (PC) Rules such goods and/or

packages of such goods shall not be covered by Section 4A (1) and

(2) of the Act. However, all such packages which are covered under

Chapter II, more particularly under Rule 6(1)(f), Rules 15, 16 and 17,

would be governed under Section 4A as such packages are required

to declare the retail sale price on the packages. The packages

covered by Rule 29 would be outside the purview of the retail sales

as under that Rule retail prices are not required to be mentioned on

the package. However, again those packages which enjoy the

exemption under Rule 34 shall also be outside the scope of Section

4A of the Act as the Rules do not apply to the said packages.

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6. Shri Subba Rao, learned Advocate urged that where the goods

are sold in bulk, Section 4A would not apply and the assessment

would have to be done under Section 4 of the Act. We have already

clarified above that it is not the nature of sale which is relevant factor

for application of Section 4A but the applicability would depend upon

five factors which we have enumerated in para 2 above.

7. It was tried to be argued by Shri Joseph Vellapally, Senior

Counsel that Section 4A was introduced for simplification and to

reduce complications in valuing and assessing under Section 4 of the

Act. According to the learned Senior Counsel once the goods are

specified under the notification, that itself will be a deciding factor, for

such goods to be valued and assessed under Section 4A of the Act.

We do not think that the question can be solved on such a broad

proposition. We have already indicated the scope of Section 4A

above. On that basis and in the light of the various provisions under

the SWM (PC) Rules as also in the light of some of the circulars

which were relied upon by the parties and referred to in the impugned

orders of the Tribunal, we would now proceed to decide the individual

cases.

8. We would first deal with the appeals filed by the assessees

against the order of the Tribunal wherein the Tribunal has found that

the valuation and assessment should be under Section 4A of the Act

rejecting the contention of the assessee that it should be under

Section 4 of the Act.

Civil Appeal No.2819 of 2002

9. The assessee is engaged in manufacturing of Ice-cream falling

under Sub-heading 2105 of the Central Excise Tariff Act, 1985. It

used to supply the ice-cream in four litres pack to the Catering

Industry or as the case may be hotels, the hotel used to sell the said

ice-cream in scoops. The assessee used to specifically display on

the said packs that \023the pack was not meant for retail sale\024. The ice-

cream contained in the said pack of four litres used to be sold in

unpacked form by the hotel to which the said ice-cream used to be

supplied. The contention of the assessee, therefore, was that since

the pack which could be described as the bulk pack of four litres, was

not meant to be sold in retail, it was bound to be treated as a

wholesale transaction and as such the assessee was not required

under SWM Act and the Rules made thereunder to print the

Maximum Retail Price(\023hereinafter referred to as \023MRP\024) which was a

pre-condition for application of section 4A of the Act for the purposes

of valuation and assessment. The further contention of the assessee

is that the assessee is entitled to exemption under Rule 34 of the

SWM (PC) Rules. This stand was not accepted by the Assessing

Authority or the Appellate Authority who held that the valuation would

have to be under Section 4A and not under Section 4 of the Act

(perhaps because that would yield more revenue). The Tribunal has

upheld those orders dismissing the appeals filed by the present

appellant. That is how the matter has come before us.

10. Shri Ravinder Narain, the learned counsel appearing on behalf

of the appellant contends that the Tribunal has wrongly given a

finding that the four litres pack would come under the definition of

term \023retail package\024 as it is produced and distributed for

consumption by a group of individuals. Learned counsel further

urged that the Tribunal had erred in holding that the appellant is not

entitled to exemption under Rule 34 of SWM (PC) Rules. Learned

counsel was at pains to point out that this pack which is

manufactured by the appellant is also sold to Hindustan Lever Limited

who in turn supplies the same to various dealers and ultimately from

dealers the commodity reaches the consumers. According to the

learned counsel the Tribunal erred in holding that the ice-cream is not

supplied to the hotel industry for servicing it. Learned counsel

criticized the order of the Tribunal and urged that after the order of

the Tribunal was passed, the clarificatory Board Circular dated

28.2.2002 came into existence thereby binding the authorities under

the Act and as such the appeal was liable to be allowed.

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11. As against this Shri Subba Rao supported the order of the

Tribunal and pointed out that actually the MRP was displayed on the

four litres pack which suggests that even as per the assessee the

pack was for retail sale itself. Learned counsel further submits that

once the MRP was displayed on the pack, it was obvious that the

pack was meant for retail sale and ice-cream having been included in

the notification under Section 4A(2), the assessment would have to

be under Section 4A as held by all the three authorities including the

Tribunal. Learned counsel further supported the reasoning given by

the Tribunal regarding non applicability of Rule 34 of SWM (PC)

Rules. Lastly, the learned counsel contended that the said Board

Circular dated 28.2.2002 was further clarified by Circular dated

17.1.2007 bearing No.843/1/2007-CX. Learned counsel very heavily

relied on para 4 of the said circular and contended that since the lis

was continuing, there was no question of any benefit being given

under the Board Circular dated 28.2.2002 and the matters would

have to be governed by the Circular dated 17.1.2007.

12. We have already referred to the facts appearing in the orders of

the authorities below which suggest that at one point of time the

assessee used to display the MRP on the four litres pack voluntarily.

Shri Subba Rao very heavily relied on this fact. We do not think that

merely because the assessee displayed the MRP on the four litres

pack, that would negate the case of the appellant altogether. We

have already shown in the earlier part of the judgment the conditions

required for application of Section 4A. The plain language of Section

4A(1) unambiguously declares that for its application there has to be

the \023requirement\024 under the SWM Act or the Rules made thereunder

or any other law to declare the MRP on the package. If there is no

such requirement under the Act and the Rules, there would be no

question of application of Section 4A. Thus if the appellant is

successful in showing that there is no requirement under the SWM

Act or the Rules made thereunder for declaration of MRP on the

package, then there would be no question of applicability of Section

4A(1) & (2) of the Act. Even if the assessee voluntarily displays on

the pack the MRP, that would be of no use if otherwise there is no

requirement under the SWM Act and the Rules made thereunder to

declare such a price.

13. Learned counsel for appellant took us through the Rules

extensively which Rules we have already quoted above. The thrust

of the argument was that firstly the assessee could not be said to be

a \023retail dealer\024 as contemplated in Rule 2(o) of the SWM (PC) Rules

nor could the package be described as \023retail package\024 to be covered

under Rule 2(p). Learned counsel firstly suggested that the assessee

was not directly selling the package to the consumer, he was in fact

supplying the package to the intermediary for being sold to the hotel

industry. Learned counsel, therefore, argues that there was no

connection in between the assessee and the consumer nor was the

package meant to be sold as a \023package\024. The counsel is

undoubtedly right as Rule 2(o) contemplates the sale of commodity in

a packaged form directly to the consumer. The definition also

includes a wholesale dealer provided again that the package is to be

sold to the consumer directly as a package. That is not a case here

as the 4 litre pack is not meant to be sold to the consumer directly.

We would have to essentially go through to the definition of \023retail

package\024 and one look at Rule 2(p) would show that in order to be

covered under that definition such package must have been intended

for retail sale for consumption by an individual or a group of

individuals. In our view these two definitions would have to be read

together to properly understand the scope thereof. In order that the

package should be properly described as a \023retail package\024, the sale

has to be through the \023retail sale\024 for consumption by an individual or

a group of individuals. In the present case, admittedly, the sale of the

package was only to the hotel. It may be that the hotel may ultimately

sell the commodity therein, i.e., the ice-cream (not the package) to

the individuals or the group of individuals. This was not a sale in

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favour of an individual or group of individuals. We would have to

understand the scope of the term \023consumer\024 used in Rule 2(o) to be

the individual or group of individuals who consume the commodity. It

is undoubtedly true that for a sale being a \023retail sale\024 it need not

contain material for the consumption of a single individual only, it can

be for a group of individuals also. However, a hotel to which the

package is supplied cannot be covered in the term \023individual or

group of individuals\024 as contemplated in Rule 2(p) defining \023retail

package\024. We have already explained earlier that the nature of sale

is of no consequence. The material consideration is that such sale

should be in a \023package\024 and there should be a requirement in the

SWM Act or the Rules made thereunder or any other law for

displaying the MRP on such package. We find the requirement to be

only under Rule 6(1)(f) which applies to \023retail package\024 meant for

\023retail sale\024. What is required to be printed under Rule 6(1)(f) is the

\023retail sale price\024 of the package. \023Retail sale price\024 is defined under

Rule 2(r) and it suggests that the \023retail sale price\024 means the

maximum price at which the commodity in packaged form may be

sold to the ultimate consumer. The Rule further suggests the manner

in which the \023retail sale price\024 shall be mentioned on the package. It

is the case of the appellant that the four litres pack was not meant to

be sold as the package to the ultimate consumer and the sale was

only to the intermediary or as the case may be, to the hotel. If that

was so, then there is no necessity much less under Rule 6(1)(f) to

mention the \023retail sale price\024 on the package.

14. It was tried to be suggested, relying on the language of the

unamended Rule 2A, that the four litres pack of ice-cream would be

appropriately covered under Rule 2A. Rule 2A before the

amendment was as under:

\0232A. The provisions of this Chapter shall apply to all pre-

packed commodities except in respect of grains and

pulses containing quantity more than 15 kg.\024

It is true that if the unamended section is to be made applicable, the

ice-cream pack of four litres would certainly be covered under Section

2A. However, Rule 3 explains that provisions of Chapter II would

apply to packages intended for \023retail sale\024 and expression \023package\024

wherever it occurs in the chapter shall be construed accordingly. It is,

therefore, clear that the \023package\024 which was sold by the assessee

could not be termed as \023retail package\024 nor the sale thereof be

termed as a \023retail sale\024 and as such there was no requirement of

mentioning the \023retail sale price\024 on that package. All this has been

completely missed in the order of the Tribunal.

15. On the other hand the package in question would certainly

come within the definition of \023wholesale package\024 as defined in Rule

2(x)(ii) as it contained the commodity (ice-cream) and was sold to

intermediary (Hotel) for selling the same to the consumer in small

quantities. Then Rule 29 would apply to such package which does

not require the price to be displayed on the package. What is

required to be stated is (a)name and address of the manufacturer (b)

identity of commodity and (c) total number of retail packages or net

quantity. Shri Ravindra Narain is quite justified inrelying on Rule 2(x)

and Rule 2(q). The Tribunal does not refer to these vital Rules.

16. There is one more substantial reason supporting the appellant.

Shri Ravinder Narain invited our attention to Rule 34 in Chapter V of

SWM (PC) Rules which provides for exemptions. We have quoted

Rule 34 earlier. The Rule has now been amended. However, under

the unamended Rule there is a specific declaration that the SWM

(PC) Rules shall not apply to any \023package\024 containing a commodity if

the marking on the package unambiguously indicates that it has been

specially packed for the exclusive use of any industry as a raw-

material or for the purpose of \023servicing any industry, mine or quarry\024.

Learned counsel points out that the \023package\024 which is sold by the

assessee mentions that it is specially packed for the exclusive use of

the catering industry. Learned counsel further argues that such

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\023package\024 was for the purposes of \023servicing the hotel industry or

catering industry\024 as the case may be. Learned counsel is

undoubtedly right when he seeks to rely on Rule 34 which provides

for exemption of the \023packages\024 which are specially packed for the

exclusive use of any industry for the purposes of \023servicing that

industry\024. Shri Subba Rao supported the view expressed by the

Tribunal that the words \023servicing any industry\024 could not cover the

present case and he further suggested that ice-cream cannot be a

\023raw material\024 for any industry. He is undoubtedly right that the ice-

cream cannot be termed as \023raw material\024 for any industry. However,

the words \023or for the purposes of servicing any industry\024 are broad

enough to include the transaction in question, i.e., the sale of a pack

of ice-cream to the retail industry. Hotel does not manufacture the

ice-cream and is depended entirely upon the sale of ice-cream to it by

the assessee for ultimately catering the commodity in the package,

i.e. ice-cream to the ultimate consumer. In our view this can be

squarely covered in the term \023servicing any industry\024. The word

\023service\024 is a noun of the verb \023to serve\024. This Court in Coal Mines

Provident Fund Commissioner vs. Ramesh Chander Jha [AIR

1990 SC 648] in a different context, observed as under:

\023The word \021service\022 in section 2(17)(h) must necessarily

mean something more than being merely subject to the

orders of Government or control of the Government. To

serve means \021to perform functions; do what is

required for\022.\024 [Emphasis supplied]

A hotel is a hospitality industry and undoubtedly supplies food and

eatables to the consumers. Therefore, to supply the ice-cream to

such a hotel would be doing what is required for the hotel. In that

sense the supply by way of sale of ice-cream which is ultimately sold

to the \023ultimate consumers\024 would, no doubt, be covered in the term

\023servicing the hotel industry\024. Even otherwise the word \023service\024 as

per Concise Oxford English Dictionary means:

(i) perform routine maintenance or repair work on (a

vehicle or machine);

(ii) provide a service or services for;

It is an act of helpful activity \026 help, aid or to do something. It also

includes supplying of utilities or commodities. In that view we are not

prepared to give a narrow interpretation to the term \023service any

industry\024. We, therefore, accept the arguments advanced by Shri

Ravinder Narain that the \023package\024 sold by the assessee to the hotel

was, apart from being for the exclusive use of the hotel was, also \023for

the purpose of servicing that industry\024. If that is so, then the SWM

(PC) Rules would not apply at all.

17. The Tribunal has given very narrow meaning to Rule 34 by

firstly holding that ice-cream is not a \023raw material\024. There the

Tribunal was right but the Tribunal was not right by holding that the

words \023servicing any industry\024 were not applicable to such \023package\024.

We, therefore, accept the arguments of the learned counsel and

reject the contention raised by Shri Subba Rao. If that is so, the

appeal would have to be allowed and it would have to be held that

Section 4A will not apply to the ice-cream sold by the assessee.

18. This takes us to the last argument regarding the applicability of

the Circular dated 28.2.2002. However, it is not necessary for us to

delve on that issue in view of the findings which we have recorded

earlier holding that the assessment would have to be under Section 4

of the Act and not under Section 4A. In fact the tenor of the

notification is to the same effect. However, considering the fact that

the notification came after the order of the Tribunal and further it was

sought to be explained by the subsequent notification dated

17.1.2007, we are not going into that question.

19. In the result the Civil Appeal No.2819 of 2002 is allowed.

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

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manufacture of wafers covered with milk chocolate under the brand

name \023KIT KAT\024 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 \023retail sale price\024 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 was Rs.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 litres in 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 \023retail sale\024

and on 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 MRP

under 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

the said 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

of KITKAT 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 4 A of the

Act. The Tribunal while accepting the case of the Revenue simply

went on to hold that once the goods are 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 Rule 34 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 Pepiso 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

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chocolate sold to Pepsico was for free distribution along with 1.5 litre

bottle of Pepsi and, 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 \023sale\024 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 order of the Tribunal and pointed out that this could be viewed as

a \023retail sale\024. He adopted the reasoning given by the Tribunal on the

definition of \023retail sale\024 holding that the transaction in the present

case amounting to \023retail sale\024 since the chocolates were meant for

distribution for consumption by \023an individual or group of individuals

by retails sale\024 and therefore, covered in 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

commodities under Section 4A or Section 4 of the Act. A reference is

made to para 1, Entry 4 of which is as under:

\023Items supplied free with another consumer items as

marketing strategy. Example, one Lux soap free with on

box of surf.\024

Para 6 of the notification is as under:

\023It 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 price 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 CE 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 CE Act, 1944.\024

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 to the 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 vs. Pepsi

Foods Ltd. [(2005) 186 ELT 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

bound to 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 vs. Dhiren Chemical Industries [(2002) 139 ELT 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 price on the labels of Pepsi would be of

no consequence for the simple reason that it 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 its product

but that cannot be said to be binding vis-`-vis Nestle. What is

required is the requirement under the Rules of printing the price.

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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\022s 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\022s

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. The circular becomes binding as held in the

case of Dhiren Chemical Industries (supra).

27. The Tribunal in para 8 of its judgment has observed:

\023Once 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 is required 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 Commodity) Rules, 1977.\024

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 MRP but 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 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 \023required\024 under the SWM Act

and the Rules made thereunder to declare the MRP. The Tribunal

has even erred in holding that the circular dated 28.2.2002 is not

applicable to the present case. A cursory glance at the circular 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

judgment and further relied on the first Explanation of Section 4A and

suggested that the \023retail sale Price\024 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 \023may be\024 in contra-

distinction to the expression \023shall be\024 that even if a portion of 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

lowered on 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 \023retail price\024, 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

sole consideration 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 II (b) because we do not

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find different sale prices declared on the different packages of the

chocolates. The case of the assessee has been consistent from the

beginning that these chocolates were sold to Pepsi under a 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 \023any\024 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.

29. It was then suggested that the free gift by Pepsi to its

customers would amount to distribution and would, therefore, be

amounting to \023retail sale\024 and the package of KITKAT would be \023retail

package\024. However, what is material is the definition of \023retail sale

price\024. 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 \023retail sale price\024 as provided in Rule 2(r) which

clearly explains that the MRP means the maximum price at which the

commodity in packaged form \023may be sold\024 to the ultimate

consumer. Thus, the definition of \023sale\024 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 \023it was specially packed for Pepsi\024. 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:

\023Admittedly, the situation in the present case is not

covered by any of the conditions noticed in the said Rule

34.\024

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 \023servicing any

industry\024. We have already dilated upon the expression \023servicing

any industry\024 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 NOS.2150-2151 OF 2004

CIVIL APPEAL NO.1144 OF 2004

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CIVIL APPEAL NO.1385 OF 2005

CIVIL APPEAL NO.3847 OF 2005

CIVIL APPEAL NO.6425 OF 2005

31. The next group of appeals that we take into consideration is in

relation to the sale of telephones by the companies like ITEL, BPL

Telecom, Himachal Exicom and Uniword Telecom. In all the cases

the Tribunal has found in favour of the assesses holding on the facts

that the assessment should be under Section 4A and not under

Section 4. The Revenue pleaded that the assessment should be

under Section 4 of the Act (perhaps for attracting more revenue). In

arriving at this conclusion, the Tribunal took note of the factual

situation that all the telephone instruments were specified goods

under Section 4A of the Act and that all the telephone instruments

were packed and every package declared the MRP thereupon.

32. It is an admitted case that all these telephone manufacturing

companies sold the instruments (Push Button Telephones) to

Department of Telecommunications (hereinafter referred to as the

\023DoT\024), Mahanagar Telephone Nigam Limited (hereinafter referred to

as the \023MTNL\024) and Bharat Sanchar Nigam Limited (hereinafter

referred to as the \023BSNL\024). The purchaser did not sell these

instruments to the general public but instead provided the instruments

on rental basis or otherwise to their customers, meaning thereby that

there was no further sale of these instruments. The product falls

under sub-heading 8517 and is covered under Notification

No.9/2000-CE (NT) dated 1.3.2000 and subsequently by Notification

No.5/2001 dated 1.3.2001. It was, therefore, an admitted position

that from 1.3.2000 Electronic Push Button Telephones manufactured

by the assesses were specified goods and were bound to be valued

for assessment with reference to the retail price under Section 4A of

the Act. It is also an admitted position that on all the telephone

pieces sold to DoT, MTNL and BSNL, as the case may be, the

assesses had declared the MRP. The assesses got the advantage of

the abatement and because of that they were required to pay lesser

duty under Section 4A as compared to the duty chargeable under

Section 4 of the Act on the basis of contract price. The abatement

was 40% on the retail price. It was undoubtedly true that bulk supply

was made by the telephone manufacturing assesses to DoT, MTNL

and BSNL and perhaps because of that the Department averred that

since this was a wholesale transaction, the duty was assessable on

the contract price and not on the MRP. Before the Tribunal Revenue

relied upon various provisions and more particularly on Rules 2(q),

2(x), 3, 6(1)(f), etc., of the SWM (PC) Rules. A reference was made

to the Board Circular dated 28.2.2002 also. There was a difference

of opinion amongst the two Members of the Tribunal in Appeal

No.E/701/2002 & E/962 of 2002 (Civil Appeal No.2150-51 of 2004

before this Court) as to the applicability of Section 4A vis-`-vis

Section 4A of the Act to the transactions. The matter, therefore, was

considered by the third Member who came to the conclusion that the

only applicable provision would be Section 4A. The Third Member

found that the goods were cleared with the MRP having been

declared on the package. The third Member of the Tribunal further

observed that unless the packages themselves were exempt under

the SWM (PC) Rules, the assessment would have to be under

Section 4A and that the goods were sold in bulk under contract

cannot be the criteria.

33. Learned counsel Shri Subba Rao, however, reiterated his

argument that since the goods were sold in bulk the valuation should

be under Section 4 of the Act. We have already explained earlier the

scope of Section 4A suggesting that the Section would apply to the

package if it is required under SWM Act and the Rules made

thereunder to declare the MRP thereon. We are not in a position to

accept the arguments of learned counsel that merely because there

is a bulk sale to DoT, MTNL and BSNL, the assessment should be

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under Section 4 of the Act. We again mention it at the cost of

repetition that the nature of sale is not important, what is important is

the requirement of printing the MRP on the packages. It was not and

indeed cannot be disputed that these telephones are also sold in the

retail market in the same form and the same package and that there

is a requirement of printing the MRP on each package of the Push

Button Telephone. Learned counsel Shri Subba Rao also did not

dispute before us the necessity of printing the MRP on the package of

each telephone which is sold in the market. If that is so, the package

would be covered under the relevant SWM (PC) Rules. We do not

find anything in the SWM (PC) Rules that where a customer purchase

a large number of packages, such bulk purchase itself rules out the

applicability of the SWM (PC) Rules. Under Rule 2A, as it then stood,

it was provided that Chapter II apply to all pre-packaged

commodities. Rule 3 thereof provided that the provisions of Chapter

apply to the packages intended for \023retail sale\024 which would mean

that the sale would be for consumption by an individual or group of

individual or any other consumer. There can be no doubt that the

telephone instruments were to be used by the consumers. Therefore,

the telephones were sold to these three instrumentalities, there is no

escape from the fact that these telephones were meant to be

ultimately used by the consumers and it is only with that object that

the said telephones were purchased by the three instrumentalities

from its manufacturers. Therefore, the sale of the telephone

instruments would be covered in the term \023retail sale\024. Rule 6 is

thereafter very clear which requires every package to make certain

declarations including the declaration of the \023retail sale price\024 on the

package. There is also no dispute that the said declaration was

indeed made on the package of each piece of telephone. If this be so,

then it is obvious that Rule 6 could apply and there will be a

requirement under the Rules as provided in Section 4A(1) of the Act

for printing the MRP on the package. Shri Subba Rao argued that

the transaction between the assessee companies and DoT, MTNL &

BSNL did not satisfy the requirement of definition of \023retail sale\024 as

there was no retail sale agency or other instrumentalities involved in

the said transaction. We are afraid the specific language of \023retail

sale\024 is not being perceived properly. The \023retail sale\024 does not have

to be only through the \023retail sale agencies\024 or other

\023instrumentalities\024. One look at the definition of \023retail sale\024, as

provided in Rule 2(q) is sufficient to justify this inference. The

argument is, therefore, rejected. According to Shri Subba Rao further

the package would not be a \023retail package\024 as contemplated in Rule

2(p) as the DoT, MTNL & BSNL cannot be viewed as an individual or

group of individuals. We are afraid again the unamended definition of

Rule 2(p) is not read properly. When a \023retail package\024 containing

any commodity is produced, distributed, displayed, delivered or

stored for sale for consumption by an individual or group of

individuals, it would be a \023retail package\024. In this case, admittedly,

DoT, MTNL & BSNL provided these instruments, after they have

purchased the instruments , to the individual customers, though not

by way of a \023sale\024 but for their use. The \023package\024, therefore,

undoubtedly be a \023retail package\024. It was further suggested, relying

on the definition of \023retail sale price\024 in Rule 2(r) that DoT, MTNL &

BSNL are not the \023ultimate consumers\024 as contemplated in the

definition. We are afraid even there the definition is not being read

properly as it cannot be said that DoT, MTNL & BSNL are not the

\023ultimate consumer\024. The purchasers, in this case, undoubtedly,

used the telephone instruments for supply to their customers on

rental basis or on some other basis. It cannot be, therefore, said that

they would be excluded from the term \023ultimate consumer\024. It was

thereafter contended that the MRP was not printed whereas it is

asserted on behalf of the learned counsel for the assessees that each

package was carrying the MRP and duty was paid with reference to

the MRP and this is how the goods were cleared. We are not

prepared to accept a bald statement made before us that the

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packages did not have the MRP on them as from the orders of the

Tribunal we do not find such factual position emerging. That was the

most relevant factor and we are sure that the Tribunal could not have

missed it. Again we do not find that such a factual position was

canvassed before the Tribunal. We, therefore, reject this contention

and accept the assertion on the part of the counsel for the assessees

that the MRP was displayed on each package. However, we leave it

open to the Department to check this factual position again and the

Department would be free to proceed if the MRP is not printed on the

part of any particular assessee. It was also asserted by Shri Subba

Rao further that some of the assessees had not paid the duty on the

MRP but on the contract price. There is no reference of this assertion

even before the Tribunal. Instead we have the affidavits before us

that in each case the duty has been assessed not on the contract

price but on the MRP. We do not wish to go into that question now at

this juncture but we only clarify that if that is so, then the Department

would be free to take action against the concerned assessees. All the

learned counsel for the assesses accepted that if at all they have

made the payment of the duty not on the MRP but on the contract

price, they would be liable to be proceeded against by the

Department in accordance with law. We leave the question on the

basis of this assertion. However, we must reiterate that we do not

find any such reiteration in the order of the Tribunal. We, therefore,

leave it to the Revenue Department to ascertain this position and to

proceed against the erring assessees, if any.

34. Lastly Shri Subba Rao, by way of almost a desperate argument

tried to rely on Rule 34 of the SWM (PC) Rules suggesting therein

that the Rules did not apply as the transactions in the sets of

telephone instruments was covered under Rule 34 of the SWM (PC)

Rules. We do not accept the argument for the simple reason that

there does not appear any factual assertion on the part of the

Department that the packages contained a declaration that they were

specially packed for a particular industry for servicing the same. In

the absence of this factual background the applicability of Rule 34 is

completely ruled out. We, therefore, dismiss all the appeals of the

Department subject to the observations which we have made as

regarding the printing of MRP and also as regards the payment of

duty on the basis of contract price and not on MRP in the earlier part.

In the facts and circumstances of the case, there will be no 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 the valuation of the Refrigerators manufactured by the

assesses. It is a common plea 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 assesses 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 assesses holding that these cases would be

governed by the decision of the Tribunal in ITEL Industries Pvt. Ltd.

vs. CCE reported in [2004 (169) ELT 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

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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

earlier part 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 assesses have paid the duty based on

contract price and not on the MRP. We do not think so as there is

material placed before us by the learned counsel appearing for the

assesses that the duty has been paid not on the contract price but on

the MRP. However, we leave it open to the Department to take an

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 assesses 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.

Civil Appeal No.498/2006

36. This appeal relates to the manufacture and sale of Electric

Filament Lamps. The Tribunal has allowed the claim of the assessee

relying on the decision in ITEL Industries Pvt. Ltd. vs. CCE reported

in [2004 (169) ELT 219]. A perusal of the order of the authorities

below suggest that this case is identical with the case involving the

manufacture and sale of telephones by ITEL. It is admitted position

that the goods here were sold with the MRP declared on the

packages as per the SWM (PC) Rules. We see no reason to take

any different view. Nothing was stated before us by Shri Subba Rao

as to why we should take any different view in this matter. In that

view we would chose to dismiss the appeal filed by the Department

but without any order as to costs.

Civil Appeal Nos.6559-60/2005

37. These appeals are in respect of Mineral Water bottles. The

manufacturer used to pack 12 200ml. bottles in a single package and

used to mention the MRP on the said package. The assessee was

paying the duty under Section 4A(1) of the Act. The Tribunal, relying

on the judgment in Jayanti Food Processing Pvt. Ltd. vs. CCE, Jaipur

[2002 (141) ELT 162] held that the assessment was bound to be

under Section 4A(1) and not under Section 4 of the Act as the

package amounted to a \023retail package\024 in view of the provisions of

Rule 2(p) of the SWM (PC) Rules. On that basis the Tribunal came

to the conclusion that the valuation was bound to be under Section

4A(1) and not under Section 4 of the Act. Aggrieved by that, the

Department has come up before us in the present appeals. Shri

Subba Rao, learned counsel appearing on behalf of the appellant

Revenue drew a parallel with Jayanti Food\022s case and urged that the

valuation is bound to be under Section 4 of the Act as the Tribunal

had incorrectly held that the \023package\024 would be a \023retail package\024.

Learned counsel relied on the definition of \023wholesale package\024 under

Rule 2(x) of the SWM (PC) Rules and pointed out that the \023package\024

in question came within the definition of \023wholesale package\024 as there

are a number of retail packages in the form of Mineral Water Bottles

in that one package and further the said package is not intended for

sale directly to a single consumer. These bottles which were of 200

ml. capacity were not meant for sale directly to a single consumer.

He, therefore, urges that this matter was identical with Jayanti Foods\022

case and, therefore, we should take a view that the valuation should

be on the basis of Section 4 and not under Section 4A of the Act as

has been done by the Tribunal. Though the Tribunal has relied on

the judgment passed by it in the case of Jayanti Foods, we find that

there is no parallel in between Jayanti Foods and the present case.

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In a way there is a conflict in these two cases in the sense that while

Jayanti Foods would want its valuation under Section 4, the present

assessee would want it under Section 4A of the Act.

38. The factual scenario is that though the MRP was declared on

the package of 12 bottles, the bottles did not have any MRP instead it

was written: (a) not for re-sale; (b) specially packed for Jet Airways.

No retail price was written on 200 ml. Bottle. There is further no

dispute that the assessee had entered into a contract with Jet

Airways dated 13.2.2002 and the contracted price of sale for the

goods was Rs.2.61. It was the condition in the contract that each

bottle to be supplied shall have a printed label \023specially packed for

Jet Airways\024. On the basis of these facts Shri Subba Rao urged that

this case, if it was identical with Jayanti Foods case, then it was

bound to be held that the MRP based assumption could not be the

correct assessment and it should be under Section 4 of the Act. The

contention is incorrect and as in fact the \023package\024 cannot be viewed

as a \023wholesale package\024. It does not come within the definition of

Rule 2(x)(i) as the \023package\024 was not intended for sale, distribution or

delivery to an intermediary. On the other hand it is sold directly to Jet

Airway and the Jet Airways supplied the said bottles to their

passengers and thus there is no further sale by the Jet Airways of

these bottles. Therefore, it is obvious that after the first sale bottles

go directly to the \023ultimate consumers\024. There would be, therefore,

no question of application of Rule 2(x)(i). Rule 2(x)(ii) will also not

apply as this does not amount to a commodity sole to an intermediary

in bulk so as to enable such intermediary to sell, distribute or deliver,

the said commodity to the consumer in smaller quantities. The

concerned period regarding which the show cause notice was given

is April, 2002 to September, 2002. Therefore, Rule 2(x)(iii) which

came by way of an amendment into 2000 would also have to be

considered. However, even that clause is not applicable as the said

\023package\024 though contains more than 10 bottles, those bottles cannot

be viewed as the \023retail package\024 nor is there any rule requiring

labeling the said \023retail package\024 and declaring the price thereof. In

fact there is no price involved as it is specifically written on the

package \023not meant for sale\024. It is, therefore, obvious that the

\023package\024 containing 12 bottles cannot, therefore, be viewed as a

\023wholesale package\024. Once that position is clear, there is no question

of the applicability of Section 4 of the Act as the \023package\024 as it is a

retail sale of the package to the Jet Airways which supplies the same

to the passengers on demand. Therefore, the contention of Shri

Subba Rao has to be rejected that we should draw a parallel in this

case with the appeal of Jayanti Foods and hold that Section 4 is

applicable to the transactions. Once that position is clear, the

\023package\024 will be covered under Section 6 requiring the declaration of

\023retail sale price\024 which appears on the package. In this behalf we

must take into consideration the definition of \023commodity in packaged

form\024 as provided in Section 2(b) of the SWM Act. The definition is

as under:

\0232(b) \023commodity in packaged form\024 means commodity

packaged, whether in any bottle, tin, wrapper or

otherwise, in units suitable for sale, whether wholesale or

retail.\024

Twelve bottles were packed in a wrapper and the wrapper contained

the MRP price though the bottles themselves did not have the price.

Therefore, we accept the view taken by the Commissioner (Appeals)

and the Tribunal that the MRP was correctly mentioned and as such

the assessment should have been under Section 4A of the Act and

not for the reasons given by the Tribunal that we uphold the ultimate

verdict of the Tribunal that the valuation should be under Section 4A

of the Act. We accordingly dismiss the appeals filed by the

Department but without any order as to costs.

39. In the result Civil Appeal Nos.2819/2002 and Civil Appeal

No.1738/2004 are allowed and Civil Appeal Nos.2050-51/2004,

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1144/2004, 4754/2004, 1385/2005, 3847/2005, 6425/2005,

2877/2005, 6168/2005, 5840/2006, 498/2006 and 6559-60/2005 are

dismissed. In the facts and circumstances of the case, there will be

no order as to costs.