2010 (9) TMI 257 - AT - Central Excise

Retail Packaging Classification: Implications of Central Excise Rule 34(b) on MRP Declaration

The Tribunal determined that the pet jars/poly bags with individual Eclairs were multi-piece retail packages, not wholesale packages. The exemption under ... Multi-piece package - wholesale package - exemption under Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - assessment under Section 4A of the Central Excise Act - intention of the manufacturer / marketing pattern - total weight test for multi-piece retail packagesMulti-piece package - wholesale package - intention of the manufacturer / marketing pattern - Characterisation of the pet jars/poly bags containing individual Eclairs pieces as multi-piece retail packages rather than wholesale packages. - HELD THAT: - The referral Division Bench's factual finding that the impugned poly packs and pet jars are sold in retail and satisfy the definition of a multi-piece package is sustained. The packages bore labels with weight, MRP and number of pieces and evidence showed they were available for purchase by ultimate consumers; retail sale includes sale for consumption by an individual or group. Whether a package is retail or wholesale is a question of fact determined by applying the statutory definitions and relevant evidence, including the manufacturer's intention and marketing pattern; the Larger Bench cannot overturn the factual finding of the referring Bench in this case. [Paras 26, 29]The impugned pet jars and poly bags are multi-piece retail packages.Exemption under Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - total weight test for multi-piece retail packages - Whether the exemption under Rule 34(b) applies to multi-piece retail packages. - HELD THAT: - Following the ratio of the Larger Bench and precedent (Kraftech/Urison), the exemption under Rule 34(b) is available to a multi-piece retail package only if the total weight of all the pieces in the multi-piece package does not exceed the prescribed limit. The benchmark is the aggregate weight of the pieces contained in the multi-piece package, not merely the unit weight of an individual piece. [Paras 26, 29]Rule 34(b) exemption applies to a multi-piece retail package only when the total weight of all pieces in the package is within the prescribed limit.Assessment under Section 4A of the Central Excise Act - exemption under Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - Whether assessment of the impugned products is to be made under Section 4 or Section 4A of the Central Excise Act. - HELD THAT: - Given the factual finding that the impugned poly packs and pet jars are multi-piece retail packages and that the total weight of the pieces in each such package exceeds 20 grams, the Rule 34(b) exemption is inapplicable. Where Rule 34(b) does not exempt the package and the SWM/PC Rules require declaration of retail sale price on the package, valuation under Section 4A (MRP based assessment) applies rather than valuation under Section 4. [Paras 26, 29]Assessment is to be made under Section 4A of the Central Excise Act for the impugned packages.Final Conclusion: The Larger Bench upholds the referral Bench's factual finding that the pet jars/poly bags are multi-piece retail packages; holds that Rule 34(b) exemption applies to a multi-piece package only if the aggregate weight of pieces is within the prescribed limit; and, because the total weight in the impugned packages exceeds 20 grams, directs assessment to be made under Section 4A of the Central Excise Act. Appeals are returned to the referring Division Bench for final orders in accordance with these conclusions. Issues Involved:1. Classification of pet jars/poly bags containing individual pieces of Eclairs as 'wholesale package' or 'multi-piece package.'2. Relevance of exemption under Rule 34(b) of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 for deciding assessment under Section 4 or 4A of the Central Excise Act.3. Appropriate section for assessment of the impugned products under the Central Excise Act (Section 4 or Section 4A).Detailed Analysis:Issue 1: Classification of Pet Jars/Poly BagsThe appellants argued that the pet jars/poly bags containing individual pieces of Eclairs should be classified as 'wholesale packages' as they contained more than ten retail packages and were meant for wholesale dealers. They cited Rule 2(x) of the PC Rules, which defines a wholesale package as one containing ten or more retail packages, and argued that their products met this definition. However, Revenue contended that these packages were 'multi-piece packages' intended for retail sale, as per Rule 2(j) of the PC Rules, which defines a multi-piece package as containing two or more individually packaged pieces intended for retail sale. The Tribunal, considering the referral order and the definitions, found that the pet jars/poly bags were indeed multi-piece packages intended for retail sale, thus supporting the Revenue's view.Issue 2: Relevance of Exemption under Rule 34(b)The appellants claimed that Rule 34(b) of the PC Rules exempted their products from the requirement of affixing MRP since each individual piece weighed less than 10 grams. They argued that the exemption should apply to the entire package if the individual pieces met the criteria. However, the Tribunal noted that the exemption under Rule 34(b) applies only if the total weight of the multi-piece package does not exceed the prescribed limit of 20 grams. Since the pet jars/poly bags weighed more than 20 grams, the exemption under Rule 34(b) was not applicable. The Tribunal emphasized that the nature of the package (retail or wholesale) and the total weight were crucial factors in determining the applicability of the exemption.Issue 3: Appropriate Section for AssessmentThe appellants argued that their products should be assessed under Section 4 of the Central Excise Act, as they were not intended for retail sale. They cited the CBEC circulars and previous judgments to support their claim. However, the Tribunal, referring to the Supreme Court's decision in Jayanti Food Processing (P) Ltd. v. Commissioner of C. Ex., Rajasthan, held that the assessment should be done under Section 4A if the goods were sold in packages and required to declare the retail sale price under the SWM Act or PC Rules. The Tribunal found that the pet jars/poly bags were retail packages and required to declare MRP, thus making Section 4A applicable for assessment.Majority Judgment:The majority of the Tribunal members agreed that the pet jars/poly bags containing individual pieces of Eclairs were multi-piece retail packages, not wholesale packages. They held that the exemption under Rule 34(b) was not applicable as the total weight exceeded 20 grams. Consequently, the assessment should be done under Section 4A of the Central Excise Act, requiring the declaration of MRP. The Tribunal directed the regular Bench to decide the appeal based on these findings.Separate Judgment:One member, while agreeing with the majority on the classification and applicability of Rule 34(b), emphasized that the Larger Bench's role was advisory and not to reverse the findings of fact by the referral Bench. He reiterated that the referral Bench's finding that the packages were multi-piece retail packages was sound and should be respected. The assessment should be under Section 4A as the total weight exceeded 20 grams.Conclusion:The Tribunal concluded that the pet jars/poly bags containing individual pieces of Eclairs were multi-piece retail packages, not wholesale packages. The exemption under Rule 34(b) was not applicable due to the total weight exceeding 20 grams. Consequently, the assessment should be done under Section 4A of the Central Excise Act, requiring the declaration of MRP. The appeal was directed to be decided by the regular Bench based on these findings.