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2016 (2) TMI 533
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....y liability on the said products which are termed as technical products (hereinafter referred to as products) without assessing them under the provisions of Section 4 of the Central Excise Act and assessing the same under the provisions of Section 4A of the Central Excise Act, 1944. On completion of the investigation, a show-cause notice dated 19.6.2009 was issued to the respondent directing them to show cause as to why differential Central Excise duty aggregating to Rs. 21,26,07,051/- as per the Annexure to the show-cause notice should not be demanded and recovered for the products cleared during June, 2004 to 30th April, 2009 and why the amount should not be appropriated which has been paid by them and penalties be not imposed on the respondent as also various individuals. 2.1 The respondent assessee contested the show-cause notice as also other noticees on the merits of the case as well as on limitation. The adjudicating authority after following the due process of law, dropped the proceedings initiated by the show-cause notice and held that the products were correctly valued. 2.2 Aggrieved by the said order, the Revenue preferred an appeal before the Tribunal. The Tribu....
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....ent dated 17.7.2006 in the said Rules, he would then take us through the definition of words Dealers, pre-packed commodity, retail dealer, retail package, retail sale, wholesale dealer and wholesale package from the said Rules and submit that the products did not pass test of any of the definition of retail package, as the said products are cleared by the respondent for the consumption of professionals in salon and hence, it is not a retail sale or a retail package. (iv) It is also his submission that there is no independence or right to the dealers or the respondent herein to sell the technical products anywhere else, except the salons, which is confirmed by the packages on which there is mention for use of professionals in salon. It is his submission that the adjudicating authority has erred in coming to the conclusion that the provision of rule is irrelevant as to who consumed the goods. It is his submission that Standards of Weight and Measures (Package Commodity) Act, 1976 (hereinafter referred to as said Act) clearly states that the provisions are made with respect to the packaged commodities is for consumer protection. (v) The adjudicating aut....
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....liance placed by the adjudicating authority on the opinion of the Deputy Controller of Legal Metrology is also not correct as the said opinion was taken without informing the facts of the case to Legal Metrology Department. It is his submission that the products sold by salons are treated as retails product and thus they are to be exclusively used by salon would be technical products not intended for sale and would be covered by the provisions of Section 4 of the Central Excise Act and not Section 4A as being followed by the respondent assessee. It is his submission that the Legal Metrology Department by final letter dated 15.5.2010 withdrew its letter dated 9.3.2009. (ix) It is his further submission that he is relying upon the judgment of the Apex Court in the case of Jayanti Foods Processing (P) Ltd. Vs. CCE, Rajasthan - 2007 (219) ELT 327 (SC) for the proposition that in the said case, products which were considered were more or less identical to the case in hand. It is his further submission that the intention needs to be gauged by the literature printed on the product, which in this case indicates the technical product are not intended for retail sale. It is hi....
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.... under provisions of Section 4A of the Central Excise Act as these technical products in retail package are sold through distributors to be consumed by the Salons and Beauty Parlors and such packages were indicating the RSP at which the same can be sold. It is his submission that provisions of Rule 2(q) read with Rule 6 of the said Rules would mean that sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals. The salons use these goods for benefit of the customers and hence sale to such individual customers are retail sale. He would place reliance on the meaning of the word consumer, which means a person who buys the goods and uses it and person who use the original products and submit that it can be inferred that the consumer was a person and such a sale was retail sale. (ii) It is his submission that where any definition is provided for ascertaining the correct meaning, the same should be construed as in common parlance or trade or commercial parlance and in their popular sense. It is his further submission that the expression any other consumer appearing ....
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....lar view in respect of the goods which is purchased by the company for supply to their subsidiary while providing taxable services, upheld the contention that affixing of MRP on the goods and valuation in terms of Section 4A of the Central Excise Act is correct. (vi) It is submitted that the provisions of rules relating to exemption from declaration of retail sale price were not applicable to the technical products prior to 14.1.2007 as sale to salons were retail sale as it is specifically mentioned on the packages and the literature thereunder for professional use only or not to be resold in public should not be mixed with declaration made under Rule 34 of the Rules. It is his submission that the said declaration on the professional technical products were specifically mentioned for the use by the professionals and they did not claim any exemption as they considered that salons were consumers and sale to such salon is retail sale. It is his submission that the declaration on the package merely restricted the class of retail buyers and should not be considered that the technical products were not indeed meant for retail sale, mixing the class of retail buyers. The d....
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....ed upon the understanding of the law under the provisions of Section 4A of the Central Excise Act. It is his submission that if the Department had any reason to doubt the same, they should have checked up with the respondent earlier. It is his further submission that method or rule as adopted by the respondent was not suppressed as full co-operation was extended to the authority during investigation. Further the issue that respondent could have had a bona fide belief, supported by various judgments and clarifications. (x) It is his further submission that the show-cause notice has not stated any reason as to why the authorities believed that the respondent had willfully contravened the provisions of Central Excise Act or rules made thereunder. It is his submission that if no tax is payable, interest and penalty is also not payable and further that no penalty is payable for the non-payment of tax, which was due to bona fide belief. (xi) For the proposition that the respondent is consumer or is institutional consumer and whether the goods are required to be valued under the provisions of Section 4 or 4A of the Central Excise Act, he relies upon the follo....
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....es on discharge of Central Excise duty as per the provisions of Section 4A of the Central Excise Act under a belief that the products manufactured by the respondent and cleared to salon are covered under the MRP/RSP regime. It is also undisputed that the professional technical products, as a matter of policy, are only sold to salons and beauty parlors and are not allowed to be sold to retailers for direct sale to consumers. The products are purchased by the salon and beauty parlors through the dealers of the respondent. 6.3On ground of such factual matrix, it is necessary to reproduce relevant provisions of rule 2 of said Rules which are as under: - (o) "retail dealer" in relation to any commodity in packaged 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; (p) "retail package" 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; ....
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.... of Rule 2A with effect from 14/1/2007, but was also applicable in terms of Rule 34 as has been held by the Bombay High Court in the case of Larsen & Toubro Ltd., Petitioners Vs. The Union of India & Others, Respondents 2008 (XCI) GJX-811-BOm. In this case the company was supplying switch gears through their dealers to the customers. The issue was whether the switch gears which were mainly used by large residential complex, commercial buildings and industries and which could be installed by licensed electrical contractors only were meant for retail sale and whether the switch gear products were governed by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 or whether they were assessable under Section 4. These products also bore the declaration as "specifically packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry and not intended for retail sale." The period involved was both prior to 14.01.2007 and thereafter. "In our opinion, the rules required the MRP to be shown only if it is a pre-packed commodity. A mere declaration under Rule 34(a) since deleted, that it is not meant f....
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....lass of consumers who in the absence of the explanation or Rule 2A would be consumers. The industrial or institutional consumers for the purpose of Rule 2(p), As an illustration. If the packaged c6mmodity purchased cannot be directly installed by the Co-operative Housing S9ciety on the ground that such user is prohibited by the Electricity Rules, that\however, would only mean that a person qualified under the rules can Install the; same for the consumer who may hove purchased the package. There is, therefore, no prohibition on such society purchasing the product and installing it through a licensed person. They are the ultimate consumers. Similarly another consumer who is qualified may purchase the commodity and install the commodity directly. Such a consumer will not cease to be a consumer because the retell package IS not consumed by such purchaser but supplied to some other consumer. The act of purchase and use also make such purchaser the ultimate consumer. Yet another person may purchase the retail package and use it in combination with other goods, as an illustration to make a switch board. Such a consumer cannot be said not to be the ultimate consumer. Such a consum....
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....ment by recording that all the information as required was given by the respondent to the authorities i.e. Dy. Controller of Legal Metrology. We also find it so. It is surprising to note that the Revenue authorities are arguing against their own circular dated 28.2.2002 wherein Board has specifically clarified as regards to the dispute that may arise whether the product is covered under the provisions of RSP/MRP or otherwise. In paragraph 7 of the said Circular, CBE&C has clarified as under: - "7. The Standards of Weights & Measures Act, 1976, and the rules made there under, are administered by the State Governments. Instances of dispute could arise between the deptt. and the assessee as to whether, in respect of a particular commodity/transaction, the assessee is exempted from declaring the retail price or not. In case of such doubt a clarification may be obtained from the concerned Deptt. (generally the Metrology Deptt.) of the State Government." It can be seen from the above reproduced clarification given by the Board that letter of the Dy. Controller of Legal Metrology cannot be brushed away as being got by suppressing any facts. Learned AR has sought to assail the ....
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.... there is no retail sale. Thus, the allegations in the show-cause notice in respect of the retail products sold by the salon to their clients clearly fail. There is a retail sale and the provisions of Section 4A are squarely applicable to these, products. In fact the decision of the Supreme Court in the same case in respect of the sale of mineral water in packs of 12 bottles is more 'applicable in this case. The Supreme Court held in the context of Rule 34, PC Rules prior to 14.01.2007, that 38 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 "ultimate consumers." In our considered view the above said findings are correct from the facts of the case and the judgment of apex Court in the case of Jayanti Foods Processing (supra) squarely applies. 6.8 We also find that the issue as to whether the consumption of product by the salons would amount to consumption by consumer has been answered by the Hon'ble Supreme Court in the case of Laxmi Engineering Works Vs. P.S.G. Industrial Institute (supra), wherein their Lordsh....
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....w: - "51. Further, as already stated earlier, the Standards of Weights and Measures Act has only two categories of products; either those which are sold in retail or those which are consumed by the industrial and institutional consumers. Thus all the products which do not fall within the purview of Rule 2A of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977 would automatically fall in the category of retail products to which Section 4A applies. It is irrelevant as to who consumes them. Thus the attempt to identify whether the consumer is a service industry or, an ultimate consumer does not help the case of the department. As is already stated, since these products are sold through dealers for consumption by the salons and in some cases to their customers and provided none of them are directly sourced from the manufacturers, none of these products would fall under the category institutional consumers or industrial consumers as defined under Rule 2A." 6.10 In our considered view and in the facts and circumstances of the case, it is clear from the records that the products professional technical products are sold by the appellant through the d....
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....ase where goods are sold to an institutional buyer under a contracted price, shall be governed by Section 4 of the Act and not under Section 4A. 3. The Revenue further relied upon few provisions under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as 'Rules') which, according to them, specifies that retail sale price has to be declared only in case the goods are intended for retail sale and not otherwise. The goods sold to institutional buyers at the contract price are not meant for retail sale. Such goods are sold to the institutional buyers and are not intended for sale directly to the consumers. The provisions of Section 4A, therefore, are not attracted as there is no requirement under the Rules to declare retail sale price on the packages meant for such sale. Thus, mere affixing MRP on packages supplied to institutional buyers does not constitute retail sale as MRP is required to be affixed only in the case of retail sale and not in the case of wholesale sale or bulk sale to the institutional buyers. 4. The Revenue also relied upon the CB.E. & C Circular dated 31-7-1998 wherein it was stated that in ca....
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....respondent to affix MRP on the goods supplied. 11. It is also a matter of record that footwear is an item which is specified under Section 4A of the Act. 12. Once we find that the footwear is an item which is specified under Section 4A, which is covered by Weights and Measures Act and Rules, and MRP was affixed on the products supplied, which were not exempted under Rule 34of the Rules, the provision of Section 4A of the Act shall stand attracted. 13. The issue is no more res integra and has been elaborately dealt with by this Court in 'Jayanti Food Processing (P) Ltd. v. Commissioner of Central Excise, Rajasthan' [2007 (8) SCC 34 = 2007 (215) E.L.T. 327 (S.C)] in the following terms :- "32. 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 2-A.However, Rule 3 explains that provisions of Chapter II would apply to packages intended for "retail sale" and expression "package" wherever it occurs in the Chapter shall be construed accordingly. It is, therefore, clear that the "package" which was sold by the assessee could not be termed as "retail package....