ORDER
Archana Wadhwa, Member (J)
1. After allowing Revenue’s application for early hearing of appeal, we take up the appeal itself for final disposal inasmuch as the issue is covered by the earlier decisions of the Tribunal.
2. The present appeal has been filed by the Revenue against the orders of the Commissioner of Central Excise (Appeals) vide which he has set aside the order of the original adjudicating authority confirming demand of duty against the Respondents on the ground that the same should have been paid under the provisions of Section 4A on the basis of the maximum retail price specified on the packaged goods instead of discharging duty on the assessable value in terms of Section 4 of the Central Excise Act, 1944. While setting aside the order of the authorities below, Commissioner(Appeals) has observed that Section 4A only applies to packaged commodities in relation to which is required by the provisions of the Standards of Weights & Measures Act, or the Rules or any other law for the time being in force to declare on the package thereof the maximum retail sale price of such packaged goods. The Standards of Weights & Measures Act, 1976 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 require the marking of the retail price, batch number etc as prescribed for various commodities. The Rule 34 of the said Rule states that nothing contained in these Rules shall apply to retail packaging of less than 20 gms inasmuch as the hair dye Sachets of 3 gms or the retail packets consisting of 3 such sachet (total 9 gms) are less than 10 gms in weight, the provisions of the said rules will not apply to them and in turn the provisions of Section 4A will not apply. He has also referred to the Government of India letter F. No. 041/64/97-TRU dt. 11.8.97 wherein has been clarified that Sub-section (1) of Section 4A applies only when the MRP is required to be indicated under the provisions of Standards of Weights & Measures Act, 1976. As such, he has held that inasmuch as the maximum retail price fixed on the said Sachets on the retail pack was not required to be fixed statutorily, Section 4A will not apply.
3. We have heard Shri Hitesh Shah, Ld. SDR appearing for the Revenue who has drawn our attention to the Hon’ble Madras High Court decision in the case of Varnica Herbs v. C.B.E.C, New Delhi wherein under similar facts and circumstances, the Hon’ble High Court has held that Section 4A would be applicable to the small packets of Hair dye of 3 gms each and further retail pack consisting of 3 such Sachets. As such, submits Ld. JDR, that the issue stands decided against the Respondents by the above referred decision of the Madras High Court.
4. Shri Ravindran, Ld Advocate, appearing for the respondents draws our attention to the Tribunal’s order in the case of Commissioner of Central Excise, Daman v. Kraftech Products Inc. [being order No. A/699/WZB/2004/C-I dt. 10.5.2004] and Kraftech Products Inc. v. CCE, VApi [being order No. A-817-18/WZB/2004/C-III dt. 29.7.2004]. Our attention has been further drawn to another order in the case of Commissioner of Central Excise, Daman v. Kraftech Products Inc. [being order No. 1079/04-NB(A) dt. 7.10.04] wherein the said decision of the Hon’ble Madras High Court in the case of Varnica Herbs was considered and it was held that the same is not applicable to the Sachets and retail packets of less than 10 gms which would be assessed to duty on the basis of the assessable value determined under Section 4 of the Act.
5. We have considered the submissions made by both sides. In the case of Kraftech Products Inc. v. CCE, Vapi an identical dispute in respect of 3gms sachets of Hair Dye and such 3 sachets being put up in a retail packs having weight of 9 gms was the subject matter of the decision. While arriving at a finding in favour of the assessee, the Tribunal took note of the various Circulars and letters issued by the Board. For better appreciation, we reproduce paragraph 3 :
” The reading of Circular No. 341/64/97-TRU dated 11th August 1997 indicates, that Section 4A applies only when there is a statutory requirement of affixing/declaring MRP. When such manufacturers voluntarily affixed MRP, they shall not be charged to duty on the basis of Section 4A of the Act and the notification. While letter No. 103/1/97-CX.3 dated 30th April 1998 from the Board to the Chief Commissioner of Central Excise, Vadodara indicates that sachets of 8 ml shampoo is not exempted under rule 34(1)(b) of the Standards of Weights and Measures Act/Rules and therefore they would not be covered by levy of duty under Section 4A of the Act (these instructions were withdrawn vide Circular dated 31.7.98). circular No. 411/44/98-CX vide para 4 thereof, reiterated instructions No. 341/645/97-TRU dated 11.8.1997. The instruction dated 31.7.98, clearly provides under para 2 thereof, Section 4A to be applicable only when the MRP was affixed under a statutory requirement”,
A reference was also made to another Circular of the Board and it was observed as under :
“It is also found that Board vide Circular No. 625/16/2002-CX dated 28.2.2002 vide para 2 thereof reiterates that Section 4A applies only where manufacturer is legally obliged to print the MRP on the packages of the goods. Para 5 of this Circular states the position as contained in circular dated 11.8.1997 and further clarifies the application in respect of all goods whether notified under Section 4A or not which are not statutorily required to declare the MRP. There is another Circular No. 639/30/2002-CX dated 24.5.2002 which clarifies that when more than one retail price is declared on package, then the highest of two prices will be taken for the purpose of assessment under Section 4A (Circular No. 673/64/2002-CX. Dated 28th October 2002) seeks to bring uniformity in valuation of multi-piece packages under different circumstances. Further, it also modifies the earlier circular dated 24.5.2002 to this extent, that if one of the two prices declared on the package is scored out then such scored out MRP should be ignored. From the Circulars issued time to time it is apparent that the view has consistently been that if a manufacturer is not legally required to declare the MRP on a package, then the provisions of Section 4A of the Central Excise Act will not be applicable for… Of assessment of duty on such packages. Rule 34b of the Rules under the Standards of Weights and Measures Act is very clear and unambiguous. The sub rule (b) thereof, provides that the provisions of the Packaged Commodity Rules, will not be applicable where the net weight or measure of the commodity contained therein, is 20 gm or 20 ml or less. The second proviso thereto relates to declarations in respect of Maximum Retail Price, net quantity. When these two proviso of rule 34(b) are read together it is clear that the declaration in respect of Maximum Retail Price and the net quantity is not required to be made if the net content of the packages is less than 10 gms or 10ml. Therefore, the appellants multi-piece packages having only 9 gms in the multi pack under consideration is clearly exempt from the requirement of declaration of MRP under the Standard Weights and Measures Act. In other words, it is not legally obligatory to declare MRP of such packages”.
That the Tribunal in the case of CCE, Daman v. Kraftech Products Inc. dealt with the plea of the Ld. JDR as regards the issue having been decided by the Madras High Court and observed as under :
“7.1 The Ld. SDR has placed heavy reliance on Circular No. 492/58/99 CX dt. 2.11.1999 and the decision of Madras High Court in Varnica Herbs. We do not agree with the learned Advocate’s contention that reliance on Circular dated 2.11.1999 is beyond the scope of the show cause notice inasmuch as the notice clearly mentioned that the multi-piece package is to be assessed under the provisions of Section 4A of the Central Excise Act and not on the basis of assessable value determined under Section 4 of the said Act. Mere reliance on circular in support of the charge leveled in the show cause notice does not mean that the Revenue has traveled beyond the scope of the notice. We are, however, of the view that there is nothing in the language of Rule 34(b) of PCR, 1977 to arrive at a conclusion that is does not apply to multi-piece package. The Law Ministry has only advised that “this exemption does not appear to be applicable to multi-piece packages”. The Law Ministry has not categorically advised that Rule 34(b) does not apply to multi-piece package. Secondly, the Board has only clarified :-
(i) that the declaration of retail sale price of multi-piece packages and individual pieces contained in such multi-piece package (if such individual pieces are capable of being sold separately) is statutorily required under Rule 17(1) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
(ii) that in respect of multi-piece packages of a commodity intended for retail sale and which are notified under Section 4A, they shall be assessed to excise duty under the provisions of Section 4A of Central Excise Act, 1944.
7.2 The Central Board of Excise & Customs has not clarified that exemption contained in Rule 34(b) of PCR 1977 will not apply to multi-piece package. It has only clarified that the provisions of Section 4A will be applicable as the declaration of retail sale price is required to be declared on multi-piece package statutorily under rule 17(1) of PCR 1977. In the case of Varnica Herbs, the Madras High Court has held that the Circular dated 2.11.1999 is not null and void “as the purpose of the impugned circular is to issue clarification in the matter relating to manner of levying excise in respect of article”. The Hon’ble High Court has held that “the contention of the petitioner that the exemption under rule 34 would be applicable is not acceptable”. The decision is in respect of the product `herbal hair dye’ packed in sachets of 8 gms in weight in Photo Protective Pouch and six such pouches were packed in a mono carton. The net weight of the commodity so contained in mono carton was thus 48 gms which is much more than the limit of weight prescribed in rule 34(b) of the PCR, 1977. In view of this factual position, the exemption under rule 34 is not applicable and the exemption under rule 34 is not applicable and the Hon’ble High Court did not accept the contention of the petitioner that the net weight of the individual sachets was less than 10 gms, which was not sold either by weight or by measure. As in the present matter, the net weight of the commodity is less than maximum weight prescribed in rule 34(b) of PCR, 1977, the exemption contained therein is available to the respondents. We, therefore, hold that the impugned order products are liable to be assessed on the basis of assessable value determined under Section 4 of the Central Excise Act and not under Section 4A of the Act. Thus, the appeal filed by the Revenue is rejected”.
We agree with the above reasoning of the Tribunal and do not find any justifiable reason to take a contrary view.
6. Inasmuch as the issue stands decided by the above referred three decisions of the Tribunal, we do not find any merits in the Revenue’s appeal and reject the same.
7. I am afraid the above view is erroneous for the following reasons :
(i) Exemption from valuation in terms of Section 4A of Central Excise Act is being claimed purely on a legal basis – that “the net weight or measure of the commodity” in “any package” is less than 10 gms and on account of that reason the package in question is exempt from the provisions of the Packaged Commodities Rules, 1977 in terms of Sub rule (b) of Rule 34. This claim is untenable. The Rule reads as under :-
“(b) the net weight or measure of the commodity is ten grams or ten milliliters or less, if sold by weight or measure:”
In the present case claim of exemption is made merely on the ground that the packages contain less than 10 gms of the item. Such a claim is contrary to the condition stipulated in the rule. It is subject to the condition “if sold by weight or measure”. In the present case, the claim of sale “by weight” is sought to be supported by the fact that net weight is indicated on the packages. This is not sufficient inasmuch as requirement for indicating net weight exists separately under Rule 6. Therefore, the marking of weight on the packages could be treated only as satisfying the requirement under Rule 6.
(ii) There could be no case that the goods contained in the packages in the present case are “sold by weight or measure”. Each package contained marking of maximum retail price and sale is at those prices and
(iii) The appellant’s claim of exemption under 34 completely lacks credibility. If the appellant was serious about that claim, it would have availed of the exemption. Instead, it has satisfied the requirement of the Rule by marking retail price. Thus, after complying with the requirement of Packaged Commodities Rules, the assessee is making a hollow claim of being exempt from Rules before excise authorities. Such a claim cannot be accepted as serious or bonafide. Nor are the excise authorities the appropriate authorities to decide on that claim. Excise authorities should go by the actual practice.
(iv) The judgment of Madras High Court in the case of Varnica Herbs v. CB E & C, New Delhi – related to almost an identical case and the High Court ruled that the exemption is not available. It is to be noted that the High Court specifically noted that “Even though the net weight is less than 10 gms, it is evident that article is not intended to be sold either by weight or by measure as contemplated under Rule 34(b)” (para 15). The Tribunal appears to have distinguished this judgment without noticing this ruling relating to “sale by weight or by measure”.
(v) It is well settled that the Tribunal is bound by the decision of a High Court on a matter of legal interpretation – Union Carbide India Ltd. v. CCE, 1996(86)ELT 613.
8. In view of what is stated above, I am of the opinion that the order of the Tribunal in the case of Kraftech Products is required to be reconsidered by a Larger Bench. The case may be placed before the Hon’ble President for constituting such a Bench.Sd/ 07.01.05
Difference of Opinion
Whether the appeal filed by the Revenue is required to be rejected as recorded by Member (Judicial) or the disputed issue is required to be referred to Larger Bench as held by Member (Technical).