ORDER
P. Karthikeyan, Member (T)
1. The subject appeal seeks to vacate the Order-in-Original No. 89/2005 (ACC) dated 01.02.2005 passed by the Commissioner of Customs, Chennai. In the impugned order, the Commissioner demanded differential additional duty of customs amounting to Rs. 3,75,45,395/-on button cells imported by M/s. Titan Industries Ltd (TIL) under 62 Bills of Entry during the period 01.03.2001 to 31.12.2002. The Commissioner also demanded interest under Section 28AB of the Customs Act (the Act) and imposed a penalty on TIL equal to the duty demanded, under Section 114A under the Act.
2. The facts of the case are that the appellants, manufacturer of Titan brand watches, had imported button cells declaring them as for own use. The appellants had cleared the goods on payment of all duties based on the transaction value. The button cells are specified under Section 4(A)(1) of the Central Excise Act ’44. Rule 33 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 applied to all prepackaged commodities imported into India and required declaration of their retail price. It was therefore tentatively decided that in respect of the button cells cleared under the subject 62 Bills of Entry, the appellants had short paid CVD to the tune of Rs. 3,75,45,395/-. The retail sale price (RSP) for the above purpose had been ascertained from the appellants. It transpired in investigation that the button cells were not used in the manufacture of watches but were used in their service centres as spares for replacement. Adjudicating a show cause notice issued the Commissioner found that the TIL had misdedared the use of the button cells to avail assessment of CVD on the basis of transaction value and to avoid payment of full duty due based on MRP. The adjudicating authority found that the imported goods were packed in bulk in a carton and were therefore “commodity in packaged form” as per Section 2(b) of the Standards of Weights and Measures Act, 1976 (SWMA). The imported goods were ‘commodity packaged, whether in any bottle, tin, wrapper or otherwise, in units available for sale whether wholesale or retail’ as defined in the said Section 2(b). He found that the button cells imported were pre-packaged commodity which was required to carry a declaration including retail sale price on their import in terms of Rule 33 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Accordingly, he concluded that the impugned imports attracted assessment of CVD based on retail sale price as provided under Section 3(2) of the Customs Tariff Act, 1975 and demanded differential CVD short paid at the time of their clearance.
3. The impugned order has been assailed in the appeal mainly on the following grounds. Button cells were not imported in prepackaged form. The Hon’ble Andhrapradesh High Court in its judgment reported in AIR 2003 AP 175 had decided that to attract the provisions of SWMA and Rules made there under it was essential that the commodity was notified for the purpose under Section 1(3)(d) SWMA. No such notification was issued as regards button cells. Ministry of Commerce had clarified that components of watches were not prepacked commodity. Therefore Rule 33 of Standards of Weights and Measures (Packed Commodities) Rules, 1977 did not apply to button cells. The goods imported were found on inspection by customs authorities to be in non-retail packing. Proposal in a show cause notice issued to assess Bill of Entry No. 303656 dated 8.5.01 on MRP basis in the wake of a Central Revenue Audit objection had been dropped. Therefore, the demand was barred by limitation.
4. The major ground taken by the appellants is that since the imported goods were in bulk, Section 4A of the Central Excise Act would not apply as SWMA applied only if goods were in retail pack. They claimed support for this plea from the clarification issued by the Hyderabad Commissioner in a RAC meeting held on 20th December, 2002, to the effect that to attract assessment under Section 4A of the Central Excise Act, it was not enough that the goods were notified under Section 4A (1) of Central Excise Act, but they were also covered by the provisions of SWMA. The CBEC in Circular No. 737/53/03-CX dated 19.08.03 issued a clarification to the same effect. No notification had been issued under Section 1(3)(d) of the SWMA covering button cells. Therefore assessment of button cells based on MRP was not called for.
5. They cited Circular No. 625/28/2/2002 dated 28.02.2002 of the CBEC which had clarified that to attract assessment of CVD on any goods as per Section 4A of the Central Excise Act, it was essential that the provisions of the SWMA, or the rules made there under, or any other law for the time being in force, required to declare the retail sale price on the packages of the goods. The impugned goods were imported packed in thermo foamed trays, each tray holding 100 button cells with 10 such trays shrink wrapped and stacked in a carton. Each shipment consisted of 1,50,000 button cells so packed. Therefore, the imports were in bulk packages and did not attract MRP based assessment.
6. The Ld. SDR reiterated the findings of the Commissioner in the impugned order.
7. We have carefully considered the case records and the rival submissions. The short question to be decided in the instant case is whether the button cells imported by the appellants are assessable to CVD on the basis of their retail sale price ascertained by the department or on their transaction value. In the impugned order, the Commissioner has found that the consignments of button cells were imported in cartons in which packages of 1000 pieces each were shrink wrapped. These plastic packages contained strips containing 10 cells each. Obviously, the button cells were packed in bulk.
7.1. In Circular No. 625/16/2002-CX dated 28.02.2002 of the CBEC, it was clarified that unless the provisions of SWMA required to declare the retail sale price on the packages containing the goods, Section 4A of the Central Excise Act will not apply for their assessment. As per Section 2 (b) of SWMA, “commodity in packaged form” means commodity packaged, whether in any bottle, tin, wrapper or otherwise, in units suitable for sales, whether wholesale or retail. Commissioner has erroneously read this to mean that commodity in bulk packages attracts assessment based on retail price. We find that the impugned order came to be passed on this basis.
7.2. CBEC Circular No. 737/53/03-CX dated 19.08.03 contains the following clarification in its para 4:
4. Section 39 of the Standards of Weights & Measures Act, 1976 applies to commodities, which are cleared, sold, distributed etc. in packed condition. In terms of Rule 1(1) of the Standards of Weights & Measures (Package Commodity) Rules, 1977, a ‘prepackaged commodity’ means a commodity, which, without the purchaser being present, is placed in a package so that the quantity of goods contained therein, has a pre-determined value and such value cannot be altered without opening the package. Further, in terms of the said Rules, the term ‘package’ is to be construed as package containing such prepacked commodity. Therefore, only when such pre-packed commodities are sold in retail packages, the provisions of Standards of Weights & Measures Act and rules regarding declaration of the retail sale price (and consequently valuation of the goods based on such RSP) arises.
7.3 The Counsel for the appellants showed us the examination report by the officer of customs on the Bill of Entry relating to one of the impugned consignments that they were in non-retail packing. The adjudicating authority also recorded a finding to that effect. In view of the above clarification of the CBEC, the imported goods involved do not attract Section 4A of the Central Excise Act for the purpose of assessment of CVD. Therefore we find that the impugned order demanding differential duty on the basis that the impugned consignments are liable to CVD on the basis of MRP is not sustainable in law. Accordingly we set aside the impugned order and allow the party’s appeal.
(Operative part of the order pronounced in open Court)