2005 (98) ECC 100 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(B)

Shri S.S. Kang, Member (J) and Shri V.K. Agrawal, Member (T)

CCE, New Delhi-I

Versus

Ishaan Research Laboratories P. Ltd.

E/Misc./416/2003-B & E/Misc./68/2003-B with E/Appeal Nos. 2558/2001-NB(B) & 78/2002-NB(B)

[Arising out of Order-in-Appeal No. 759-767-CE/DLH/01 dated 3.9.2001 and 992-CE/DLH/2001 dated 15.10.2001 both passed by the Commissioner (Appeals), Central Excise, New Delhi]

Final Order No. 442-443/2004-B, dt. 9.6.2004, Certified on 23.6.2004

Valuation (C. Excise)

Contractual price -- The mere fact that the packaged commodities were also sold to hotels will not make any difference for the purpose of valuation for levying Central Excise duty. The sale at contractual price in wholesale cannot be the criterion for valuation as in the normal course of business goods are traded through wholesale business whether the valuation is resorted to under Section 4 or Section 4A of the Act r/w definition of `retail sale' in Rule 2(q) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977.

Words & Phrases

Retail sale -- Definition in Rule 2(Q) "retail sale" includes "distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer" -- Standards of Weights & Measures Rules, 1977.

PRESENT :

Shri V. Valte, SDR for the appellant.

Shri V.P. Goyal, Adv. for the respondents.

Cases Cited :

1. Bata India Ltd. v. CCE, Patna, 1999 (114) ELT 78 (T)....................................... [Para 4]

2. Bharat Systel Ltd. v. CCE, Chandigarh-1, 2002 (145) ELT 626 (T)...................... [Para 3]

3. CCE, New Delhi v. Trishul Research Lab. 2002 (144) ELT 204 (T)...................... [Para 3]

4. Sitaram Hari Salunkha v. Laman Rambodh AIR 1980 Bom. 55....................... [Para 5.2]

5. State of U.P. v. Synthetics and Chemicals Ltd., IT 1991 (3) SC 268................ [Para 5.2]

6. T.R. Thandur v. UOI, AIR 1996 SC 1643.......................................................... [Para 4]

Per : V.K. Agrawal

In these two appeals, arising out of two Orders-in-Appeal and filed by Revenue, the common issues involved are whether the products manufactured by M/s. Ishaan Research Laboratories (P) Ltd. are classifiable under Heading No. 30.03 as P or P Ayurvedic Medicaments as confirmed by the Commissioner (Appeals) or under Chapter 33 of the Schedule to the Central Excise Act as claimed by Revenue and whether the assessable value of the goods supplied to Hotels will be determined under Section 4A of the Central Excise Act as confirmed by the Commissioner (Appeals).

2. We heard Shri V. Valte, learned SDR, for the Revenue and Shri V.P. Goyal, learned Advocate, for the Respondents. Both learned SDR and learned Advocate agree that the classification issue has been decided by the Appellate Tribunal in the Respondents' own case vide Final Order No. 381-396/2000-C dated 28.8.2000 which has only been followed by the Commissioner (Appeals). Revenue has preferred the appeal against the said Final Order of the Tribunal classifying their 21 items as Ayurvedic Medicaments before the Hon'ble Supreme Court. As no order staying the operation of the said Final Order has been brought on record, we uphold the impugned Orders as far as classification of the products is concerned.

3. The learned SDR submitted that the Respondents sell their products to hotels; that the sale to hotels is not a retail sale and as such provisions of Section 4A of the Central Excise are not applicable; that provisions of Section 4A of the Act are applicable to goods, in relation to which it is required, under the provisions of the Standards of Weight & Measures Act, 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; that Rule 34(1)(a) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 clearly provides that "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.....";

He contended that in view of this exclusion provision contained in Weight & Measures Rules, 1977, the goods supplied to hotels are outside the purview of Standards of Weights and Measures Act and Rules made thereunder and consequently Section 4A will not be applicable. He relies upon the decision in CCE, New Delhi v. Trishul Research Lab. (P) Ltd., Final Order No. 168/2002-A dated 19.4.2002 : 2002 (144) ELT 204 (T) wherein the Tribunal has held that goods packed under a special contract for the hotel industry are not required to bear the "maximum retail price" declaration on the retail package. Under such circumstances it is clear that the goods fall outside the purview of Section 4A. They are, therefore, required to be assessed in terms of the valuation provided for in Section 4." The learned SDR also mentioned that the Board vide Circular No. 41/44/98-CX, dated 31.7.98 has 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 or under any other law; that "in other words, Section 4A applies only when there is statutory requirement of affixing the MRP. Accordingly, in case a manufacturer voluntarily affixes MRP which is not statutorily required then the excise duty on goods in such packing shall not be charged on the basis of Section 4A." He contended that it is thus clear that on packs supplied to Hotels, the provisions of Section 4A of the Central Excise Act are not applicable, since hotels fall under the definition of industry and sale to them cannot be termed as retail sales in view of clause (a) of Sub-rule (1) of Rule 34 of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977. He also relied upon the decision in Bharat Systel Ltd. v. CCE, Chandigarh-1, 2002 (145) ELT 626 (T) wherein the telephones, supplied in bulk to DOT & MTNL were given by them to their subscribers on rental basis without transferring ownership, have been held to be assessed on the basis of valuation under Section 4 of the Central Excise Act and not under Section 4A of the Act. Finally the learned SDR referred to Explanation 1 to Section 4A of the Act which mentions that "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and contended that the goods sold to hotels are not sold to ultimate consumer as the hotel do not sell these goods but use them for servicing their customers.

4. On the other hand, the learned Advocate submitted that Section 4A(1) of the Central Excise Act provides that Section 4A(2) would apply to such goods, as are specified by the Central Government Notification, which are required, as per the Standards of Weights & Measures Act or Rules made thereunder, to be sold under packages will the retail sale price declared thereon. Section 4A(2) provides that in respect of goods notified under Sub-section (1), the assessable value would be the retail sale price less abatement to such extent as is notified by the Central Government in respect of such goods; that the Central Government has issued Notification No. 18/97-CE(NT) dated 19.6.97 specifying goods falling under Heading Nos. 33.03, 33.04, 33.05 and 33.07 of the Central Excise Tariff as the goods to which provisions of Sub-section (2) of Section 4A shall apply; that once the Central Government has issued the Notification specifying a product under Section 4A(1), it cannot be disputed by the Central Excise Officers that the goods so specified are not such goods, in relation to such retail sale price is required to be declared on its package. He relied upon the decision in the case of Bata India Ltd. v. CCE, Patna, 1999 (114) ELT 78 (T) wherein it has been held by the Tribunal that in view of non obstante clause used in Section 4A, "the provisions of Section 4A will, therefore, override the provisions of Section 4 if excisable goods have been specified under Section 4A." Reliance has also been placed on the judgment in the case of T.R. Thandur v. UOI, AIR 1996 SC 1643 wherein it has been held by the Apex Court that the "the non-obstante clause clearly indicates that Section 20 overrides the foregoing provisions of Chapter III" of the Urban Land (Ceiling & Regulation) Act, 1976. The learned Advocate thus contended that use of non-obstante clause in sub-section (2) of Section 4 makes it abundantly clear that provisions of Section 4 of the Central Excise Act would not apply to any goods specified under sub-section (1). He further submitted that there is no dispute that on the package of goods sold to hotels, MRP has been affixed; that the provisions of Section 4A and the Notification issued thereunder is referring to MRP affixed on the products and not whether the sale of product is given in retail or wholesale or on contractual price; that all these considerations are irrelevant once the MRP is affixed on the products.

5.1 The learned Advocate mentioned that provisions of Rule 34(1)(a) of Packaged Commodities Rules, 1977 becomes applicable only if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any industry or for the purpose of servicing any industry; that this specification does not stand satisfied in the case of the labels affixed by the Appellants; that the decision in the case of Trishul Research Lab. (P) Ltd. is not applicable to the facts of present matter as the facts are different inasmuch as that in the present matters the retail sale price is affixed on the package of the impugned goods whereas this was not so in the case of Trishul Research Lab (P) Ltd. He mentioned that the definition of `Retail sale' as given in Packaged Commodities Rules is as under:

"retail sale", 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 a group of individuals or any other consumer."

5.2 He contended that the impugned goods are not used as raw material by the Hotel but are distributed by the hotels to their customers; that thus the goods are distributed for the consumption of the individual customers; that the instrumentality of sale is hotels; that "retail sale" under the Packaged Commodities Rules does not mean that the sale should necessarily take place through retail sales agencies as it also includes distribution or delivery of commodity through other instrumentalities for consumption by an individual or a group of individuals or any other consumers. The learned advocate also referred to the decisions in the case of Sitaram Hari Salunkha v. Laman Rambodh Dubey, AIR 1980 Bom. 55 and State of U.P. v. Synthetics and Chemicals Ltd., IT 1991 (3) SC 268 to emphasis (sic, emphasise) the contention that a decision decided per incuriam the specific provision of the Act and the Rule, is not binding upon the co-ordinate Bench', that "A precedent is not binding if it was rendered in ignorance of the statute or a Rule having the force of a statute. In such circumstances it can be said that the matter was decided per incuriam. He also mentioned that in Bharti Systel Ltd. the question was whether the demand raised contrary to the Circular of the Board was sustainable and the Tribunal following the settled legal principle has held that the Circulars are binding on Revenue.

6. We have considered the submissions of both the sides. It is an admitted fact that the goods in question have been specified by the Central Government under Sub-section (1) of Section 4A of the Central Excise Act and as such these goods are such goods in relation to which provisions of Standards of Weights & Measures Act apply. As per Rule 6 of the Standards of Weights & Measures (Packaged Commodities) Rules, the sale price of the goods has to be affixed on the goods in question. It has been emphasized by the Appellants that the impugned goods are affixed with the maximum retail price. Section 4A of the Act excludes the application of provisions of Section 4 of the Act as sub-section (2) of Section 4A clearly provides that "notwithstanding anything contained in Section 4" value of the goods specified under sub-section (1) shall be deemed to be the retail sale price declared on such goods, less amount of abatement allowed by the Central Government. The mere fact that the packaged commodities were also sold to hotels will not make any difference for the purpose of valuation for levying Central Excise duty. The sale at contractual price in wholesale cannot be the criterion for valuation as in the normal course of business goods are traded through wholesale business whether the valuation is resorted to under Section 4 or Section 4A of the Act. The definition of `retail sale' in Rule 2(q) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 makes it very clear that goods covered by the said Rules need not actually be sold in retail. As per the definition in Rule 2(q) "retail sale" include "distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer." In the present matters the impugned goods are distributed to the consumers through the instrumentality of hotels. The provisions of Section 34 of the Packaged Commodities Rules, 1977 are not applicable to the impugned goods as no material has been adduced by Revenue to show that "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." The Commissioner (Appeals) has given specific finding in the impugned Order-in-Appeal No. 759-767/2001 that "the goods in question are not used as raw material. It has been submitted that the goods supplied by the appellants to the hotels are in turn distributed to the customers and thus these goods are not supplied for servicing the hotel industry." The learned Advocate has rightly distinguished both the decisions relied upon by the learned SDR. In Trishul Research Lab. Case, provisions of Rule 34(1)(a) and definition of "retail sale" as given in Packaged Commodities Rules were not discussed and as held by the Supreme Court in State of U.P. v. Synthetics and Chemicals Ltd., supra, "precedents sub-silentio and without argument are of no moment" decision in the case of Bharti Systel Ltd. was passed in view of the Board's Circular No. 625/16/2002-CX dated 28.8.2002 holding that the "Revenue cannot be heard to contend against a view taken in such circulars." Accordingly the said decision is not applicable to the present matters as it is always open to the assessees to challenge the views taken by Revenue in its Circulars. In view of this we find no reason to interfere with the impugned Orders passed by the Commissioner (Appeals) and reject both the appeals filed by Revenue on the court of valuation.

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