Calcutta Chemical Company Ltd vs Commissioner Of Central Excise

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI

APPEAL Nos.E/1236/2004 & E/1237/2004 [Arising out of Order-in-Appeal No.79 & 80/2004 (M-II) dt. 01.07.2004 passed by the Commissioner of Central Excise (Appeals), Chennai]

Calcutta Chemical Company Ltd. Appellant-Assessee Versus

Commissioner of Central Excise, Chennai-II Respondent-Revenue

APPEAL Nos.E/MISC/415, 416/2012 & E/1368/2004 & E/1369/2004 [Arising out of Order-in-Appeal No.54 & 55/2004 (TRY) (ADK) dt. 31.8.2004 passed by the Commissioner of Central Excise (Appeals), Trichy] Commissioner of Central Excise, Trichy. Appellant-Revenue

Versus Henkel SPIC India Ltd.

(sought to be changed as "Henkel India Ltd.") Respondent-Revenue Shri Raghavan Ramabadran, Advocate For the Assessees Shri M.Rammohan Rao, DC (AR) For the Revenue CORAM : Shri R.Periasami, Honble Technical Member Shri P.K. Choudhary, Honble Judicial Member

Date of Hearing/Decision : 06.07.2015

FINAL ORDER NO.41763-41766/2015

Per R.Periasami

Out of these four appeals, two are filed by the assessee and two are filed by Revenue. In Revenues appeals, two MISC applications are filed by the respondent for change of cause title. As the issue involved in all the appeals is common, therefore, they are taken up together for disposal.

E/1236/2004 & E/1237/2004

2. The brief facts of the case are that appellant-assessees are manufactures of Mr.White Detergent Powder falling under Chapter Heading 3402.90 and the goods are covered under M.R.P based assessment as per Notification 5/2001 (NT) dt. 1.3.2001. The appellant also received bulk orders from M/s.Duncans India Ltd. Duncans Tea Ltd. & Tata Tea Ltd. for supply of 250 gms and 35 gms. of detergent powder to be supplied as free gifts along with their products. Assesses have sought permission for clearance of the goods under Section 4 which are supplied to industrial consumers and cleared the said goods to their customers by assessing under Section 4 of Central Excise Act during the periods May 2002 to Oct 2002 and November 2002 to March 2003. Show cause notices dt.3.4.2003 and 22.8.2003 were issued to the assessee covering the aforesaid periods proposing to assess the goods under Section 4A as per the M.R.P and demanding differential duty. Adjudicating authority in his OIO No.2/2004 dt. 30.1.2004 and OIO No.11/2004 dt. 16.4.2004 confirmed the demand of Rs.1,60,390/- and Rs.22,629/- respectively along with interest and also imposed equivalent penalties. On appeal, Commissioner (Appeals) upheld the adjudication orders and rejected the appeals filed by assessee. Hence these two appeals before Tribunal.

E/1368 & 1369/2004

3. In these Revenue appeals, the respondents M/s.Henkel SPIC India Ltd. have filed two MISC applications for change of cause title to change the name of the respondents name from M/s/Henkel SPIC India Ltd. to M/s.Henkel India Ltd. under the scheme of amalgamation by virtue of Honble High Courts order dt. 26.4.2005. Ld. Counsel produced the copy of the Honble High Courts in C.M.P.Nos.64 & 65/2005 dt. 26.4.2005. Accordingly, the MISC applications for change of cause title are allowed. Registry is directed to amend the cause title to change the name of the Respondent as Henkel India Ltd.

4. The respondent, M/s.Henkal India Ltd., Karaikal are manufacturers of Henko Power Pearls Detergent Powder and cleared the goods to M/s.Calcutta Chemical Company Ltd., Chennai. and M/s.Detergents India Ltd. Coimbatore for free distribution along with their products like Margo soap, Neem Soap etc. Respondents paid the entire duty on the basis of transaction value under Section 4 of the Central Excise Act. Two show cause notices were issued covering the period December 2001 and February 2002 and June 2002 to August 2002 for rejecting assessment under Section 4 and proposing to demand differential duty based on M.R.P under Section 4A. The adjudicating authority in his OIO Nos.6/03 dt.27.3.2003 and 8/03 dt. 30.4.2003 dropped both the SCNs. Revenue preferred appeals before Commissioner (Appeals) against the adjudication orders. Commissioner (Appeals) upheld the impugned order and rejected the Revenues appeals. Hence Revenue filed these appeals before Tribunal.

5. ARUMENTS OF THE ADVOCATE FOR THE ASSESSEE 5.1 In the case of assessees appeal, he submits that detergent powders were sold for retail sale and also to the industrial consumers i.e. M/s.Duncans India Ltd. Duncans Tea Ltd. & M/s. Tata Tea Ltd. and these goods are not sold in the retail market by the buyers but these were supplied as free packs (gifts) along with their products. He submits that Section 4A will apply only for the goods in relation to which it is required under the provisions of Standards of Weights and Measures Act, 1976 (S.W.M. Act) and not for goods sold in bulk to industrial consumers and hence Section 4A will not be applicable on these products. He relied Boards circular dt. 28.2.2002. He also drew our attention to Rule 2(r) and Rule 6(1) (f) of S.W.M. Act will only apply when the goods are to be sold to the ultimate consumers. In the present case the goods are purchased by the manufacturer for free distribution from seller as free gifts and not sold as retail sale. He submits that appellate authority relying Tribunals order in the impugned order in the case of BPL Telecom (P) Ltd. Vs CCE Cochin  2004 (168) ELT 251 (Tri.-Bang.) is not applicable to the present case. He relied the following case law :-

(1) Jayanti Food Processing (P) Ltd. Vs CCE Rajasthan 2007 (215) ELT 327 (SC) (2) KLM Pack Vs CCE Pondicherry 2011 (267) ELT 278 (Tri.-Che.) (3) Wyeth Ltd. VS CCE Mumbai 2008 (231) ELT 53 (Tri-Delhi) (4) Sun Direct TV Pvt. Ltd. Vs CC (Sea) Chennai 2009 (243) ELT 705 (Tri.-Chennai) (5) Butterfly Gandhimati Appliances Ltd. & Another Vs CCE Chennai-III 2014-TIOL-2466-CESTAT-Mad.

5.2 In the Revenues appeals in respect of respondent M/s.Henkel India Ltd. he reiterated the findings of both adjudicating authority and appellate authority and submits that the authorities have correctly dropped the proceedings. He submits that adjudicating authority has correctly relied Boards circular dt. 11.8.97, 31.7.98 and 28.2.2002. He submits that in view of Supreme Court judgment in the case of Jayanti Food Processing (supra), there is no valid ground of the Revenues appeals.

ARGUMENTS OF A.R FOR REVENUE

6. On the other hand, Ld. AR Shri K.P.Muralidharan, AC (AR) in respect of assessees appeals reiterated the findings of the impugned order and for the Revenues appeals, he reiterated the grounds of appeal. He submits that the goods are covered under packaged commodities and falls under S.W.M.Act. Assessees themselves were clearing these goods under M.R.P basis for their own sales whereas for sale to these free supply goods, they have adopted Section 4 which is not correct. He submits that even if the goods are sold as free gifts, once the goods are covered under M.R.P., Section 4A should be applicable. He submits that Boards circular dt. 28.2.2002 is not applicable and also submits that retail sale includes sales to industrial consumers for their own consumption. He relied the following case law :-

(1) Macneill Engineering Vs CCE 2001 (134) ELT 173 (Tri.) (2) CCE Mumbai Vs Voltas Ltd.

1987 (27) ELT 718 (Tri.) and (3) BPL Telecom (P)Ltd. Vs CCE Cochin 2004 (168) ELT 251 (Tri.-Bang.)

7. After hearing both sides, we find that the short issue relates to whether goods cleared to industrial consumers by the assessee as free supply to be assessed under Section 4A or Section 4 of the Central Excise Act. In both the cases, there is no dispute on the fact that these goods were supplied to industrial consumers for their own consumption. In the case of assessees appeals, we find that the facts are not under dispute. The period of dispute relates to May 2002 to March 2003. The detergent powders are sold to the consumer i.e. M/s. M/s.Duncans India Ltd., M/s. Duncans Tea Ltd. & M/s.Tata Tea Ltd. who in turn give these goods as free gifts along with their final products.

8. In the case of Revenue appeals also, the goods were supplied by the respondent M/s.Henkel India Ltd. to M/s.Calcutta Chemicals Co. Ltd. who in turn give as free supply along with their products viz. soaps, detergents. In the Revenue appeals, the period of dispute is December 2001 and February 2002 and June 2002 to August 2002. In this regard, we find that the Board vide circular No.625/16/2002-CX. dt. 28.2.2002 has categorically clarified that a notified commodity can be partly assessed on the basis of M.R.P under Section 4A and partly assessed on the basis of normal price or transaction value under Section 4. We find that the issue stands settled by the Honble Supreme Court in the case of Jayanti Food Processing (P) Ltd. Vs CCE Rajasthan (supra). The relevant paragraphs of the Supreme Court order are reproduced as under :-

"27.? The Tribunal in Para 8 of its judgment has observed :

Once the goods are specified items under Section 4A(1) and are excisable goods chargeable duty (sic) with reference value, then such value shall be deemed to be the retail sale price declared on such goods, less amounts of abatements etc. As we have already observed that Weights & Measures Act requires chocolate manufactured by the appellant to be printed with MRP on the same, we are of the view that the duty of excise on such goods is required to be assessed in terms of the MRP. The only exception where a manufacturer can deviate from the general rule of printing of MRP on the package is Rule 34 of Standards of Weights & Measures (Packaged Commodity) Rules, 1977. We are afraid the law is too broadly stated here. It may be that chocolates manufactured by the appellant are required to bear the declaration of MRP but that cannot be true of all the chocolates. In this the Tribunal has ignored Para 6 of the aforementioned circular dated 28-2-2002 wherein it is specifically provided that there would be instances where the same notified commodity would be partly assessed on the basis of MRP under Section 4A and partly on the basis of normal price prior to 1-7-2000 or transaction value from 1-7-2000. Again merely because the goods are specified items under Section 4A(1), that by itself will not be a be all and end all of the matter as before such goods are brought in the arena of Section 4A(1), there would have to be the satisfaction of a particular condition that the packages of such goods are required under the SWM Act and the Rules made thereunder to declare the MRP. The Tribunal has even erred in holding that the circular dated 28-2-2002 is not applicable to the present case. A cursory glance at the circular would suggest that it is applicable to the present case where two commodities have been sold as a market strategy.

28.? Shri Subba Rao also heavily relied on Para 9 of the impugned judgment and further relied on the first Explanation of Section 4A and suggested that the retail sale price would be the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumers and includes all taxes, local or otherwise. The Tribunal has held, relying on the expression may be in contradistinction to the expression shall be that even if a portion of the goods are sold at a lower rate than the MRP affixed therein, the assessable value in respect of such percentage of goods will not be lowered on the ground that they have actually been sold at a lower rate. In our opinion the thrust of the Explanation I is not as the Tribunal has shown but is more on as to what retail price should be. The explanation provides that the retail price, i.e., the maximum price would include all taxes, local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertisements, delivery, packing, forwarding and the like. The further thrust of the explanation is on the notion that the price is the sole consideration of such sale.

The Tribunal has mixed up Explanation I with Explanation II which is not permissible. This was not a case under Section 4A, Explanation II(b) because we do not find different sale prices declared on the different packages of the chocolates. The case of the assessee has been consistent from the beginning that these chocolates were sold to Pepsi under a contract for a particular value and the said chocolates were to be offered as a free gift to the one who purchased a particular bottle of Pepsi (1.5 litres). The Tribunal has further expressed that the argument that the bar of KITKAT was not to be sold by Pepsi in the retail market but was to be given as a free gift, would be of no consequence as even if the appellant itself intended to give the bar of KITKAT as a free gift to its customers along with other item, the appellant would not be in a position to claim that there is no assessable value of the goods and as such no duty of excise shall be charged on the same. The logic is clearly faulty. In the given circumstances, the appellant would undoubtedly be assessable to duty under Section 4 of the Act.

It is not as if the appellant would be totally exempt from paying any duty on such goods. It was rightly contended before the Tribunal that the thrust of Section 4A is on the packages and not on the commodity and it is only where the goods are sold in the packages that the section would be attracted. The submission was undoubtedly right. The Tribunal, while rejecting this submission, has clearly ignored the language of Section 4A(1) of the Act.

29.? It was then suggested that the free gift by Pepsi to its customers would amount to distribution and would, therefore, be amounting to retail sale and the package of KITKAT would be retail package. However, what is material is the definition of retail sale price. The requirement of Rule 6(1)(f) is specific. It requires the retail sale price of the package be printed or displayed on the package. If there is no sale involved of the package, there would be no question of Rule 6(1)(f) being attracted. There is a clear indication in the definition of retail sale price as provided in Rule 2(r) which clearly explains that the MRP means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer. Thus, the definition of sale in Section 2(v) of the SWM Act becomes relevant. Therefore, unless there is an element of sale, as contemplated in Section 2(v), Rule 6(1)(f) will not be attracted and thus such package would not be governed under the provisions of SWM (PC) Rules which would clearly take such package out of the restricted arena of Section 4A(1) of the Act and would put it in the broader arena of Section 4 of the Act."

The ratio of the above case law is squarely applicable to the present case as the goods are sold to the industrial consumers who in turn supplied these goods as free gifts and these are not ultimately sold in retail sale either by the consumer or by the person who purchases it or by the ultimate buyer.

9. Further, we find that this Tribunal in the case of Butterfly Gandhimati Appliances Ltd.& Another Vs CCE Chennai-III (supra) on identical issue has allowed the appeal by relying the above Supreme Court judgement. By respectfully following the apex court decision and maintaining this Tribunals decision (supr), we hold that the detergent powders cleared to the industrial consumers are exempted from M.R.P. and not covered under Section 4A. Accordingly, we hold that differential duty confirmed in respect of Appeal Nos.E/1236, 1237/2004 in the impugned orders are liable to be set aside. As regards, the Revenues appeals E/1368, 1369/2004, as already discussed above, we do not find any infirmity in the order of the lower authorities and the Revenues appeals stand rejected.

10. In the result, Assessees appeal Nos.E/1236, 1237/2004 are allowed by setting aside the impugned orders. Revenues appeal No.E/1368,1369/2004 are rejected by upholding the impugned orders. Miscellaneous applications filed by respondent M/s.Henkel India Ltd. get disposed of.

(Operative part of the order pronounced in court on 06.07.2015)

(P.K.CHOUDHARY) (R.PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER

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