Shri Atul Aggarwal, Director vs C.C.E & S.T. Faridabad

[Arising out of Order-in-Appeal No. 02 & 03/DM/ADJN/2011-12 dated 04.05.2011 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Faridabad].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Sterling Tools Ltd.

Shri Atul Aggarwal, Director .Appellants

Vs.

C.C.E & S.T. Faridabad .Respondent

Appearance:

Shri V. Lakshmi Kumaran & Shri Amit Jain, Advocate for the Appellant

Shri Pramod Kumar, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 05.08.2015

FINAL ORDER NO. 52747-52748/2015-EX(DB)

Per Ashok Jindal:

The appellants are a manufacturer of fasteners i.e. nuts, bolts and screws for automobile. Shri Atul Aggarwal is Director of appellant company.

2. The goods manufactured by the appellant are chargeable to Central Excise duty under notification no. 11/2006-CE-NT dated 29.05.2006 as amended. The automobile component and accessories falling under any chapter of Central Excise Tariff are to be charged duty on assessable value determined under section 4(A) of the Central Excise Act 1944. The period of dispute in this case is 01.06.2006 to 31.12.2008 and from 01.01.2009 to 31.09.2010. During the impugned period, the appellant company was clearing automobile parts in the following manner:

a) Automobile manufacturers as original equipment parts in loose condition on which duty was being paid on transaction value under section 4 of the Central Excise Act 1944.

b) Spare parts division of automobile manufactures in packings containing 1 to 10 pieces and on which as per the instruction of manufacturers labels mentioning the MRP and other particulars like manufacturer name, part no. etc., were being affixed and duty on the same has been paid on the value determined under section 4(A) of the Act; and,

c) To wholesale dealers of goods were being sold in boxes of 100 pieces each and on which duty was paid on transaction value of the section 4 of the Central Excise Act 1944.

3. There is no dispute about the clearance made under category a) & b) herein above. The only dispute with regard to the goods sold to the wholesale dealer in boxes of 100 pieces each on which duty was paid and transaction value as per section 4 of the Act. Therefore, the show cause notices were issued to the appellant by invoking extended period of limitation for the period 01.06.2006 to 31.12.2008 on 07.05.2010 and for the period Jan 2009 to October 2010 on 07.01.2011 to demand duty on the clearances made to the wholesale dealer to whom the goods were being sold in boxes of 100 pieces each, as per the value to be determined under section 4(A) of the Act. The show cause notices were adjudicated. Demand of duty was confirmed along with interest and penalties on both the appellants were imposed. Aggrieved from the said order, the appellants are before us.

4. Shri V. Lakshmi Kumaran, Advocate, Ld. Counsel for the appellants appeared and submits that in this case the Adjudicating authority proceeds with the finding that the appellant are clearing their goods as multi piece packaging which is beyond the show cause notices as there is no allegation as such in the show cause notice. He submits that the packing in which the appellant is clearing the goods are wholesale packing and no MRP is required to be declared and the valuation is to be done as per section 4 of the Act. He further submits that the Rules governing multi piece packing were omitted from the statute book w.e.f. 13.01.2007 vide Notification no. GSR/425 (E) dated 17.07.2006. Therefore, the demand post 12.01.2007 is not sustainable. He further submits that for the period upto 12.01.2007 the demand is also not sustainable as there was no saving clause in the Rules and it is settled law that proceedings cannot be initiated under a rule, after it has ceased to exist. To support his contention he relied on the decision of the Apex Court in the case of Rayala Corporation Pvt. Ltd. vs. Director of Enforcement New Delhi reported in 1969 (2) SCC 412 and Kolhapur Cane Sugar Works Ltd. Vs. UOI 2000 (119) ELT 257 (SC).

5. On merits, he submits that goods in question cannot be considered as multi piece packages as multi piece packages contemplates individually packed and labeled pieces of same commodity intended for retail sale. In fact, in the present case the nut, bolts, screws are not individually packed or labeled. On the contrary, they are packed in bulk in loose form in a polythene bag inside a carton containing 10 to 200 pieces. Individual pieces are sold to ultimate consumer without any packing. Therefore, the wholesale package cannot be considered to be Multi piece package. He further submits that fasteners packed in loose form in bulk sold to intermediaries / distributors for further distribution in smaller quantities are wholesale packages in terms of Rule 2(x)(ii)-SMW (PC) Rules and are governed by the provision of Rule 29 of SMW (PC) Rules in chapter III. The goods are sold to ultimate consumer in lose condition and therefore, there is no requirement to affix MRP and the provision of section 4A are not applicable. To support this contention he relied on the decision of:

a) Sarvotham Care Ltd.-2012 (286) ELT 357 (Tri-BLR)

b) Swans Sweets Pvt. Ltd.-2006 (198) ELT 565 (Tri-Bombay)

c) Central Arecanut & Cocoa Marketing & Processing Co-OP Ltd.-2008 (226) ELT 369 (Tri-Madras)

d) Roy Industries-2006 (201) ELT 609 (Tri-Bang)

e) Makson Confectionery Pvt. Ltd. 2010 (259) ELT 5 (SC)

f) Sampre Nutrition Ltd. Vs. CCE Hyderabad-2013 (290) ELT 291 (BLR).

6. He further submits that the MRP declared on individual packages sold to the spare division cannot be taken as MRP for the wholesale packages sold to the distributors as there is no statutory requirement to affix retail price on wholesale packages. He further submits that only about 40 items out of more than 1000 types of fasteners manufactured are sold to Maruti. The sale to Maruti construe about 1% of the total sales of the appellant. Therefore, adoption of the average of MRP prices based on the same is not sustainable. He further submits that the Central Excise (Determination of Retail Price of Excisable Goods) Rules came into force w.e.f. 01.03.2008 vide notification no. 13/2008-CE(NT). Prior to that, there was no method to determine the assessable value under section 4 (A) of the Act. Therefore, the impugned order is not sustainable. He further submitted that the demands beyond normal period of limitation are not sustainable as earlier show cause notice in respect to clearance to Maruti was issued on 09.04.2010 invoking extended period of limitation. At the time of issuance of show cause notice all the facts were in the knowledge of the Department. Therefore, extended period of limitation cannot be invoked in subsequent show cause notices. He also submits that the decision of Swans Sweets Pvt. Ltd. (Supra) was in favour of the appellant prior to the period in dispute and was prevailing during the relevant period. Therefore, the extended period is not invokable. He further submits that the alleged discrepancy was detected during audit on 14.07.2008 to 18.07.2008. The goods sold to Maruti were seized on 01.12.2008. However, the first show cause notice was issued on 07.05.2010, therefore, the entire amount of duty in the said show cause notice is barred by limitation. He further submits that demand for the period January 2009 to November 2009 is also barred by limitation as show cause notice has been issued on 07.01.2011. In these terms, he prayed that impugned order be set aside and appeals be allowed with consequential relief.

7. On the other hand, Ld. AR supported the impugned order and submits that when the appellants are clearing goods to their spare part division and doing valuation as per section 4(A) of the Act. Therefore, this clearance to dealer / distributors are also liable to be assessed as per the value determined under section 4(A) of the Act.

8. Heard the parties. Considered the submissions.

9. In this case the sole issue before us for determination is that whether the goods supplied to the distributor in wholesale packages are liable to be assessed under section 4(A) of the Central Excise Act 1944 or not?

10. Before deciding the issue we have to see the various provisions of the Standard of Weight and Measures (Packaged Commodities) Rules 1977 as per Rule 2(x) of the said Rules defines wholesale packages which is reproduced here as under:

Rule 2(x)  definition of wholesale package:

Wholesale package means a package containing-

(i) A number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer, or

(ii) A commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer quantities; or

(iii) Package containing ten or more than ten retail provided that retail packages are labeled as required under the rules.

11. We also find that Rule 2 (J) defines multi piece packages. It is also reproduced as under:

multi-piece package means a package containing two or more individual packaged or labeled pieces of the same commodities of identical quantity, intended for retail sale, either in individual pieces or the package as a whole

12. We also find that Rule 29 of the said rules requires the declaration to be made on the wholesale packages and same is as under:

PROVISIONs APPLICABLE TO WHOLESALE PACKAGES

29. Declaration to be made on every wholesale package-Every wholesale package shall bear thereon a legible, definite, plain and conspicuous declaration as to-

(a) the name and address of the manufacturer or where the manufacturer is not the packer, of the packer;

(b) the identity of the commodity contained in the package; and

1[(c) the total number of retail packages contained in such hole sale package or the net quantity in terms of standard unit of weights, measures or number of the commodity contained in wholesale package

13. On going through the above said provisions, we find that Multi piece packages means a package containing individually packed pieces of the same commodity of identical quantity for retail sale either in individual pieces or the package as a whole. As per the above definition of multi piece packages and the definition of wholesale packages, we find that sub clause 2(x) is applicable to the facts of this case, as the fasteners are sold by the appellant to wholesaler in bulk enabling the wholesaler to sell distribute or deliver such fastener to the consumer in smaller quantity. As the fastener cleared by the appellant to the wholesaler in bulk, we are of the considered view that the appellant are clearing their goods in wholesale packages, after analyzing the definition of wholesale package as defined under Rule 2(x) of the standard of Weight and Measures (Package Commodities) Rule 1977. We also find that Rule 29 (ibid) specifies that on wholesale packages the declaration to be made by the assessee and as per the said Rule there is no requirement to declare retail sale price. Therefore, we hold that appellant are not required to declare retail sale price on wholesale packages.

14. In these circumstances, we are of the view that on merits, the appellants are having a case that they are clearing their goods as wholesale packages to the distributors / intermediaries to sell the goods in question to the consumer in smaller quantities.

15. With regard to the case laws, we find that the issue on valuation under section 4(A) of the Central Excise Act 1944 was dealt by the Honble Apex Court in the case of Jayanti Food Processing (P) Ltd. Vs. CCE-2007 (215) ELT 327 (SC) wherein the Honble Apex Court has laid down the guidelines for valuation of the goods under section 4 (A) of the Act which are reproduced here as under:

Even at cost of repetition the following would be factors to include the foods in Section4A(1) &(2) of the act

(i)The goods should be excisable goods;

(ii)They should be such as are sold in the package;

(iii) Their should be requirement in the SWM Act or the Rule made thereunder or any other law to declare the price of such goods relating to their retail price of the package

(iv) The central Government must have specified such goods by notification in the Official Gazette

(v) The valuation of such goods would be as per the declared retail sale price of the packages less the amount of abatement.

If all these factors are applicable to any goods, then alone the valuation of the goods and the assessment of duty would be under Section 4A of the Act.

16. As per the guidelines, these should be required in SWM Act or Rules made there under or any other law to declare the price of such goods relating to their price on the packages.

17. As we have seen in the preceding paras, that as per Rule 29 of the said rules the appellant were not required to affix MRP on the product which were cleared as wholesale packages, therefore, the provisions of the SWM (PC) Rules are not applicable to the facts of this case which is squarely covered by the guidelines issued by the Honble Apex Court in the case of Jayanti Food Processing (P) Ltd. (Supra). In these circumstances, we hold that appellant has correctly valued their goods sold to the wholesaler in wholesale packages and valued as per section 4 of the Central Excise Act 1944 i.e. transaction value.

18. With these observations, we set aside the impugned order and allow the appeals with consequential relief, (if any) without going into the issue of limitation.

19. The appeals are allowed in the above terms.

(Dictated and pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

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