# JAY ANTI FOOD PROCESSING (P) LTD v. COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN

- **Citation:** [2007] 9 S.C.R. 221
- **Court:** Supreme Court of India
- **Decided:** 2007-08-22
- **Case number:** Civil Appeal Nos.2819 of 2002
- **Bench:** Ashok Bhan, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jay-anti-food-processing-p-ltd-v-commissioner-of-central-excise-rajasthan-23285
- **Pages:** 38

## Headnote

A
B
Central Excise Act, 1944; Ss. 4, 4A/Standards of Weights and Measures
Act, 1976/Standards of Weights and Measures (Packaged Commodities) Rules,
1977; Rr. 2(o), 2(p), 2(q), 2(r), 2(w), 2(x), 3, 6, 15, 16, 17, 23, 24 & 34 and C
Notification No.62511612002-CA dated 28.2.2002:
Valuation of excisable goods-Declaration of retail sale price on
packages-Ss.4 and 4A of 1944 Act and r.34 of 1977 Rules-Scope and
ambit of-Held: In terms ofS.4A of 1944 Act, valuation of the excisable goods
for the purpose of assessment could be made when the goods are being sold D
in packages-In terms of provisions uls.4A(i) of 1994 Act and SWM Act!
Rules, declaration of retail sale price on the package of goods is a requirement
provided the goods are not covered under general exception ulr.34 of the
Rules-If assessee is successful in showing that there is no such requirement
under the Act and the Rules, then S.4A would not be applied-Nature of sale
is of r.io consequence, the material consideration is that such sale of the E
goods should be in package for displaying MRP on package-Jn the facts
and circumstances of th'e present cases, MRP of the goods in question rightly
declared by the assesset!S, and hence, valuation of goods should be made ul
s.4A of the 1944 Act.
Words and Phrases:
'retail dealer~ 'retail package', 'retail sale', 'retail sale price', 'wholesale
dealer', and 'wholesale package'-Meaning of in the context of the Standards
of Weights and Measures (packaged Commodities) Rules, 1977.
F
Civil Appeal Nos.2819 of 2002 and 1738 of 2004 were filed by the G
assessee challenging the order of the Tribunal pertaining to levy of excise
duty on the sale of ice-creams and KITKA T Chocolates respectively; remaining
13 appeals were filed by the Revenue challenging the order of the Tribunal in
favour of the assessee regarding levy of excise duty on the sale of telephone
n1
H
222
SUPREME COURT REPORTS
[2007} 9 S.C.R.
A instruments, Refrigerators, bottled mineral water and electric filament lamps.
The issue in all these appeals pertains to the interpretation of Sections 4 and
4A of the Central Excise Act, 1944 and the provisions of Standards of Weights
and Measures Act, 1976 as also the Standards of Weights and Measures
(Packaged Commodities) Rules, 1977. ·
B
The question which arose for determination in all these appeals was
relating to the scope and ambit ofS.4A as added in the Central Excise Act,
1944 by way of amendment by Act 26of1997.
Allowing the appeals filed by the assessees and dismissing the appeals
C filed by the Revenue, the Court
HELD: 1.1. Sectio~ 4A was introduced in the Central Excise Act with
the sole idea to end the uncertainty caused in determining the value of the
go;,ds under Section 4 and then assessing the duty under that Section. Section
4 was the basic formula for valuation of excisable goods and for the purposes
D of charging of the duty of excise. It provided the mechanism of determining
the valuation of the goods under various circumstances.
(Para 2) (233-D, EJ
1.2. Sub-section (1) of Section 4A of the Act was linked with the
packages of the goods in respect of which the retail sale price was required
E to be printed under the Standards of Weights and Measures Act and the Rules
made thereunder or any other law. (Para 2) (233-F, G]
l.3. After introduction of Section 4A in the Act, the nature of sale lost
its relevancy in the sense that the valuation did not depend upon the factor
whether it was a wholesale or sale in bulk or a retail sale. The whole section
F covered the goods which were packaged and sold as such with the rider that
such package had to have a retail price thereupon under the provisions of
SWM Act, Rules made thereunder or under any other law. Thus, viewed from
the plain language of the Section, where the goods are excisable goods and
are packaged and further such packages are required to mention the price
G thereof under the SWM Act, Rules made thereunder or under any other law
and further such goods are spec

## Text

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JAY ANTI FOOD PROCESSING (P) LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN
AUGUST 22, 2007
[ASHOK BHAN AND V.S. SIRPURKAR, JJ.]
A
B
Central Excise Act, 1944; Ss. 4, 4A/Standards of Weights and Measures
Act, 1976/Standards of Weights and Measures (Packaged Commodities) Rules,
1977; Rr. 2(o), 2(p), 2(q), 2(r), 2(w), 2(x), 3, 6, 15, 16, 17, 23, 24 & 34 and C
Notification No.62511612002-CA dated 28.2.2002:
Valuation of excisable goods-Declaration of retail sale price on
packages-Ss.4 and 4A of 1944 Act and r.34 of 1977 Rules-Scope and
ambit of-Held: In terms ofS.4A of 1944 Act, valuation of the excisable goods
for the purpose of assessment could be made when the goods are being sold D
in packages-In terms of provisions uls.4A(i) of 1994 Act and SWM Act!
Rules, declaration of retail sale price on the package of goods is a requirement
provided the goods are not covered under general exception ulr.34 of the
Rules-If assessee is successful in showing that there is no such requirement
under the Act and the Rules, then S.4A would not be applied-Nature of sale
is of r.io consequence, the material consideration is that such sale of the E
goods should be in package for displaying MRP on package-Jn the facts
and circumstances of th'e present cases, MRP of the goods in question rightly
declared by the assesset!S, and hence, valuation of goods should be made ul
s.4A of the 1944 Act.
Words and Phrases:
'retail dealer~ 'retail package', 'retail sale', 'retail sale price', 'wholesale
dealer', and 'wholesale package'-Meaning of in the context of the Standards
of Weights and Measures (packaged Commodities) Rules, 1977.
F
Civil Appeal Nos.2819 of 2002 and 1738 of 2004 were filed by the G
assessee challenging the order of the Tribunal pertaining to levy of excise
duty on the sale of ice-creams and KITKA T Chocolates respectively; remaining
13 appeals were filed by the Revenue challenging the order of the Tribunal in
favour of the assessee regarding levy of excise duty on the sale of telephone
n1
H
222
SUPREME COURT REPORTS
[2007} 9 S.C.R.
A instruments, Refrigerators, bottled mineral water and electric filament lamps.
The issue in all these appeals pertains to the interpretation of Sections 4 and
4A of the Central Excise Act, 1944 and the provisions of Standards of Weights
and Measures Act, 1976 as also the Standards of Weights and Measures
(Packaged Commodities) Rules, 1977. ·
B
The question which arose for determination in all these appeals was
relating to the scope and ambit ofS.4A as added in the Central Excise Act,
1944 by way of amendment by Act 26of1997.
Allowing the appeals filed by the assessees and dismissing the appeals
C filed by the Revenue, the Court
HELD: 1.1. Sectio~ 4A was introduced in the Central Excise Act with
the sole idea to end the uncertainty caused in determining the value of the
go;,ds under Section 4 and then assessing the duty under that Section. Section
4 was the basic formula for valuation of excisable goods and for the purposes
D of charging of the duty of excise. It provided the mechanism of determining
the valuation of the goods under various circumstances.
(Para 2) (233-D, EJ
1.2. Sub-section (1) of Section 4A of the Act was linked with the
packages of the goods in respect of which the retail sale price was required
E to be printed under the Standards of Weights and Measures Act and the Rules
made thereunder or any other law. (Para 2) (233-F, G]
l.3. After introduction of Section 4A in the Act, the nature of sale lost
its relevancy in the sense that the valuation did not depend upon the factor
whether it was a wholesale or sale in bulk or a retail sale. The whole section
F covered the goods which were packaged and sold as such with the rider that
such package had to have a retail price thereupon under the provisions of
SWM Act, Rules made thereunder or under any other law. Thus, viewed from
the plain language of the Section, where the goods are excisable goods and
are packaged and further such packages are required to mention the price
G thereof under the SWM Act, Rules made thereunder or under any other law
and further such goods are specified by the Central Government. by
notification in the Official Gazette, then the valuation of such goods would be
on the basis of the retail sale price of such goods and only to such goods the
provisions ofsub-section (2) of Section 4A of the Act shall apply.
(Para 2) (233-H; 234-A-CJ
H
JAYANTI fOOO PROCESSING (P) LTD. v. COMMNR. Of CENTIIAL liXCISE. RAJASTHAN
223
1.4. If under-mentioned factors are applicable to any goods, then alone A
the valuation of the goods and the assessment of duty would be under Section
4A of the Act:
(i)
The gobds should be excisable goods;
(ii) They should be such as are sold in the package;
(iii) There should be requirement in the SWM Act or the Rules
made thereunder or any other law to declare the price of such
goods ·relating to their retail price on the package.
(iv) The Central Government must have specified such goods by
B
notifica(ion in the Official Gazette;
C
(v)
The valuation of such goods would be as per the declared retail
sale price on the packages less the amount of abatement.
[Para 2) [234-D-F)
1.5. When the Rules under the Standards of Weights and Measures D
(Packaged Commodities) Rules are read along with provisions of Section 4A
of the Act are read, it would be clear that where there is a general exemption
as under Rule 34 of the Rules such goods and/or packages of such goods
shall not be covered by Section 4A (1) and (2) of the Act. However, all such
packages which are covered under Chapter II, more particularly under rules
6(l)(t), 15, 16 and 17 of the Rules, would be governed under Section 4A of E
the Act as such packages are required to declare the retail sale price on the
packages. The packages covered by Rule 29 would be outside the purview of
the retail sales as under that Rule retail prices are not required to be
mentioned on the package. !Para 5) 1237-F, G)
Civil Appeal No.2819 of2002:
2.1. The plain la~guage of Section 4A(l) unambiguously declares that
for its application there has to be the "requirement" under the SWM Act or
F
the Rules made thereunder or any other law to declare the MRP on the
package. If there is no such requirement under the Act and the Rules, there
would be no question of application of Section 4A. Thus if the appellant is G
successful in showing that there is no requirement under the SWM Act or
the Rules made thereunder for declaration of MRP on the package, then there
would be no question of applicability of Section 4A(l) & (2) of the Act. Even
if the assessee voluntarily displays on the pack the MRP, that would be of no
use if otherwise there is, no requirement under the SWM Act and the Rules H
224
SUPREME COURT REPORTS
(2007] 9 S.C.R.
A made thereunder to declare such a price. (Para 12) (240-B, DJ
2.2. In this case, the four litre pack of ice cream is not meant to be sold
to the consumer directly. The definition of "retail package" and one look at
Rule 2(p) would show that in order to be covered under that definition such
package must have been intended for retail sale for consumption by an
B individual or a group of individuals. These two definitions would have to be
read together to properly understand the scope thereof. In order that the
package should be properly described as a "retail package", the sale has to
be through the "retail sale" for consumption by an individual or a group of
individuals. In the present case, the sale of the package of ice cream was only
C to the hotel. It may be that the hotel may ultimately sell the commodity therein,
i.e., the ice-cream (not the package) to the individuals or the group of
individuals. This was not a sale in favour of an individual or group of
individuals. (Para 13) (240-G-H; 241-A)
2.3. It is undoubtedly true that for a sale being a "retail sale" it need
D not contain material for the consumption of a single individual only, it can be
for a group of individuals also. However, a hotel to which the package is
supplied cannot be covered in the term "individual or group of individuals"
as contemplated in Rule 2(p) defining "retail package". However, the nature
of sale is of no consequence. The material consideration is that such sale
should be in a "package" and there should be a requirement in the SWM Act
E or the Rules made thereunder or any other law for displaying the MRP on
such package. (Para 13) (241-B, q
2.4. Retail sale price is defined under Rule 2(r) and it suggests that
the "retail sale price" means the maximum price at which the commodity in
F packaged form may be sold to the ultimate consumer. The Rule further
suggests the manner in which the "retail sale price" shall be mentioned on
the package. It is the, case of the assessee that the four litres pack was not
meant to be sold as the package to the ultimate consumer and the sale was
only to the intermediary or as the case may be, to the hotel. If that was so,
then there is no necessity much less under Rule 6(1)(1) to mention the "retail
G sale price" on the package. (Para 13) (241-D, E)
H
2.5. It is true that if the unamended section is to be made applicable, the
ice-cream pack of four litres would certainly be covered under Rule 2A.
However, Rule 3 explains that provisions of Chapter II would apply to packages
intended for "retail sale" and expression "package" wherever it occurs in
>
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJ AST 1 JAN
22 5
the chapter shall be construed accordingly. It is, therefore, clear that the A
"package" which was sold by the assessee could not be termed as "retail
package" nor the sale thereof be termed as a "retail sale" and as such there
was no requireme._t of mentioning the "retail sale price" on that package.
All this has been completely missed in the order of the Tribunal.
(Para 14) (241-H; 242-A-B) B
2.6. The package in question would certainly come within the definition
of "wholesale package" as defined in Rule 2(x)(ii) as it contained the
commodity (ice-cream) and was sold to intermediary (Hotel) for selling the
same to the consumer in small quantities. Then Rule 29 would apply to such
package which does not require the price to be displayed on the package. What C
is required to be stated is (a)name and address of the manufacturer (b) identity
ofcommodity and (c) total number of retail packages or net quantity.
(Para 15) (242-8, CJ
2.7. Though the ice-cream cannot be termed as "raw material" for any
industry. However, the words "or for the purposes of servicing any industry" D
are broad enough to include the transaction in question, i.e., the sale of a
pack of ice-cream to the retail industry. Hotel does not manufacture the icecream and is depended entirely upon the sale of ice-cream to it by the assessee
for ultimately catering the commodity in the package, i.e. ice-cream to the
ultimate consumer. Hence, this can ~ squarely covered in the term "servicing
any industry". (Para 16) (242-G, H; 243-A)
E
2.8. A hotel is a hospitality industry and undoubtedly supplies food and
eatables to the consumers. Therefore, to supply the ice-cream to such a hotel
would be doing what is required for the hotel. In that sense the supply by way
of sale of ice-cream which is ultimately sold to the "ultimate consumers" F
would, no doubt, be c;overed in the term "servicing the hotel industry". It is
an act of helpful activity - help, aid. or to do something. It also includes
supplying of utilities or commodities. Thus, a narrow interpretation to the
term "service any industry" cannot be given. Hence, the "package" sold by
the assessee to the hotel was, apart from being for the exclusive use of the
hotel was, also "for the purpose of servicing that industry". If that is so, then G
the SWM (PC) Rules ,would not apply at all. (Para 16) (243-C; 243-E-F)
Coal Mines Provident Fund Commissioner v. Ramesh Chander Jha, AIR
(1990) SC 648, relied on.
H.
226
SUPREME COURT REPORTS
(2007) 9 S.C.R.
A
2.9. The Tribunal has given very narrow meaning to Rule 34 by firstly
holding that ice-cream is not a "raw material". There the Tribunal was right
but the Tribunal was not right by holding that the words "servicing any
industry" were not applicable to s~ch "package". If that is so, Section 4A
will not apply to the ice-cream sold by the assessee. (Para 17) (243-G-Hl
B
Civil Appeal No.1738 of 2004:
3.1. The KITKA T chocolate, though a notified commodity, need not, in
all cases be assessed under Section 4A of the Act. (Para 26) (246-H)
Commissioner of Central Excise Ludhiana v. Pepsi Foods Ltd, (2005)
C 186 ELT 603 and CC£, Vadodara v. Dhiren Chemical Industries, (2002) 139
EL T 3, referred to.
3.2. It may be that Chocolates manufactured by the assessee are required
to bear the declaration of MRP but that cannot be true of all the chocolates.
D In this the Tribunal has ignored para 6 of the Notification No.625/16/2002CX 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 of the Act and partly on the basis of normal
price prior to 1.7.2000 or transaction value from 1.7.2000.
E
(Para 27) [248-B-C)
3.3. Merely because the goods are specified items under Section 4A(i),
that by itself will not be a be all and end all of the matter as before such goQds
are brought in the arena of Section 4A(i), 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
F 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. (Para 27] [248-C-D]
3.4. The Tribunal has ·held, relying on the expression "may be" in contraG distinction 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. But, the thrust of the Explanation
,,-
I is not as the Tribunal has shown but is more on as to what retail price should
H be. The explanation provides that the "retail price", i.e., the maximum price
·-:
JAY ANTI FOOD PROCESSING (P) LTD. '· COMMNll. OF CENTRAL EXCISE, RAJASTHAN
22 7
would include all taxes, local or otherwise, freight, transport charges, A
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. (Para 28) (248-F-H)
B
3.5. The case of the assessee has been consistent from the beginning
that the 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 KITKA Twas n,ot to be sold b{ C
Pepsi in the retail market but was to be given as a free gift, would be of no
consequence as even if the assessee itself intended to give the bar of KITKA T
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 assessee would undoubtedly be l.J
I
•
assessable to duty un,der Section 4 of the Act. (Para 28) (249-A-C)
3.6. 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 Tribu11
'tile rejecting this E
submission, has clearly ignored the language of Se'-·-
.• 4A(i) of the Act.
(Para 28) (249-C-D)
3.7. What is material is the definition of "retail sale price". The
requirement of Rule 6(l)(f) is specific. It requires the retail sale price of the F
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)(t) being attracted.
(Para 29) (249-E)
3.8. Unless there is an element of sale, as contemplated in Section 2(v),
Rule 6(1)(t) will not be attracted and thus such package would not be governed G
under the provisions of SWM (PC) Rules which would clearly take such
package out of the restricted arena of Section 4A(l) of the Act and would put
it in the broader arena of Section 4 of the Act. (Para 29) (249-F-G)
Civil Appeal Nos. 2150-2151/2004; 1144/2004; 384712005 and 6425/
H
228
A ·2005:
SUPREME COURT REPORTS
[2007) 9 S.C.R.
4.1. The nature of sale is not important, what is important is the
requirement of printing the MRP on the packages. It was not and indeed
cannot be disputed that the telephones in question are also sold in the retail
market in the same form and the same package and that there is a
B requirement of printing the MRP on each package of the Push Button
Telephone. If that is so, the package would be covered under the relevant
SWM (PC) Rules. (Para 33) [252-8-CJ
4.2. Nothing found in the SWM (PC) Rules that where a customer
purchase a large number of packages, such bulk purchase itself rules out
C the applicability of the SWM (PC) Rules. (Para 33) [252-CJ
4.3. There can be no doubt that the telephone instruments were to be
used by the consumers. Therefore, the telephones were sold to the three
instrumentalities, there is no escape from the fact that these telephones were
meant to be ultimately used by the consumers and it is only with that object
D that the said telephones were purchased by the three instrumentalities from
its manufacturers. Therefore, the sale of the telephone instruments would
be covered in the term "retail sale". (Para 33) [252-D, El
..,.,,.
4.4. When a "retail package" containing any commodity is produced,
E distributed, displayed, delivered or stored for sale for consumption by an
individual or group of individuals, it would be a "retail package". In this case,
admittedly, assessees provided these instruments to the individual customers,
though not by way of a "sale" but for their use. The "package", therefore,
undoubtedly be a "retail package". [Para 33( (253-A-BJ
F
4.5. It cannot be said that the assessees are not the "ultimate
consumer". The purchasers, in this case, undoubtedly, used the telephone
instruments for supply to their customers on rental basis or on some other
basis. It cannot be, therefore, said that they would be excluded from the term
"ultimate consumer". [Para 331 [253-C(
G
4.6. It is open to the Revenue to check this factual position again and
H
to proceed if the MRP is not printed on the part of any particular assessee.
(Para 33) [253-Fl
4.7. On the contention that some of the assessees had not paid the duty
on the MRP but on the contract price it is clarified that if that is so, then the
...
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJASTHAN
229
Revenue would be free to take action against the concerned assessees.
A
(Para 33) (253-FJ
4.8. There does not appear any factual assertion on the part of the
Revenue that the packages contained a declaration that they were specially
packed for a particular industry for servicing the same. In the absence of
this factual background the applicability of Rule 34 is completely ruled out. B
(Para 34) (254-8-C]
Civil Appeal Nos. 2877of2005; 6168 of2005 and 5840 of2006:
5. The Tribunal has held that these cases are identical with the cases
involving the s~le of telephone. Since the judgment of the Tribunal pertaining C
to the sale of teiephones in the earlier part of this judgment has already been
approved, no reasons are found to take a different view in case of the
Refrigerators in the present appeals. However, it is open to the Revenue to
take an action bi accordance with law if it is found that the duty is paid on the
contract price ~nd not on MRP. (Para 35) (255-8-C)
D
Civil Appeal No. 498 of 2006:
6. This c~se is also identical with the case involving the manufacture
and sale of telephones by ITEL. It is admitted position that the goods here
were sold with the MRP declared on the packages as per the SWM (Pq Rules. E
No reason is found to take any different view. (Para 361 (255-Fl
Civil Appeal Nos.6559-60 of2005:
7.1. In fact, the package of mineral water bottles in question cannot be
viewed as a "wholesale package". It does not come within the definition of F
Rule 2(x)(i) as the "package" was not intended for sale, distribution or delivery
to an intermediary. On the other hand it is sold directly by the assessee to
Jet Airways and the Jet Airways supplied the said bottles to their passengers,
and thus, there is no further sale by the Jet Airways of these mineral water
bottles. Theref(lre, it is obvious that after the first sale bottles go diredly to
the "ultimate consumers". There would be, therefore, no question of G
application of Rule 2(x)(i). Rule 2(x)(ii) will also not apply as this does not
amount to a commodity sold to an intermediary in bulk so as to enable such
intermediary to sell, distribute or deliver, the said commodity to the consumer
in smaller quan,tities. The concerned period regarding which the show cause
notice was given is April, 2002 to September, 2002. Therefore, Rule 2(x)(iii) H
230
SUPREME COURT REPORTS
[2007] 9 S.C.R.
A which came by way of an amendment into 2000 would also have to be
considered. However, even that clause is not applicable as the said "package"
though contains more than 10 bottles, those bottles cannot be viewed as the
"retail package" nor is there any rule requiring labeling ·the said "retail
package" and declaring the price thereof. In fact there is no price involved as
B it is specifically written on the package "not meant for sale". It is, therefore,
obvious that the "package" containing 12 bottles cannot, therefore, be viewed
as a "wholesale package". Hence, there is no question of the applicability of
Section 4 of the Act as the "package" as it is a retail sale of the package to
the assessee which supplies the same to the passengers on demand.
c
(Para 38) (257-A-D)
7.2. Twelve bottles were packed in a wrapper and the wrapper contained
the MRP price though the bottles themselves did not have the price. Therefore,
the view taken by the Commissioner (Appeals) and the Tribunal is accepted
that the MRP was correctly mentioned and as such the assessment should
have been under Section 4A of the Act and not for the reasons given by the
D Tribunal that the ultimate verdict of the Tribunal that the valuation should be
under Section 4A of the Act is upheld. (Para 38) (257-G-H; 258-A)
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2819 of2002.
From the final Order No. 1912000-A dated 10.1.2002 of the Customs
E Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. El
18971200 l-A.
WITH
Civil Appeal Nos. 2150-2151/2004, ll44/2004, 1738/2004, 1385/2005, 28771
F 2005, 384712005, 616812005,.612512005, 6559-6012005, 49812006, 475412006, 58401
2006.
Joseph Vellapally, Ravinder Narain, Sonu Bhaniagar, Ajay Aggarwal
Rajan Narain, A. Subba Rao, Ashok K. Srivastava, B. Sunita Rao, K. Subba
Rao, B.K. Prasad, Ritin Rai (for Mis K.J. John & Co.) Subrat Birla, S.C. Birla,
G A.V. Palli, Rekha Palli, Alok Yadav, Rajesh Kumar, M.P. Devanath, Vinay Garg,
Deepam Garg, Renu Choudhary, Shiv Khoma, Amit Sharma, Saravavanan
Anupam Lal Dass, C. Sarvana, Nikhil Nayyar, Anikt Slghal, Tarun Gulati,
Praveen Kumar, Jaiveer Shergil and Raghvesh Singh for the appearing parties.
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The Judgment of the Court was delivered by
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JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE, RAJASTIIAN 1v.s. SIRPURKAR.1.1
231
V.S. SIRPURKAR, J l. This judgment will dispose of in all 15 appeals. A
They can be classified in two groups. Two appeals are filed by the Assessees
challenging the order of Customs, Excise & Gold (Control).Appellate Tribunal
(hereinafter referred to as "the Tribunal"), they being CA 2819/2002 tiled on
behalf of Jayanti Food Processing (P) Ltd., for sale of Ice-creams ·and CA
1738/2004 filed on behalf of Nestle India Limited pertaining to KITKAT
Chocolates. The remaining appeals are filed by the Commissioners of Central B
Excise from various places and they are CA 2150-51/2004 and CA6425/2005
against ITEL Industries, CA 1144/2004 and CA 4754/2006 against BPL Telecom
Ltd., CA 1385/2005 against Himachal Exicom Communication Ltd. These appeals
by themselves fonnulate into one group relating to the sale of telephone
instruments by the assesses. CA 2877/2005, CA6168/2005 and CA5840/2006 C
against Electrolux Kelvinator and Electrolux India relate to the sale of
Refrigerators. Further CA6559-6560/2005 against Explicit Trading and Marketing
Pvt.Ltd., pertain to the sale of bottled mineral water. Lastly CA498/2006
against Ramani Power Cables Pvt., Ltd. relate to the sale of Electric Filament
Lamps.
2. All these appeals pertain to the interpretation of Section 4 and 4A
of the Central Excise Act, 1944 (hereinafter referred to as "the Act") and the
provisions of Standards of Weights & Measures Act, 1976 (hereinafter referred
D
to as "the SWM Act") as also the Standards of Weights & Measures (Packaged
Commodities) Rules, 1977 (hereinafter referred to as "the SWM (PC) Rules"). E
In the appeals tiled by the Assessees, Jayanti Foods and Nestle India the
Tribunal has accepted the contention of the Department that these Assessees
should be assessed under Section 4A while the contention of the Assessees
is that they should be assessed and taxed under Section 4 of the Act. In the
appeals filed by the Department pertaining to sale of Telephone Instruments,
the contention of the Department is that they should also be taxed and F
assessed under Section 4 and not under Section 4A of the Act as ordered
by the Tribunal. Similar is the case in respect of appeals pertaining to the sale
of Refrigerators where the Tribunal has ordered the assessment under Section
4A of the Act. In the case of sale of Bottled Mineral Water while the Tribunal
has ordered the 'assessment under Section 4, the Department suggests that G
the assessment should be under Section 4A of the Act. Lastly CA 498/2006
pertain to the sale of Electric Filament Lamps where the assessment is ordered
under Section 4A of the Act. In short unless an authoritative interpretation
is handed out, it will not be possible to settle the issues between the assessees
and the Department. In respect of some of the items, as the assessment under
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(2007) 9 S.C.R.
A Section 4A is less, the same is being insisted upon by the Assessee while
in some cases the assessment being more beneficial ufider Section 4, the
Assessees insisted on the assessment under Section 4 of the Act. Eventually
the stand of the Department is to the contrary. All these appeals, therefore,
would depend upon the interpretation of the scope of Section 4A which is
inextricably connected with the provisions of PC Rules under the SWM Act.
B We would, therefore, first explain the interpretation and scope of Section 4A
more particularly sub-sections (I) and (2) thereof. Section 4A was added by
Section 82 of the Finance Act, 1997 (Act 26 of 1997) which amendment was
with effect from 14.5.1997. Section 4A, as it originally stood, and relevant for
our purposes, is as under:
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"Section 4A. Valuation of excisable goods with reference to retail
sale price - (1) The Central Government may, by notification in the
Official Gazett~, specify any goods, Jn relation to which it is required,
under the provisions of the Standards of Weights al).d Measures Act,
1976 (60 of 1976) or the rules made th_sreunder or under any other law
for the time being in force, to declare ~n the package thereof the retail
sale price of such goods, to which the provisions of sub-section (2)
shall apply.
(2) Where the goods specified under sub-section (I) are excisable
goods and are chargeable to duty of excise with reference to value,
then, notwithstanding anything contained in section 4, such value
shall be deemed to be the retail sale price declared on such goods less
such amount of abatement, if any, from such retail sale price as the
Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any
abatement under sub-section (2) take into account the amount of duty
of excise, sales tax and other taxes, if any, payable on such goods.
(4) If any manufacturer removes from the place of manufacture any
excisable goods specified under sub-section (1) without declaring the
retail sale price of such goods on the packages, or declares a retail
sale price which does not constitute the sole consideration for such
sale, or tampers with, obliterates or alters any such declaration made
on the packages after removal, such goods shall be liable to
confiscation.
Explanation 1. For the purposes of this section, "retail sale price"
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JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJASTIIAN JV.S. SIRPURKAR, I.(
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means the maximum price at which the excisable goods in packaged A
form may be sold to the ultimate consumer and includes all taxes local
or otherwise, freight, transport charges, commission payable to dealers,
and all charges towards advertisement, delivery, packing, forwarding
and the like, as the case may be, and the price is the sole consideration
for such sale.
Explanation 2 (a) Where on the package of any excisable goods more
than one retail sale price is declared, the maximum of such retail sale
price shall be deemed to be the retail sale price for the purpose of this
section.
B
(b) Where different retail sale prices are declared on different packages C
for the sale of any excisable goods in packaged form in different areas,
each such retail sale prices shall be the retail price for the purposes
of valuatfon of the excisable goods intended to be sold in the area to
which the, retail sale price relates."
This Section was introduced with the sole idea to end the uncertainty D
caused in determining the value of the goods under Section 4 and then
assessing the duty under that Section. Sect.ion 4 was the basic formula for
valuation of excisable goods and for the purposes of charging of the duty
of excise. It provided the mechanism of determining the valuation of the
goods under various circumstances, e.g., in the matter of wholesale trade or E
in the matter of sales being at the different prices for different places of
removal or in case where the assessee sold the goods only to related persons,
etc. Section 4A of the Act, as would be clear from the language ofsub-section
(1), linked the valuation of the goods to the provisions of SWM Act or the
Rules made thereunder by firstly providing that it would, be for the Central
Government to specify any goods in respect of which the declaration of price F
on the package was required under the provisions of SWM Act, Rules made
thereunder or any law for the time being in force. In short sub-section ( l) was
linked with the packages of the goods in respect of which the retail sale price
was required to be printed under SWM Act and the Rules made thereunder
or any other law. Sub-section (2) then provides that such specified goods G
where they are excisable goods would be valued not on any other basis but
on the basis of the retail sale price declared on such packages. The Section
also provides that the assessee would be entitled to the deduction from such
valuation the amount of abatement provided by the Central Government by
a notification in the Official Gazette. In short after introduction of Section 4A,
the nature of sale lost its relevancy in the sense that the valuation did not H
234
SUPREME COURT REPORTS
[2007] 9 S.C.R.
A depend upon the factor whether it was a wholesale or sale in bulk or a retail
sale. The whole section covered the goods which were packaged and sold. as
such with the rider that such package had to have a retail price thereupon
under the provisions of SWM Act, Rules made thereunder or under any other
law. Thus, viewed from the plain language of the Section, where the goods
B are excisable goods and are packaged and further such packages are required
to mention the price thereof under the SWM Act, Rules made thereunder or
under any other law and further such goods are specified by the Central
Government by notification in the Official Gazette, then the valuation of such
goods would be on the basis of the retail sale price of such goods and only
to such goods the provisions of sub-section (2) shall apply whereby it is
C provided that the value of such goods would be deemed to be the such retail
price declared on the packages. Of course, the assessee shall be entitled to
have a reduction of abatement as declared by the Central Government by the
notification in the Official Gazette. Even at the cost of repetition the following
would be factors to include the goods in Section 4A(l) & (2) of the Act:
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(i)
The goods should be excisable goods;
(ii)
They should be such as are sold in the package;
(iii) There should be requirement in the SWM Act or the Rules made
thereunder or any other law to declare the price of such goods
relating to their retail price on 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 on 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.
3. It is not in dispute that all the goods with which we are concerned
G in these appeals are excisable goods and they are specified by the Central
Government by issuing a notification in the Official Gazette.
4. Since the language of Section 4A(l) of the Act specifically mentions
that there would be a requirement under SWM Act .or Rules made thereunder
or under any other law to declare on the package of the goods the retail sale
H price of such goods for being covered by the Section, it would be better to
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IAYANTI FOOD PROCESSING (P) LTD .•. <;OMMNR. OF CENTRAL EXCISE. RAJASTilAN 1v.s. SIRPURKAR, 1.1
235
see the various provisions of the said Act and the Rules made thereunder. A
Section 83 of the SWM Act empowers the Central Government to make Rules
on the subjects provided in Section 83(2). Accordingly, the Central Government
framed the Rules. called "The Standards of Weights and Measures (Packaged
Commodities) Rules, 1977". As would be suggestive from the title itself, Rule
1(3) provided that these Rules would apply to the commodities in packaged
form which are, or are intended or likely to be sold, distributed, delivered or B
offered or displayed for sale, distribution or delivery, or stored for sale or for
distribution or delivery in the course of inter-State trade and commerce.
Definition of "retail dealer" under Rule 2(o) is as under:
"retail dealer" in relation to any commodity in packaged form means C
a dealer who directly sells such packages to the consumer and includes, .
in relation to such packages as are sold directly to the consumer, a
wholesale dealer who makes such direct sale."
Definition of "retail package" under Rule 2(p) is as under:
"retail package" means a package containing any commodity which is
produced, distributed, displayed, delivered or stored for sale through
retail sales,.agencies or other instrumentalities for consumption by an
individual or a group of individuals".
Definition of "retail sale" under Rule 2(q) 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 group of
individuals or any other consumer."
Definition of "retail sale price" under Rule 2(r) is as under:
"retail sale p~ice" means the maximum price at which the commodity
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in packaged form may be sold to the. ultimate consumer and where
such price is mentioned on package, there shall be printed on the
packages the :words "maximum or max. retail price ... inclusive of all G
taxes or in the form MRP Rs ... incl., of all taxes".
Explanation: F.or the purposes of the clause "maximum price" in relation
to any commodity in packaged form shall include all taxes, local or
otherwise, freight, transport charges, commission payable to dealers, H
236
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SUPREME COURT REPORTS
[2007) 9 S.C.R.
and all charges towards advertisement, delivery, packing, forwarding
and the like, as the case may be."
Definition of "wholesale dealer" under Rule 2(w) is as under:
·~wholesale dealer" in relation to any commodity in packaged fonn
means a dealer who does not directly sell such commodity to any
consumer but distributes or sells snch commodity through one or
more intermediaries.
Explanation: Nothing m this clause shall be construed as preventing
a wholesale dealer from functioning as a retail dealer in relation to any
C
commodity, but where he functions in relation to any commodity as
a retail dealer, he shall comply with all the provisions of these rules
which a retail dealer is required by these rules to comply.''.
Definition of "wholesale package" under Rule 2(x) is as under:
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"wholesale package" means a package containing -
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(i)
a nun.aer 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 in smaller quantities;. or
(iii) packages containing ten or more than ten retail packages provided
that the retail packages are labeled as required under the rules.''
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Chapter II of these Rules is applicable to the packages intended for
retail sale. Rule 3 provides that the expression "package" wherever occurring
in the Chapter shall be construed as "packages intended for retails sale". Rule
6( I) provides for the declaration to be made on every package and sub-rule
(t) thereof is as under:
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"(f) the retail sale price of the package"
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Rules 15 and 16 pertain to the declarations required to be made on combination
packages and group packages. A glance at these Rules suggests that the sale
price is required to be mentioned on both. Rule 17 deal with multi-pieces
packages also requiring to declare the sale price on the same. Rule 23(1) and
IAYANTI FOOD PR.OCESSING (P) LTD.•· COMMNR. OF CENTRAL EXCISE, RAll\SlllAN (V.S. SIRPURKAR.1.1
23 7
(2) provide as under:
A
"23. Provisions relating to wholesale dealer and retail dealer''
(I) No wholesale dealer or retail dealer shall sell, distribute, deliver,
display or store for sale any commodity in the packaged form unless
the package complies within all respects, the provisions of the Act B
and these rules.
(2) No retail dealer or other person including manufacturer, packer and
wholesale dealer shall make any sale of any commodity in packed form
at a price exceeding the retail sale price thereof.
:
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Explanation: For the removal of doubts, it is hereby declared that a
sale, distribution or delivery by a wholesale dealer to a retail dealer
or other person is a "retail sale" within the meaning of this sub-rule."
Chapter Ill deals with the provisions applicable to wholesale packages.
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Rule 29 pertains to the declaration required to be made on every wholesale D
package.