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Judgment
Elipe Dharmarao, J.—The appellant is having its factory premises at Plot Nos. 22 and 23, Ambattur Industrial Estate, Chennai-58 and
registered as manufacture of ''Cookies'', falling under Chapter sub-heading 1905 31 00 of Central Excise Tariff Act, 1985. They also manufacture
''dough'' falling under Chapter sub-heading 1901 20 00, the main ingredient used in the manufacture of their final product ''cookies'' and the
product ''Dough'' had been charged to excise duty with effect from 1-3-2005, by virtue of amendment made in the Finance Act, 2005.
On the intelligence gathered that the appellant/assessee are manufacturing and clearing the product ''dough'', without payment of duty, to their
franchisee/outlets, their unit was visited by the officers of the Central Excise Department on 19-1-2006 and the preliminary scrutiny of the records
collected by the Department showed that the assessee are maintaining separate sets of invoices for different customers and no assessable value or
duty payment particulars were mentioned in the invoices but only invoices for clearances made to M/s. Britannia Industries have been properly
invoiced, showing the Excise Duty. Therefore, with further intelligence, the factory-cum-registered office of the assessee was surprised by the
officers attached to the Divisional Preventive, Chennai-II Division on 21-1-2006 and two computer systems along with certain records were
recovered from the assessee under mahazar and the assessee''s own outlet at Spencer''s Plaza, Mount Road, Chennai was also surprised on the
same day by the officials and certain records were also recovered from there, under mahazar.
According to the Revenue, the assessee is manufacturing ''Dough'' which is used as raw material for manufacture of ''Cookies'' and after the
introduction of the eight digit tariff heading, with effect from 1-3-2005, the dough was brought under specific tariff entry under 1901 20 00 as
''mixes and dough for the preparation of baker wares of heading 1905'' attracting excise duty at the rate of 16% and education cess @ 2% on
such excise duty; that the assessee manufactures the dough in their factory premises and for storage purposes they send the same in a packed
condition to deep freezer, transported through cold storage vehicle (for storage at minus 20 degrees centigrade) to M/s. Snowman Frozen Foods
Ltd., Sriperambadur Taluk of Kancheepuram District; that the goods have been cleared to their cold storage under a letter marked ''to
whomsoever it may concern'' wherein the details of the goods being despatched have been annexed; that the assessee has not raised proper
documents like delivery challan for movement of these goods; that the assessee also did not inform the Department nor did he obtain necessary
permission for storage of non-duty paid excisable goods outside the factory premises (godown/cold storage); that the dough, whenever necessary,
is brought back to the factory for baking or sent to the own outlets of the assessee or sold to their franchisees for use in the manufacture of
cookies; that the assessee has cleared the dough to their franchisee/outlets under invoices without payment of duty and this fact of clearance of
dough, without payment of duty, has not been reflected in their ER-1 returns filed and thus the assessee suppressed the fact of clearance of dough
to their outlets/franchisee.
It is the further case of the Revenue that during the course of investigation, the assessee furnished a detailed worksheet showing clearance of
dough from March, 2005 to December, 2005, the quantity and the value cumulated based on the invoices raised during the period; that the said
figures represented the month-wise value of dough cleared to their franchisees such as M/s. Soniraj Confectionery, M/s. Mom''s Delight, M/s.
SSR Foods and to their own outlet at Spencer''s Plaza, Chennai and Mumbai; that the investigation conducted has revealed that the assessee has
manufactured and cleared a total quantity of 2,20,813 kgs. of dough to the extent of value of Rs. 1,49,04,162/- without payment of duty during the
period from March, 2005 to December, 2005 to their various franchisees and their outlets.
The further case of the Revenue is that the assessee has availed cenvat credit from April, 2005 onwards for the inputs and packing materials
used for packing of their final products viz. ''cookies''; that the scrutiny of the records of the assessee has revealed that during the period from 1-4-
2005 to 28-2-2006, the assessee has cleared various CENVAT availed packaging materials without expunging the credits involved thereon
amounting to Rs. 3,17,323/-.
The further case of the Revenue is that the assessee has cleared their final products viz. ''cookies'' to M/s. Taj Group of Hotels; M/s. GRT
Grand Hotels, M/s. Jet Airways etc. in bulk based on specific contract with each of the parties; that these institutional customers are not selling
these cookies, but are supplying the same to their customers free for consumption; that the assessee knowing very well that these goods were sold
in bulk, and are not meant for retail sale and also no Maximum Retail Price (MRP) was mentioned on the packages and thus are not covered u/s
4-A of the Central Excise Act, 1944, but, in order to avail the benefit of 35% abatement on the purchase order value of the cookies, he has
misdeclared the contract (purchase order) price of cookies as MRP and availed the said abatement, instead of adopting ''Transaction value'' u/s 4
of the Central Excise Act; that the differential duty payable on this count for the clearances effected during the period from February 2004 to April
2006 comes to Rs. 7,04,697/- and cess Rs. 14,094/- and during the course of investigation, the assessee admitted the same and also furnished a
detailed worksheet showing the goods cleared and the duty involved thereon, by their letter dated 12-5-2006 and 31-5-2006. According to the
Revenue, the sales value mentioned in the worksheet is inclusive of all taxes such as Sales Tax, surcharge on sales tax, excise duty, education cess;
that assessable value has been arrived at from the sales value after deducting the sales tax and surcharge on sales tax for local sales and sales tax
for outstation sales and after deducting excise duty and cess from 1-7-2004 onwards, the assessable value has been arrived at and in total the duty
payable for the entire period from 1-2-2004 to 30-4-2006 was worked out at Rs. 7,04,697/- and cess at Rs. 14,094/-.
On the above said imputations, the assessee was issued with a show-cause notice dated 31-7-2006 requiring the assessee to show-cause,
within 30 days from the date of receipt of the notice, why action should not be initiated against them and it has also been mentioned therein that ''...
or having shown cause if they do not appear for personal hearing when the case is posted for hearing before the adjudicating authority, the case
will be decided ex parte on the basis of evidences available on record.''
However, without giving any explanation to this show-cause notice, the assessee straight away approached the second respondent commission.
By the time the assessee approached the second respondent commission, the assessee has paid the duties regarding the dough clearance and the
important question that was left for consideration before the second respondent/Commission was ''whether the assessee is entitled to claim benefits
u/s 4-A of the Central Excise Act as has been claimed by him?''
Since the second respondent/Commission has upheld the contention of the assessee that he is entitled for the benefits u/s 4-A of the Central
Excise Act, aggrieved, the Revenue has filed W. P. No. 11028 of 2007 before this Court and as the learned single Judge of this Court has allowed
the said writ petition, thereby setting aside the order passed by the second respondent Commission, the assessee has come forward to prefer this
writ appeal.
Heard Mr. Aravind P. Duttar, learned senior counsel appearing for the appellant and Mr. K. Ravichandra Babu, learned Senior Central
Government Standing Counsel appearing for the first respondent/Revenue.
Since the assessee has already paid the duty regarding the dough clearance, as has been claimed by the Revenue in the show-cause notice, the
issue that has now been required to be decided by us is regarding the levy of duty payable on the wholesale price of cookies and whether the
assessee is eligible to avail the benefits u/s 4-A of the Central Excise Act.
As has already been observed supra, the assessee, on receipt of the show-cause notice, instead of submitting his explanation to the same, has
straight away approached the second respondent Commission, which has been found fault with by the Revenue.
Section 32-E of the Central Excise Act deals with ''Application for settlement of cases''. For better appreciation, we shall now extract Section
32-E of the Central Excise Act, which reads as follows:
32-E Application for settlement of cases -
(1) An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed, and
containing a full and true disclosure of his duty or liability which has not been disclosed before the Central Excise officer having jurisdiction, the
manner in which such liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulars as
may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification or
otherwise of such excisable goods, to the Settlement Commission to have the case settled and any such application shall be disposed of in the
manner hereinafter provided:
Provided that no such application shall be made unless, -
(a) the applicant has filed returns showing production, clearance and central excise duty paid in the prescribed manner;
(b) a show cause notice for recovery of duty issued by the Central Excise Officer has been received by the applicant; and
(c) the additional amount of duty accepted by the applicant in this application exceeds two lakh rupees:
Provided further that application shall be entertained by the Settlement Commission under this sub-section in cases which are pending with the
Appellate Tribunal or any Court:
Provided also that no application under this sub-section shall be made for the interpretation of the classification of excisable goods under the
Central Excise Tariff Act, 1985 (5 of 1986).
(2) Where any excisable goods, books of account, other documents have been seized under the provisions of this Act or rules made thereunder,
the assessee shall not be entitled to make an application under Sub-section (1), before the expiry of one hundred and eighty days from the date of
the seizure.
(3) Every application made under Sub-section (1) shall be accompanied by such fees as may be prescribed.
(4) An application made under Sub-section (1) shall not be allowed to be withdrawn by the applicant.
From this Section, it is seen that the assessee may approach the Settlement Commission, before adjudication to settle the case, disclosing his
duty liability which has not been disclosed by him before the Central Excise Officer. But, it nowhere provides that the assessee could approach the
Settlement Commission, regarding a disputed question, particularly regarding a disputed question of fact and law as to the applicability of a
provision of law, like the one in hand wherein the issue centres around the applicability of whether Section 4 or Section 4-A of the Central Excise
Act. Though the assessee has admitted the short levy on dough and paid the duty thereof, since he is raking up the plea that he is eligible to claim
benefits u/s 4-A of the Central Excise Act instead of Section 4, that point goes out of the jurisdiction of the Settlement Commission, since it has not
been vested with the power to decide such a question of direct assessment. By such an act, the Settlement Commission has usurped the
jurisdiction of the adjudicating authorities and as has been rightly commented on the part of the Revenue, by the impugned order, the Settlement
Commission has set a bad precedent.
Even if it is presumed, without accepting, that the Settlement Commission has been vested with such powers, a prescribed procedure has been
mandated u/s 32-F of the Central Excise Act to be adopted by the Settlement Commission after receipt of an application u/s 32-E of the Central
Excise Act. Section 32-F of the Central Excise Act has been amended w.e.f. 1-6-2007 and since the dispute arose well prior to the said
amendment, Section 32-F as it stood then has to be considered, which is extracted hereunder for better appreciation:
32-F. Procedure on receipt of an application u/s 32-E:
(1) On receipt of an application under Sub-section (1) of Section 32-E, the Settlement Commission shall call for a report from the Commissioner
of Central Excise having jurisdiction and on the basis of the materials contained in such report and having regard to the nature and circumstances of
the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded
with or reject the application:
Provided that an application shall not be rejected under this sub-section, unless an opportunity has been given to the applicant of being heard:
Provided further that the Commissioner of Central Excise shall furnish such report within a period of one month of the receipt of the communication
from the Settlement Commission, failing which it shall be presumed that the Commissioner of Central Excise has no objection to such application;
but he may raise objections at the time of hearing fixed by the Settlement Commission for admission of the application and the date of such hearing
shall be communicated by the Settlement Commission to the applicant and the Commissioner of Central Excise within a period not exceeding two
months from the date of receipt of such application, unless the presiding officer of the Bench extends the time, recording the reasons in writing.
(2) A copy of every order under Sub-section (1) shall be sent to the applicant and to the Commissioner of Central Excise having jurisdiction.
(3) Subject to the provisions of Sub-section (4), the applicant shall within thirty days of the receipt of a copy of the order under Sub-section (1)
allowing the application to be proceeded with, pay the amount of additional duty admitted by him as payable and shall furnish proof of such
payment to the Settlement Commission.
(4) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee that he is unable for good and sufficient reasons
to pay the amount referred to in Sub-section (3), within the time specified in that sub-section, it may extend the time for payment of the amount
which remains unpaid or allow payment thereof by instalments, if the assessee furnishes adequate security for the payment thereof.
(5) Where the additional amount of duty referred to in Sub-section (3) is not paid by the assessee within the time specified or extended period, as
the case may be, the Settlement Commission may direct that the amount which remains unpaid, together with simple interest at the rate of eighteen
per cent per annum or at the rate notified by the Central Board of Excise and Customs from time to time on the amount remaining unpaid, be
recovered, as the sum due to Central Government by the Central Excise Officer having jurisdiction over the assessee in accordance with the
provisions of Section 11.
(6) Where an application is allowed to be proceeded with under Sub-section (1), the Settlement Commission may call for the relevant records
from the Commissioner of Central Excise having jurisdiction and after examination of such records, if the Settlement Commission is of the opinion
that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner (Investigation) to make or cause to be made such
further inquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.
(7) After examination of the records and the report of the Commissioner of Central Excise received under Sub-section (1), and the report, if any,
of the Commissioner (Investigation) of the Settlement Commission under Sub-section (6), and after giving an opportunity to the applicant and to
the Commissioner of Central Excise having jurisdiction to be heard, either in person or through a representative duly authorised in this behalf, and
after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the
provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not
covered by the application, but referred to in the report of the Commissioner of Central Excise and Commissioner (Investigation) under Sub-
section (1) or Sub-section (6).
(8) Subject to the provisions of Section 32-A, the materials brought on record before the Settlement Commission shall be considered by the
Members of the Bench concerned before passing any order under Sub-section (7) and, in relation to the passing of such order, the provisions of
Section 32-D shall apply.
(9) Every order passed under Sub-section (7) shall provide for the terms of settlement including any demand by way of duty, penalty or interest,
the manner in which any sums due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide
that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud, or misrepresentation of
facts.
(10) Where any duty payable in pursuance of an order under Sub-section (7) is not paid by the assessee within thirty days of the receipt of a copy
of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such duty or has allowed payment
thereof by instalments, the assessee shall be liable to pay simple interest at the rate of eighteen per cent per annum or at such other rate as notified
by the Central Board of Excise and Customs on the amount remaining unpaid from the date of expiry of the period of thirty days aforesaid.
(11) Where a settlement becomes void as provided under Sub-section (9) the proceedings with respect to the matters covered by the settlement
shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission
and the Central Excise Officer having jurisdiction may, notwithstanding anything contained in any other provision of this Act, complete such
proceedings at any time before the expiry of two years from the date of the receipt of communication that the settlement became void.
Thus, a specific procedure to be followed by the Settlement Commission has been contemplated under this Section, upon receiving an
application u/s 32E(1) of the Act. From the materials placed on record it is seen that to the application dated 25-9-2006 filed by the assessee, the
first respondent/Department has forwarded their para-wise remarks on 30-10-2006, wherein in para No. 8, the Revenue has submitted as follows:
It appears that the assessee is making the valuation aspect of the issue only to score ineligible leverage and also to delay the proceedings. If the
assessee is genuinely having a point over the valuation aspect, then, he should have waited for the completion of adjudication proceedings where he
should have sought for remedy since it is strongly felt that under the proceedings of Honourable Settlement Commission, it is only a remedial forum
after having accepted the allegations in the Show Cause Notice and it cannot entertain an issue contesting the allegations in the show Cause Notice.
On the above point, it is felt that the impugned application of the assessee filed before the Settlement Commission merits no consideration and falls
outside the scope of the Hon''ble Settlement Commission and deserves rejection.
But, this specific question regarding the jurisdiction of the Settlement Commission has not at all been considered by the Settlement Commission
in its order dated 6-12-2006. The said order of the Settlement Commission, made available from page No. 32 of the typed set, clearly shows that
the same has been passed at the stage of admission since it bears the caption ''admission-cum-final order No. 66/2006-C.EX/
It is the settled legal position that in any proceeding if a question of jurisdiction of the authority deciding the issue is raised, prior to dealing with
other issues involved, the question or jurisdiction must be dealt with as a preliminary issue by the authorities. But, in the case on hand, the
Settlement Commission, which has been established as a quasi-judicial body under the Statute, has proceeded to deal with an aspect which is
completely out of its purview and jurisdiction.
At this juncture, we feel it apt to quote the rulings of the Honourable Supreme Court on the aspect of jurisdiction. In Arun Kumar v. Union of
India (2007) 1 SCC 732 the Honourable Apex Court has held:
A ''jurisdictional fact'' is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A
jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which
an administrative agency''s power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or
authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by
erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.
It was further observed:
The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction.
Drawing the distinction between ""jurisdictional fact"" and adjudicatory fact"", the Honourable Apex Court has held in the above judgment as follows:
... it is clear that existence of ''jurisdictional fact'' is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can
proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of
''jurisdictional fact'', it can decide the ''fact in issue'' or ''adjudicatory fact''. A wrong decision on ''fact in issue'' or on ''adjudicatory fact'' would not
make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present.
This principle was reiterated in Carona Ltd. Vs. Parvathy Swaminathan and Sons, and in Ramesh Chandra Sankla v. Vikratn Cement (2008)
14 SCC 58. Applying the above principles enunciated by the Honorable Apex Court to the case on hand, we have no hesitation to hold that the
second respondent/Commission has proceeded to decide a question without there being any jurisdiction conferred on it and thus, the order passed
by the second respondent/Commission is bad in law. Though, on this short legal ground of jurisdiction itself the order passed by the Settlement
Commission stands vitiated, since the learned Counsel appearing on either side have submitted their arguments on the other legal aspect of
applicability of either Section 4 or 4-A of the Central Excise Act to the case, to give a quietus to the entire issue, we shall now proceed to decide
the same.
To decide the said issue as to whether the appellant is entitled to claim abatement u/s 4-A of the Central Excise Act or whether his case has to
be dealt with only u/s 4 of the Central Excise Act, we extract hereunder Sections 4 and 4-A of the Act:
Valuation of excisable goods for purposes of charging of duty of excise.- (1) where under this Act, the duty of excise is chargeable on any
excisable goods with reference to their value, then, on each removal of the goods, such value shall-
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods
are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the
price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer
to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall
be deemed to include the duty payable on such goods.
(2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under Sub-section (2) of
Section 3.
(3) For the purposes of this section,-
(a) ""assessee"" means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) Persons shall be deemed to be ""related"" if -
(i) they are inter-connected undertakings; (ii) they are relatives;
(iii) Amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or
(iv) They are so associated that they have interest, directly or indirectly, in the business of each other.
Explanation. - In this clause-
(i) ""Inter-connected undertakings"" shall have the meaning assigned to it in Clause (g) of Section 2 of the Monopolies and Restrictive Trade
Practices Act, 1969 (64 of 1969); and
(ii) ""Relative"" shall have the meaning assigned to it in Clause (41) of Section 2 of the Companies Act, 1956 (1 of 1956);
(c) ""Place of removal"" means-
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance
from the factory, from where such goods are removed;
(cc) ""time of removal"", in respect of the excisable goods removed from the place of removal referred to in Sub-clause (iii) of Clause (c), shall be
deemed to be the time at which such goods are cleared from the factory;
(d) ""transaction value"" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price,
any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time
of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing
and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount
of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
Section 4-A of the Act reads as follows:
4-A. Valuation of excisable goods with reference to retail sale price.- (1) The Central Government may, by notification in the Official Gazette,
specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 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,
to which the provisions of Sub-section (2) shall apply.
(2) where the goods specified under Sub-section (1) 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) Where any goods specified under Sub-section (1) are excisable goods and the manufacturer-
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail
sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in Sub-
section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture,
then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price
shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. - For the purposes of this section, ""retail sale price"" means the maximum price at which the excisable goods in packaged 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 and the price is the sole consideration for such sale:
Provided that in case the provisions of the Act, rules or other law as referred to in Sub-section (1) require to declare on the package, the retail sale
price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.
Explanation 2. - For the purposes of this section,-
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be
deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered
to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas,
each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which
the retail sale price relates.
On a comparative study of both these provisions of law, it is clear that while Section 4-A deals with the valuation of excisable goods with
reference to retail sale price of goods, in relation to which it is required under the provisions of the Standards of Weights and Measures Act, 1976
(60 of 1976) to declare on the package thereof the retail sale price of such goods, the same is not the condition insofar as Section 4 of the Act is
concerned.
Therefore, for application of either Section 4 or Section 4-A of the Act, the factual question that requires to be decided is whether the goods
are required to declare on the package the retail sale price under the Standards of weights and Measures Act, 1976 or the Rules made there
under.
As per Rule 34(a) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, as it stood then, before it was omitted
w.e.f. 13-1-2007, by G. S. R. 425(E), dated 17-7-2006, while dealing with exemption in respect of certain packages, it has been clearly
stipulated 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:
Provided that this exemption shall not be available in respect of
(i) any yarn which is sold in hands to handloom weavers;
(ii) any component, part or material used in any workshop, service station or any other place where servicing or repairing of any bicycle, tricycle or
motor vehicle within the meaning of the Motor Vehicles Act, 1939 (4 of 1939), is undertaken;
(iii) any package containing a commodity of net content of 5 kilograms, or 5 litres or less and displayed for sale at the retail outlet;
(iv) any package containing a commodity to be sold by number or length and displayed for sale at the retail outlet;
From the materials placed on record it is seen that the assessee is supplying their final product ''cookies'' to their institutional customers like
M/s. Taj Group of Hotels, M/s. GRT Grand Hotels, M/s. Jet Airways etc. in bulk, on specific contracts entered into by them. Admittedly, these
institutional customers are not selling these cookies but are supplying it to their customers free of cost. One of such institutional customers of the
assessee namely M/s. Taj Coramandel, Chennai, by their letter dated 19-4-2006 addressed to the first respondent has stated that
on the packaging a standard label containing the ''date of Manufacture, Best before 60 days, product name, batch No. , net wt. Manufactured by''
alone are printed and that there is no mention of MRP or any other price on the packaging or the label since the products are supplied on the basis
of Purchase Orders raised on the assessee.
Likewise, M/s. Jet Airways, also by their letter dated 19-4-2006 have stated that ''no MRP was printed on the cover and that the words
''specifically packed for Jet Airways - not for retail sale'' were printed on the cover and they have also produced samples of pouches before the
authorities of the first respondent/Revenue. Therefore, it is clear that since the nature of clearance is in bulk and for the exclusive use of servicing
industry, as has been defined under Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules 1977, they are exempted
packages and thus the assessee is not statutorily obliged to declare the MRP on the package and only because of this reason, the assessee has not
printed the MRP on the packages.
But, during the course of arguments, the learned senior counsel for the appellant produced before us the cartons of ''Cookies'' and showed us
that they have printed the Maximum Retail Price on the packets and therefore, they are entitled to claim the benefits of Section 4-A of the Act.
But, as has already been observed supra, Section 4-A of the Act applies only to the goods, in relation to which it is required under the
provisions of the Standards of Weights and Measures Act or the Rules made thereunder to declare on the package the retail sale price of such
goods. But, in the case on hand, since admittedly, the products are being supplied by the assessee to their institutional customers in bulk based on
specific contracts entered into with them, printing on them that they are specifically packed for such institutional customers and not meant for retail
sale, and thus are exempted under Rule 34(a) of the Standards of Weights and Measures (Packaged Commodities) Rules 1977, the assessee
cannot say that he is obliged under the provisions of the Standards of Weights and Measures Act to declare the retail sale price on the package - a
pre-condition to claim benefits u/s 4-A of the Act.
Further more, when there is abundant material on record to held that during the relevant time the assessee has not printed the MRP on the
packages and has availed the exemption under Rule 34(a) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, the
subsequent cure seems to have been made by the assessee by printing the Maximum Retail Price on the packages, though he is not at all obliged to
do so under the Standards Weights and Measures (Packaged Commodities) Rules, 1977, exhibited before us, does not in any way absolve them
of the liability already cast on them during the relevant time.
The learned senior counsel appearing for the appellant has relied on a judgment of the Honourable Apex Court in Jayanti Food Processing (P)
Ltd. Vs. Commissioner of Central Excise, Rajasthan, wherein the Honourable Apex court has held as follows:
The following would be the factors to include the goods in Section 4-A (1) & (2) of the Act:
(i) The goods should be excisable goods;
(ii) They should be such as are sold in a 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 the said factors are applicable to any goods, then alone the valuation of the goods and the assessment of duty would be u/s 4-A of the Act.
From the above judgment of the Honourable Apex Court it is clear that only if all the above said five conditions are satisfied, the value of the
goods and the assessment of duty could be resorted to u/s 4-A of the Act. But, in the case on hand, as has already been observed by us supra,
there is no obligation created on the assessee to declare the maximum retail price as per the Standards of Weights and Measures Act, 1976 and
the Rules made thereunder and accordingly, he was also availing the exemption granted under Rule 34(a) of the Standards of Weights and
Measures (Packaged Commodities) Rules, 1977 and therefore, the Clauses (iv) and (v) in the above judgment of the Honourable Apex Court are
lacking in this case and therefore, the assessee is not at all entitled to claim any benefit under this judgment of the Honourable Apex Court.
The learned senior counsel for the appellant would further submit that now, the Central Government has issued a Notification No. 14/2008-
CE. (N.T.), dated 1-3-2008, in exercise of the powers conferred by Sub-sections (1) and (2) of Section 4A of the Central Excise Act, 1944,
specifying the goods to which the provisions of Sub-section (2) of Section 4-A shall apply and allows the abatement the percentage of retail sale
price and would point out that this notification at Serial No. 12 includes ''biscuits'' bearing sub-heading No. 1905 31 00 or 1905 90 20 allowing
the abatement of 35%. Relying on the above said Notification, the learned senior counsel would press into service a judgment of the Honourable
Apex court in Whirlpool of India Ltd. Vs. Union of India (UOI) and Others, , wherein while answering the question as to whether refrigerator is a
''packaged commodity'' or not, the Honourable Apex court has held:
Since notification No. 9 of 2000 dated 1-3-2000 included refrigerator, unless validity of the notification was challenged, it is binding on the
company and merely saying that the refrigerator is not a packaged commodity would not serve any purpose when the notification itself is not
challenged and if the notification is not challenged on any other ground, its effect would remain intact insofar as refrigerators are concerned.
Relying on the above said judgment of the Honourable Apex Court, the learned senior counsel for the appellant would argue that the
Notification No. 14/2008, dated 1-3-2008 does specify, at Serial Number 12, ''biscuits'' allowing abatement of 35% and since the said
Notification still holds the field, the Department has to extend the benefit of the same to the appellant. But, it is to be pointed out that this
Notification has been issued on 1-3-2008, well after the period during which the issue on hand arose i.e. prior to the year 2006. Notably, no
retrospective operation of this Notification has been given and therefore, the benefits of this notification dated 1-3-2008 cannot be given
retrospective effect to the case of the appellant, which involved the happened before and during the year 2006. When no retrospective operation
has been given to this Notification, it is common knowledge that only the law prevailing at the time of occurrence should be made applicable to the
case. Therefore, the above judgment of the Honourable Apex Court in Whirlpool''s case also has no application to the facts of the case.
Our above discussion, would lead to the following conclusions that
(i) the second respondent/Commission has usurped the jurisdiction of the adjudicating authorities and has passed the order of granting abatement
to the assessee, without any jurisdiction;
(ii) that the appellant is not obliged to declare the Maximum Retail Price on the packages and he has not declared the Maximum Retail Price on the
packages supplied by them to their institutional customers at the relevant point, thus availing and enjoying the exemption granted under Rule 34(a)
of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and only after initiation of the present proceedings, with a view
to illegally claim the benefits u/s 4-A of the Central Excise Act, he started printing the Maximum Retail Price on the packages being supplied by
them to their institutional customers also, which act will not, in any way, absolve them of their liability during the relevant point of time of committing
the evasion of duty.
(iii) The Department is right in contending that the appellant is not at all entitled to claim any benefit u/s 4-A of the Central Excise Act, since his
goods are chargeable u/s 4 of the Central Excise Act.
The learned single Judge has correctly assessed the facts and circumstances of the case in the manner required by law and has arrived at an
uner-roneous conclusion of rejecting the claim of the assessee and upholding the case of the Revenue, by setting aside the illegal and erroneous
order passed by the second respondent/Settlement Commission. Therefore, we see no reason to cause our interference into the said order passed
by the learned single Judge.
In the result, this writ appeal filed by the assessee fails and the same is dismissed. No costs. Consequently, M. P. No. 1 of 2008 is also
dismissed.