Larsen and Toubro Limited vs Union of India

F.I. Rebello, J.—Rule. By consent, heard forthwith.

The issue which arises is as to the valuation of the goods for the purpose of Excise duty and whether Excise duty was chargeable u/s 4 or Section 4A of the Central Excise Act 1944 (CEA).

Officers from the Directorate General of Central Excise Intelligence, Mumbai Zonal Unit, seized goods (switch gear) from M/s. Total Logistics India Private Limited, a stockist of the petitioners. These goods have been kept in safe custody of M/s. Total Logistics India Private Limited under a Supratnama (an undertaking of safe custody of seized goods). The petitioners herein aggrieved by the seizure, preferred a petition before this Court being Writ Petition No. 394 of 2007. Minutes of order came to be tendered and the petition came to be disposed off by order dated 10-3-2007. In terms of the Minutes of order, the petitioners were to make an application to respondent No. 6 who considering the provisions of the Standards of Weights & Measures Act, hereto referred to as the "Act" and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, hereto referred to as the "Rules" framed thereunder, was to decide whether the provisions of the said Act and rules are applicable to the seized goods. At this stage itself, we may refer to the Circular No. 625/16/2002-CX., dated 28th February, 2002 issued by the Central Board of Excise and Customs, New Delhi. The Circular came to be issued as doubt has been raised regarding the mode of valuation adopted in respect of goods notified u/s 4A of the CEA which were partly sold at the retail price printed on the packages and partly sold without printing the retail price on the packages. The Circular sets out that on examination of Section 4A of CEA, the section would be applicable in respect of only those cases where the manufacturer is legally obliged to print the MRP on the packages of the goods under the provisions of the Standards of Weights and Measures Act, 1976 or the Rules made thereunder or any other law for the time being in force. The Circular noted that the basic issue is to determine the circumstances in which Section 4A can be applied. It was therefore, clarified that where there are doubts as to whether the assessee is exempted from declaring the retail price or not, clarification may be obtained from the concerned department of the State Government.

The respondent No. 6 herein on hearing the parties, was pleased, by order of 6th July, 2007 to hold that the seized goods packages under reference are indeed intended for retail sale and therefore, have to comply with the requirement of the provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. The arguments advanced before respondent No. 6 were that the packages were only for the sake of protection during transit and storage of the goods and would not fall within the definition of "Pre-packed Commodity". That contention was rejected. Another contention raised was that the goods manufactured were meant for industrial consumer. A finding was recorded that the said items need not be used by industries only but can also be used in shopping malls, large residential complexes, commercial buildings etc. The plea made by the petitioners that the goods are not sold by weight, measure or number and are sold by the single piece only and as such the provisions of Act and Rules do not apply, was rejected by holding that it was sold by number. It was also contended that the goods are not meant to be sold to retail consumers, was also rejected as it was held that it was meant for sale to customers only.

At the hearing of this petition, on behalf of the petitioners, it was firstly submitted that the switchgear products manufactured by the petitioners are not a "commodity in the packaged form" within the meaning of Act and the Rules. Packaging is done only for the sake of convenience and for safe transportation and protection during storage and handling. The nature of the switchgear products manufactured by the petitioners is that they are not required to be packed before they can be sold and goods are not pre-packed commodity as they do not have pre-determined value at the time when they are placed in the package. Reliance is placed on the judgment of this Court and other High Courts. Though the definition of "pre-packed commodity" has been substituted effective from 14-1-2007 it does not in anyway alter the law as the amended definition of "pre-packed commodity" is the same as in the un-amended definition. Amended definition of pre-packed commodity merely seeks to include the explanation contained in the un-amended definition in the main part of the definition. Both unamended and amended definitions of pre-packed commodity can only be covered by the definition if the package contains the commodity having predetermined value. The switch gear products manufactured by the petitioners do not have a pre-determined value. Pre-determined value in the definition refers to the quantity viz. 100 ml., 10 Nos. or 100 gms. The value referred to in the definition in regard to the quantity of commodity contained in the package either by weight, measure or number. Placing reliance on the judgment of this Court in Titan Industries Ltd. Vs. Union of India (UOI) and Others, , it is submitted that there is no material change in the definition of pre-packed commodity both, before and after the amendment.

It is next submitted that Act applies only to a commodity in the packaged forms sold with reference to the weight, measures and or number/s. The switch gear product manufactured by the petitioners are not sold by Weights, Measures or numbers. Respondent No. 6 has misread the particulars provided by the petitioners on the package for ease of reference to mean that the commodity switchgear products manufactured by the petitioners are sold by numbers. It was also submitted that the switchgear products manufactured by the petitioners are sold with reference to combination of the technical parameters such as short circuit breaking capacity, application duty, operating characteristics (depicted as graph), ampere ratings, operating voltage and so on as well as the characteristics of equipment to be protected and not by weight, measure or number.

Without prejudice, it is submitted that the rules are not applicable to the switch gear products manufactured by the petitioners in view of Rule 3 of the said Rules. The said rules make it very clear that Chapter II of the Packaged Commodity Rules are intended for retail sale and the expression "package" wherever it occurs in the said chapter, shall be construed accordingly. The very nature of the product and the packing in which they are removed from the factory of the petitioners indicates that the said products are not intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein. The definition of retail sale makes it clear that the commodity in the packaged form are for consumption by an individual or group of individuals or any other consumer. The words "individual" or the "group of individuals" must be read to mean the individual consumer or group of individual consumers. Reference is placed on the dictionary meaning of the word consumer. The PC Rules, it is submitted, therefore, apply to the goods used by the consumers and not to those used by institutions or industries. The products of the petitioners are not meant to be used in households. These products perform critical role in protection of expensive capital equipments like generators, motors and transformers in industries and commercial complexes where large amount of electrical energy is consumed. The persons who purchases or cause to purchase the switchgear products are electrical engineers/contractors who have domain knowledge of the equipment - both technical and commercial. They go by the technical parameters before purchasing the goods. The goods can never be used as a stand-alone but are used in conjunction with other protective devices. These are non consumer goods and are not within the purview of the rules. The entire object of the Act is to protect the consumer from mal-practices by the packers and it is applicable or intended to be made applicable to non-industrial commodity in packaged form.

Reply has been filed on behalf of the respondent No. 6. It is contended that in terms of the rules, if the goods are pre-packed commodity the packer is required to comply with the provisions of the rules. Items manufactured by the petitioners need not be used for industry only but can also be used for shopping malls, large residential complexes, commercial buildings etc. As such the seized products are required to comply with the provisions of the rules. On the goods which are packaged, on the packet there is a declaration and the quantity is shown as one number. Pre-packed commodity as set out provides that even when packages are open and commodity can be taken out for display or examination the provisions of the rules are attracted and are applicable. Considering the basic function of the goods it is manifest that items need not be used by industries only, but can also be used by shopping malls, large residential complexes, commercial buildings etc. The object of the act is to protect the interest of consumer. The petitioners and their stockists if they are able to establish that any particular sale is to an industrial consumer as described in the declaration, then the product transaction will be assessed u/s 4 of the said Act and not u/s 4A. "Quantity" as defined in Rules 2(n) includes number and one also is a number. It is therefore, submitted that the petition be dismissed.

The first question to consider is whether the seized goods can be described as "Pre-packed commodity". What is pre-packed commodity and the other connected definitions had come up for consideration before this Court and other High Courts. That definition has been substituted w.e.f. February 2007. The definition of pre-packed commodity as it stood previous to 13-1-2007 was as set out in Rule 2(1) of the Rules. The said definition read as under :-

2(1) "Pre-packed commodity" with its grammatical variations and cognate expressions, means a commodity which, without the purchaser being present, is placed in a package of whatever nature, so that the quantity of the product contained therein has a predetermined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification and the expression "package", wherever it occurs, shall be considered as a package containing a pre-packed commodity;

Explanation I. - Where, by reason merely of the opening of a package no alteration is caused to the value, quantity, nature or characteristic of the commodity contained therein, such commodity shall be deemed, for the purposes of these rules, to be a pre-packed commodity, even though the package containing it is required to be opened for testing the commodity.

Explanation II. - Where a commodity consists of a number of components and these components are packed in one, two or more units for sale as a single commodity, such commodity shall be deemed for the purpose of these rules, to be a pre-packed commodity;

This definition had come up for consideration before this Court. We may make reference firstly to the judgment in the case of Subhash Arjandas Kataria (Mumbai) v. State of Maharashtra & Ors. reported in AIR 2006 (4) Bom. R. 570. In that case sunglasses were seized on the basis that they are pre-packed commodities. This Court after noting the various provisions of the Act and the Rules and also considering the view taken by other High Courts, held that the pre-packed commodity would be a commodity which is packed and the commodity packaged has pre-determined value and that value cannot be altered without the package being sold or opened at the time of sale. The issue once again came up for consideration in Titan Industries Ltd. Vs. Union of India (UOI) and Others, . The earlier view taken was further explained as also the meaning of the explanation and Rules. This Court also noted the judgment of the Madras High Court in Philips India Ltd. v. Union of India reported in 2002 Writ LR 140 and the Judgment of the Andhra Pradesh High Court in Eureka Forbes Limited Vs. Union of India (UOI) and Others, . This Court held that to decide whether the package is a pre-packed commodity, firstly what has to be considered is whether by the very nature of the commodity it is required to be packed before it can be sold. Secondly, in the event a package is opened does it undergo any perceptible change or reduction in value. If these two tests are met then only can it be said that the package would constitute a pre-packed commodity. Merely because the commodity is packed for protection during conveyance or otherwise or in the fancy package, would not result in the package becoming a pre-packed commodity. The explanation is only to include those commodities which by the very nature of goods have to be packed and on being opened do not undergo a change in the pre-determined value or a perceptible modification. This Court held that if the explanation was not included, commodities like electronic bulbs which otherwise by their very nature are required to be packed, before being sent from the manufacturing site would not be included as they would not fall within the expression "pre-packed commodity". From 13-2-2007 the definition of pre-packed commodity in the rules has been substituted by the following:-

2(1) "pre-packed commodity", means a commodity, which without the purchaser being present, is placed in a package of whatever nature, whether sealed or opened, so that the commodity contained therein has a pre-determined value and includes those commodities which could be taken out of the package for testing or examining or inspecting the commodity.

The various submissions made by the learned Counsel could have been considered. However, in our opinion, the issue can no longer be said to be res integra considering the judgment of the Supreme Court in Whirlpool of India Ltd. Vs. Union of India (UOI) and Others, . The Supreme Court was considering the definition before its substitution. In that case the issue was whether refrigerators which are packed in polythene cover, thermocol etc. and placed in hard board cartons fall within the expression pre-packed commodity under the rules. The Supreme Court held on considering the definition of prepacked commodity that a glance at the provisions and more particularly to Explanation I, would suggest that the refrigerator is covered under the term prepacked commodity. In our opinion, once the Supreme Court has held that a refrigerator which is a single unit which is packed in polythene cover, thermocol etc. and placed in hard board cartons is a pre-packed commodity under the old rule considering the language of the rule as substituted, there can be no escape from holding that the goods seized from the stockists of the petitioners are a prepacked commodity. The first contention therefore, advanced on behalf of the petitioners would have to be rejected.

The next question which arises for consideration is whether the goods seized can be said to be sold by weight, measure or number. We have already noted the finding recorded by respondent No. 6 that on the package description it is mentioned as one unit. Though the Supreme Court did not address itself directly to that issue, it would be apparent that by holding that refrigerator to be pre-packed commodity which is sold as one unit, the Supreme Court has rejected the contention as urged before us on behalf of the petitioners herein may be sub silentio. We may mention that in Eureka Forbes Ltd., (supra) the learned Judge of the Andhra Pradesh High Court had taken a view that a single unit could not be said to be sold by weight, measure or number. In our opinion, this would not be a correct reading of the rule. By number must be given its plain grammatical meaning, meaning thereby that if the package contains even one item, it would still fall within the definition of pre-packed commodity. The second contention therefore, as urged on behalf of the petitioners must also be rejected.

We are now called upon to answer the question whether the rules would only apply to retail package and retail sale. Insofar as the goods which have been seized from the petitioners'' stockists, it is submitted, is not for consumption by individual or group of individuals or any other consumer. As already noted earlier these are specialised goods which can only be used in conjunction with or for the purpose of assembling other goods. Reference is made firstly, to the Indian Electricity Rules, 1956 to the definition of switch board and switch gear. Switchgear is denoted to report switches, circuit breakers, cut-outs and other apparatus used for the operation, regulation and control of circuits. The goods of the petitioners are circuit breakers. By virtue of Rule 45, no electrical installment work as set out therein shall be carried out upon the premises or on behalf of consumer except by licenced electrical contractor. Failure to do so invites a penalty. It is next submitted that the goods are not goods to which Chapter 3 of the Rules would apply. It is therefore, submitted that on this count also the impugned order of respondent No. 6 has to be set aside.

On the other hand, on behalf of the respondents the learned Counsel submits that the fact that the petitioners'' goods are available for sale in retail through their stockists is borne out from the fact that the officers were able to make a purchase of the petitioners'' goods from one of its stockists named M/s. Bhavdeep Enterprise. The purpose and object of the act is to protect the interest of consumer. The goods are for consumption of individual or group of individuals. That being the case, it is immaterial as to whether it is for consumption of the individual purchasing the same as long as retail sale is to any other customer. Insofar as Section 2A is concerned all that it says is that Chapter 2 would not apply to those products and to the consumer as set out in Rule 2A. That would not mean for the purpose of Rule 3 the definition of institutional consumer or industrial consumer has not to be looked into while considering the other provisions of the chapter which speak about retail sale and other definitions.

We now proceed to consider some of the relevant definitions in the rules for the purpose of our discussion. We may reproduce Rule 2(o), 2(p), 2(q) and 2(r). The definitions read as under :-

2(o) "retail dealer" in relation to any commodity in packaged form means 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;

2(p) "retail package" means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages PROVIDED that for the purposes of this clause, the expression "ultimate consumer" shall not include industrial or institutional consumers;

2(q) "retail sale" in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer;

2(r) "retail sale price" means the maximum price at which the commodity 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 taxes or in the form MRP Rs.... incl., of all taxes"]

Explanation : For 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, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be;

The other relevant rules are Rule 2A and Rule 3.

Is it possible to accept the contention urged on behalf of the petitioners that though the retail package may be purchased at a retail sale, as the pre-packed commodity is not consumed by the ultimate consumer, the provisions of Rule 3 of Chapter II would not be applicable to these pre-packed packages.

Consumer is not defined either under the Act or the Rules. In Black''s Law Dictionary "consumer" is described as under :-

"Consumer" One who consumes. Individuals who purchase, use, maintain, and dispose of products and services. Users of the final product. A member of that broad class of people who are affected by pricing policies, financing practices, quality of goods and services, credit reporting, debt collection, and other trade practices for which state and federal consumer protection laws are enacted. Consumers are to be distinguished from manufacturers (who produce goods) and wholesalers or retailers (who sell goods)."

"A buyer (other than for purposes of resale) of any consumer product, any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product, and any other person who is entitled by the terms of such warranty (or service contract) or under applicable State law to enforce against the warrantor (or service contractor) the obligations of the warranty (or service contract)".

Before answering the issue, we may briefly refer to some of the relevant material relied upon on behalf of the petitioners herein to contend that the products are sold to individual/industrial consumers who are not the ultimate consumers. We have already referred to the provisions of the Indian Electricity Rules, 1956. Next reference is placed on the Bureau of Indian Standards (BIS) Act, 1986 and the orders, clarifications and notifications issued therein. By an order of 17th February 2003 passed under the BIS Act, electrical appliances, protection devices and accessories mentioned in the schedule to that order were prohibited from being manufactured or sold or distributed unless they duly confirmed to the specified standards and bore the standard mark of the Bureau and after obtaining the certification marks license. Representations were made to the authorities under the BIS Act to delete the aforesaid items on the ground that these products were not purchased by the ultimate consumers but only purchased by highly trained and technical persons for industrial applications. The BIS authorities accepted the said representation and by notification dated 5-2-2004 deleted inter alia the items from the schedule. The office order refers to minutes of 8-3-2004 wherein it was recorded as under :

Consequent to the issue of this order (dated 17th February, 2003) some representations from Industrial Association were received for deleting 7 items from the purview of the order on the ground that they were items of industrial application and are not used by the common man. The matter was considered in consultation with BIS and a decision was taken to exclude from the purview of the said 2003 order the 7 items.................

These deleted items are the very items which are the subject matter of the petition. This it is submitted would clearly establish that the products in question are of industrial application and are not purchased or used by the common man.

There is also a declaration made by the petitioners on their packages as "specially packed for the exclusive use of any industry as a raw material or for the purpose of serving any industry, mine or quarry and not intended for retail sale". This it is submitted is valid and binding on the authorities under the Central Excise Act, 1944 and cannot be questioned. This was based on Rule 34(a) which has been deleted w.e.f. 13-1-2007. For the effect of the declaration, reliance has been placed on the judgment in I.T.C. Ltd. Vs. Commissioner of Central Excise, New Delhi and Another, . The issue for consideration before the Supreme Court was the effect of the display of the sale price on the package. The Court noted that what revenue wanted the Court to do was to shift the basis for levy of Excise duty under the exemption notification from the MRP actually printed on the package to a price which is deemed to be the printed price. In that context, it was contended that the requirement of giving a declaration under diverse statutes have different consequences depending upon the nature of the declaration. What has to be enquired into is the compliance with the requirement and not the correctness of the declaration itself. In that case again the issue was a valuation of goods for the purpose of Central Excise Act. After considering the various contentions and the two explanations ,the Court noted that merely because an assessee displays MRP on the package that would not negate the case of the appellant that, the printed price would not be the retail price. The Court noted therefore, for the purpose of attracting Section 4A there has to be requirement under the Act and the Rules made thereunder or any other law to declare the MRP on the packet. A mere declaration of MRP on the packet, cannot result ipso facto in Section 4A of the Act becoming applicable. The argument advanced here is that the package contains a declaration that the goods are not meant for individual consumer. In our opinion, the rules required the MRP to be shown only if it is a pre-packed commodity. A mere declaration under Rule 34(a) since deleted, that it is not meant for consumption by an individual by itself cannot result in holding that it is not a retail package. Stress however was sought to be placed on the 3rd type of definition in the judgment of the Supreme Court which was "A statement of required conduct by a third party". The declaration made by the petitioners it was submitted is of the 3rd type and the Supreme Court has held in such a case that the assessing officer cannot question the basis of the said declaration. This argument could have been considered if Rule 34(a) was in force in the matter of declaration but the same has been omitted w.e.f. 13-1-2007. Apart from that what the rule will mean is that the package as a prepacked package is meant for use by industrial consumer as explained in Rule 2A explanation or for purpose of servicing any industry mine or quarry . The proviso also sets out to whom the rule will not apply and that includes any package containing a commodity to be sold by number or length as defined for sale at the retail output. The rule before its deletion did not create any other class of consumer to whom the rule will not apply. The rule considering explanation to Rule 2A exempted the package from the provisions of the rule if there was a declaration. That declaration, if the package was found in the hands of the industrial or service consumer would result in the presumption that it was meant for such consumer. That would be the scope of the declaration.

Next reliance was placed on the judgment of the Supreme Court in Commissioner of Income Tax v. Planation Corpn. of Kerala Ltd. reported in AIR 2000 SC 3714. This judgment is cited by the petitioners for their submission that the definition of industrial or institutional consumer is only for the purpose of Rule 2A and would not be applicable to the other provisions of the chapter. The issue for consideration was explanation 1 & 2 to Section 5 of the Kerala Agricultural income tax Act (22 of 1950) in computation of agricultural income whether explanation 2 is applicable only to sub-section (g) and not to the other sub-clauses of Section 5. The Supreme Court reversed the view of the Kerala High Court. The Court while considering the import of the explanation observed as under :-

Thus, viewed when Explanation 2 specifically use the words "nothing contained in this section shall be......................" expressing a specific intention to encompass the entire S.5 of the Act reading it otherwise and to confine its relevance and application to only clause (j) of S.5 would amount to not only rewriting the statutory provision by the Court but also doing violence to the plain and simple language used. When an Explanation or proviso was to apply to any one clause or limb alone of S.5, the legislature has chosen to incorporate it even in the very S.5 below the specific or particular clause which it was meant to explain or except as in clause (c) or (1) and (n). The fact that instead of doing so the Explanation 2 has been incorporated at the end of S.5 along side Explanation 1, which also use the words "for the purpose of this section....." the intention of the legislature must be considered to have been made certain positive and unambiguous leaving no room or scope whatsoever for having recorse to either internal or external aids for interpretation or construction of the said provision.

14.1. Do the seized packages fall within the definition of the expressions retail package and retail sale. Does the explanation to Rule 2(A) restrict itself to that rule alone and the definition of industrial and institutional consumer as explained there cannot be read into the proviso to Rule 2(p) and if not, what is the meaning of the expression industrial or institutional consumer under the proviso to Rule 2(p).

Rule 2A sets out to what packaged commodities the provisions of Chapter 2, would not apply.

Rule 2A reads as under :-

2A. Applicability of the Chapter - The provisions of this chapter shall not apply to :- (a) packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags upto 50 kg; and (b) packaged commodities meant for industrial consumers or institutional consumers.

Explanation : For the purpose of this rule, -

(a) Institutional consumer - Means those consumers who buy packaged commodities directly from the manufacturers/packers for service industry like transportation (including airways, railways] hotel or any other similar service industry.

(b) Industrial Consumer - Means those consumers who buy packaged commodities directly from the manufacturers/packers for using the product in their industry for production, etc.

Rule 3 reads as under :-

Chapter to apply to packages intended for retail sale

"The provisions of this Chapter shall apply to packages intended for retail sale and expression "package", wherever it occurs in this Chapter shall be construed accordingly."

The chapter therefore does not apply to packaged commodities purchased directly from the manufacturers/packers for service industry and industrial consumers who buy packaged commodities from manufacturers/packers for using the product in the industry for production etc. In the absence of Rule 2A these consumers if they had purchased a retail package from a retail dealer would be consumer within the explanation "retail sale" unless excluded by the proviso to Rule 2(p). Rule 2A therefore excludes packages even if they are pre-packaged commodities if they exceed the quantity by weight or measure or are sold to institutional or industrial consumer as explained in Rule 2A. The explanation to the rule explains who is an institutional consumer and industrial consumer for the purpose of that rule.

The petitioners'' submission is that the packaged goods sold will cease to be a retail package if they are not meant for use by the ultimate consumer. The expression shall not include industrial or institutional consumer as set out in proviso to Rule 2(p). The explanation of industrial or institutional consumer as contained in Rule 2A being restricted to the rule would not be applicable. The words industrial or institutional consumer under the proviso to Rule 2(p) it is submitted will have to be given its normal dictionary meaning. It is only if Rule 3 applies, would the action of the respondents in attaching the petitioners'' packages be legal, otherwise it would be illegal.

It is in that context that we have to understand the expression ultimate consumer as set out in the definition of retail package or retail sale in the context of industrial or institutional consumer. The definition of retail sale, is sale for consumption by individual or group of individuals or any other consumer. Retail package is defined to mean packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein. The object therefore appears to be disclosure of the sale price to a customer for consumption, whether such consumer be individual, group of individual but excludes industrial or institutional consumer. An industrial consumer who purchases a retail package by retail sale would be normally a consumer in the absence of the proviso. The question is who are the industrial or institutional consumers under the proviso to Rule 2(p) who are excluded from the definition of ultimate consumer. Can there be a distinction between a consumer who directly purchases the product and consumes the product or a consumer who purchases the product say for individual use or an industrial consumer for making another product, say a switch board and who does not fall within the explanation to Rule 2A namely a purchaser not purchasing directly from the manufacturer or packer. Are such consumers excluded from the expression ultimate consumer as set out in the proviso to Rule 2(p) or other consumer as set out in Rule 2(q) or for that matter consumer under Rule 2(o). That the package is a prepacked commodity in no longer res Integra after Whirlpool (supra). Therefore, Chapter II would apply only to pre-packed packages. Rule 2A excludes certain consumers like institutional and industrial as set out therein and as already explained. The petitioners however, want this Court to accept the submission that apart from industrial and institutional consumers as excluded by explanation to Rule 2A, there are also other consumers both industrial or institutional who if they buy retail packages from the retail dealer as in the instant case from their stockists, if they are not ultimate consumers, to them also Chapter 3 would not apply.

Such an interpretation, in our opinion, will defeat the basic objective of the Act and the Rules. The object of the Act and the rules is to protect the consumer inasmuch as the consumer must know the price of the retail package, when the consumer makes the purchase from the retail dealer by retail sale. A law for the protection of a consumer must be construed for the benefit of the consumer unless the interpretation would defeat the object of the act or the rules or result in absurdity. Secondly where was the need for the rule making authority to explain in Rule 2A as to who are the institutional and industrial consumers to whom Chapter II would not apply, if the proviso to Rule 2(p) does not include these institutional or industrial consumers. Rule 2A(b) specifically provides the chapter shall not apply to pre-packed commodities meant for industrial and institutional consumers. Both Rule 2A and Rule 3 are part of Chapter II. Can the explanation of industrial or institutional consumer be restricted only to Rule 2A and would not be applicable while construing Rule 3 to industrial or institutional consumers contemplated by proviso to Rule 2(p). Firstly when the rules use a term or expression normally unless contrary is provided they should be assigned the same meaning. Secondly a perusal of the definition clauses, would not support the contention sought to be given by the petitioners. What runs through all these definitions is the ultimate consumer. Proviso to Rule 2(p) excludes only industrial or institutional consumers. Industrial or institutional consumer is not defined but explained only in Rule 2A. Rule 2A excludes packages of commodities containing quantity of more than 25kg or 25 litre excluding cement and fertilizer sold in bags of up to 50kgs; and packaged commodities meant for industrial consumers or institutional consumers who purchases directly from manufacturers or packers. If the contentions of the petitioner are accepted then firstly it would have to be read that Chapter II speaks of two kinds of industrial or institutional consumers. One covered by the explanation to Rule 2A to whom the chapter would not apply and the second category covered by the proviso to Rule 2(p) to whom also the chapter would not apply. Such a construction would defeat Rule 2A(b). The explanation only excludes a class of consumers who in the absence of the explanation or Rule 2A would be consumers. The industrial or institutional consumers for the purpose of Rule 2(p), should be the same as in the explanation to Rule 2A. If this construction is not accepted it would amount to saying that although to consumers described in Rule 2A, Chapter II will not apply, yet also there are still other industrial or institutional consumers to whom the chapter will not apply. If that was the intention of the rule making authority, it could have defined industrial or institutional consumers independently and not provided an explanation to Rule 2A for the purpose of that chapter. Bad phraseology should not defeat the intent of the rule making authority. Rule 2A(a) also excludes certain packages by weight and measures from the operation of Rule 3. The same packages if sold in quantity lesser in weight or measure if the other provision of Rule 3 are applicable then the chapter applies. Secondly Rule 2A(b) excludes packaged commodities meant for industrial consumers or institutional consumers as they are directly sold to such consumers who buy packaged commodities for their institutional or industrial uses. These are also consumers. Therefore, it is only to such institutional and industrial consumers to whom the provisions of Chapter-II would not apply. To all other institutional or industrial consumers of a prepacked commodity sold as a retail package the chapter would apply. The explanation of institutional and industrial consumer in Rule 2A must also be read into the proviso to Rule 2(p), for the purpose of Chapter II. While construing Rule 3, only purchasers of packages who are institutional or industrial consumer as explained under Rule 2A would be excluded. Every other retail sale by a retail dealer of a pre-packed commodity would be covered.

As an illustration. If the packaged commodity purchased cannot be directly installed by the Co-operative Housing Society on the ground that such user is prohibited by the Electricity Rules, that however, would only mean that a person qualified under the rules can install the same for the consumer who may have purchased the package. There is therefore, no prohibition on such society purchasing the product and installing it through a licensed person. They are the ultimate consumers. Similarly another consumer who is qualified may purchase the commodity and install the commodity directly. Such a consumer will not cease to be a consumer because the retail package is not consumed by such purchaser but supplied to some other consumer. The act of purchase and use also makes such purchaser the ultimate consumer. Yet another person may purchase the retail package and use it in combination with other goods, as an illustration to make a switch board. Such a consumer cannot be said not to be the ultimate consumer. Such a consumer also consumes the commodity. Such consumer may market or sell it as another commodity thereby loosing its original distinct character. All such consumers whether they be institutional or industrial will also be covered by Chapter II. Even the ordinary dictionary meaning makes such a purchaser a ''consumer''. We therefore, hold that while construing Rule 3, who are excluded are only the institutional or industrial consumers as explained in Rule 2A and that the industrial or institutional consumers in terms of the proviso to Rule 2(p) for the purpose of Chapter II are the same.

The issue whether packages seized before Rule 34(c) was omitted w.e.f. 13-1-2007 and which contains the declaration and whether Section 4 or 4A of Central Excise Act applies would be relevant before 13-1-2007. Even otherwise we have explained the scope of the declaration considering the judgment in I.T.C. (supra). If the person who purchase the prepacked commodity not directly from the manufacturer or packers, they are consumers and the declaration will be of no effect.

We find no infirmity in the order dated 6th July 2007 nor can the declaration as prayed for can be granted. Consequently, rule discharged. In the circumstances of the case, however, there shall be no orders as to costs.