Commissioner of Central
Excise, Vapi Vs. M/S. Kraftech Products Inc  INSC 464 (14 March 2008)
S.B. Sinha & V.S.
CIVIL APPEAL NO. 2597 OF 2005 WITH
CIVIL APPEAL NOS. 325-326 OF 2006 CIVIL APPEAL NO. 2575 OF 2005 CIVIL APPEAL
NO. 1029 OF 2007 CIVIL APPEAL NO. 1174 OF 2007 CIVIL APPEAL NOS. 2703-2704 OF
2005 CIVIL APPEAL NOS. 5069-5073 OF 2007 S.B. SINHA, J.
1. Interpretation of Rule 34 of the Standards of Weights and Measures
(Packaged Commodity) Rules, 1977 is in question in these appeals which arise
out of the judgments and orders dated 10th May, 2004 and 23rd March, 2005
passed in Appeal No.E/293/03-MUM and E/182-183/04-NB(A) by the Customs Excise
and Service Tax Appellate Tribunal, Mumbai and Customs Excise and Service Tax
Appellate Tribunal, New Delhi respectively.
2. We, however, may notice the factual matrix of the matter from C.A.
No.2597 of 2005.
3. Respondent manufactures hair dye. It is packed in pouches each containing
3 gms.. 3 pouches (sachets) are sold in one packet. The net weight of each
pouch, as also the net weight of the commodity in 3 pouches and the maximum
rate is printed on the pouches.
4. Valuation of exciseable goods for purposes of charging the duty of excise
is laid down in Section 4 of the Central Excise Act, 1944 in the following
"4. Valuation of excisable goods for purposes of charging of duty of
Where under this Act, the duty of excise is chargeable on any excisable
goods with reference to value, such value shall, subject to the other
provisions of this section, be deemed to be - (a) the normal price thereof,
that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time
and place of removal, where the buyer if not a related person and the price is
the sole consideration for the sale."
5. Section 4A of the Act provides for mode of valuation envisaged under
Section 4. It reads as under :- "4A. Valuation of excisable goods with
reference to retail sale price:
The Central Government may, by notification in the Official Gazette,
specify any goods, in relation to which it is required, under the provisions of
and Measures Act, 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.
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.
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
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" 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, as
the case may be, and the price is the sole consideration for such sale.
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 purposes of this
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."
6. Indisputably, the commodity in question is governed under the Standards
of Weights and Measures (Packaged Commodity) Act, 1976.
Indisputably again the Central Government in exercise of the powers
conferred upon it by Section 83 of the Act framed Rules known as the Standards
of Weights and Measures (Packaged Commodity) Rules, 1977 (the Rules).
7. Rule 2 contains the interpretation section. A distinction is made in
regard to "combination package", "group package" and
Multi-piece package is defined in Rule 2(j) to mean :- (j) "multi-piece
package means a package containing two or more individually packaged or labeled
pieces of the same commodities of identical quantity, intended for retail sale,
either in individual pieces or the package as a whole;
Illustration.- A package containing "5 toilet soap cake, net weight 20
g each, total net weight 100 g" is a multi- piece package."
8. Rule 6 provides for declarations
to be made on every package, which reads as under :- "6. Declaration to be made
on every package.- (1) Every package shall bear thereon or on a label securely
affixed thereto a definite, plain and conspicuous declaration, made in
accordance with the provisions of this chapter as to-
the name and address of the
manufacturer, or where the manufacturer is not the packer, of the packer or with
the written consent of the manufacturer, of the manufacturer;
the common or generic names of the
commodity contained in the package.
Explanation.- Generic name in relation to a commodity means the name of the
genus of the commodity, for example, in the case of common salt, sodium
chloride is the generic name;
the net quantity, in terms of the
standard unit of weight or measure of the commodity contained in the package or
where the commodity is packed or sold by number, the number of the commodity
contained in the package;
the month and year in which the
commodity is manufactured or pre-packed;
[* * * ] (omitted by GSR 521 (E) dt. 26-6-1995) (f) the [retail sale
price] of the package;
where the sizes of the commodity
contained in the package are relevant, the dimensions of the commodity,
contained in the package and if the dimensions of the different pieces are
different, the dimensions of each such different piece;
such other matters as are specified
in these rules:"
Rule 12 provides for the manner in which the declaration of quantity shall
be expressed, sub-rule (2) whereof reads as under :- "12. Manner in which
declaration of quantity shall be expressed. (1) .
(2) Except in the cases of
commodities specified in the Fifth Schedule, the declaration of quantity shall
be in terms of the unit of
mass, if the commodity is solid,
semi-viscous or mixture of solid and liquid;
length, if the commodity is sold by
area, if the commodity is sold by
volume, if the commodity is liquid or
is sold by cubic measure; or (e) number, if the commodity is sold by number:
Provided that in the case of solid commodity contained in a free-flowing
liquid which is sold as such, the declaration of quantity shall be in terms of
the drained weight of such solid commodity."
Schedule V appended to the Rules specifies the commodity in packaged form
which may be sold by weight, measures or numbers as shown against the
commodity, item No.25 whereof reads as under :- "25. Cosmetics including
creams, Weight or measure shampoo, lotions and perfumes. "
Rule 17 of the Rules mandates additional declarations to be made on
9. Admittedly the valuation of the commodity for the purpose of payment of
excise duty was carried out in terms of Section 4 of the Act.
Respondent, however, was served with eight show cause notices dated 29th
August, 2001, 26th March, 2001, 4th July, 2001, 3rd September, 2001, 30th
October, 2001, 8th January, 2002, 27th March, 2002 and 16th May, 2002 in terms
of Section 11A of the Act asking it as to why :-
Differential Central Excise duty
should not be demanded and recovered under the provisions of Section 11A(1) of
the Central Excise Act, 1944.
Penalty should not be imposed under
Rule 173Q of Central Excise Rules 1944/now Rule 25 of the Central Excise (No.2)
Interest due under Section 11AA/11AB
of the Act, should not be charged/recovered from them."
Cause was shown to the said notices.
10. The Deputy Commissioner, Central Excise, Division-II, Vapi by two
separate orders dated 25th October, 2001 and 12th July, 2002 rejected the
contention of the respondent that it was entitled to exemption by operation of
the Rules in respect of their product and confirmed the demand of Central
Excise duty and imposed a penalty of equal amount as proposed in the show cause
11. Appeals preferred thereagainst by the assessee/respondent to the
Commissioner (Appeals) were allowed by an order dated 24th October, 2002.
Appeal preferred by the appellant before the Customs Excise and Service Tax
Appellate Tribunal, Mumbai was dismissed by reason of the impugned judgment
dated 10th May, 2004 stating :- "2. The main ground of the Departmental
appeal is that the exemption under the said Rule 34 does not apply to a case
where several units are packaged together. We have perused the relevant
provisions under the Rule 34.
The exemption under the same clearly applies to any package containing a
commodity if the net weight of the commodity is 20 gms. or less. The language
of the rule does not warrant the interpretation sought to be placed by the
department that since the package contains 3 units, the exemption under the
rule is not available. We are of the view that since the combined weight of the
3 units of the impugned goods is less than the prescribed weight of 20 gms. the
Commissioner (Appeals) has rightly concluded in his impugned order that the
respondents are eligible for exemption under the said Rule 34 and consequently
they are entitled to assessment under Section 4 of the Central Excise Act, 1944
instead of under Section 4A of the said Act."
12. The judgment of the appellate authority as also the Tribunal have been
questioned by the department contending that as admittedly the commodity is
sold in 3 sachets, each one of them can be sold separately, Rule 34 of the
Rules will have no application. How the product, according to the learned
counsel for the appellant, is known in the market, should be the test to find
out as to how it is sold whether in unit or by weight or measure. Strong
reliance in this behalf has been placed on a decision of this Madras High Court
in Varnica Herbs vs. C.B.E.&C., New Delhi : 2004 (163) E..L.T.
13. Mr. Ravinder Narain and Mr. Monish Panda, learned counsel appearing on
behalf of the respondents, on the other hand, would submit that keeping in view
the provisions of Rule 12(2) of the Rules, the commodity can be sold by weight
or measure. It was so intended to be done as the weight of each sachet has been
notified on the packet. It was submitted that the decision of the Madras High
Court in Varnica Herbs (supra) was rendered per incuriam as has been held by a
larger Bench of the Tribunal in Commissioner of Central Excise, Mumbai vs.
Uirson Cosmetics Ltd. : 2006 (198) E.L.T. 508 (Tri.-LB).
It was furthermore submitted that the notices under Section 11A of the Act
having been issued beyond the period of six months, the same were barred by
14. The commodity is in powder form. It is sold in a multi piece package.
Admittedly the product is packed in small packets each containing three
sachets. Each sachet discloses the weight of its contents. The packet containing
the three sachets also disclose the total weight and the number of sachets. The
weight of the product in each sachet is admittedly below 3 gms.
15. It is beyond any doubt or dispute that the commodity in question is
being sold in 'multi piece package'. Identical quantity of commodity is packed
in each sachet. Yet again admittedly three sachets are packed in one packet.
The weight of three sachets is 9 gms, that is, less than the prescribed weight
of 10 gms.
16. Rule 12, as noticed hereinbefore, provides for the manner in which
declaration of quantity shall be expressed. Sub-rule (2) of Rule 12 would not
apply to the commodities mentioned in Schedule V. Item No.25 of Schedule V
provides for a declaration to be expressed in terms of weight or measure. The
packet describes the commodity in question. It discloses also the weight. It
not only discloses the weight contained in each sachet but also discloses the
weight contained in the packet of three sachets. In view of Schedule V appended
to the Rules, therefore, the intention of the manufacturer to sell the
commodity by weight is explicit.
17. Rule 17 provides for additional declarations to be made on multi-piece
packages. It envisages declaration of the quantity and the sale price thereof
on each of the packets when the quantity is sold in the multi-piece package.
Requirements of Rule 17 have been complied with. Section 4A of the Act would
apply only when it is statutorily required to apply the provisions of the
18. Rule 34 contains an exemption clause. The exemption clause would apply
if the commodity is sold by weight or measure, subject of course to the
condition that the net weight of the commodity is 10 gms. or less. This legal
requirement in this case also stands complied with. Once it is held that the
Rules have no application in respect of the commodity as marketed and sold by
the respondent, Section 4A of the Act will have no application. The appellate
authority as also the Tribunal, in our opinion, therefore, were right in their
19. Our attention, however, has been drawn to a Circular Letter dated 2nd
November, 1999 issued by the Central Board of Excise & Customs wherein
purportedly for the purpose of clarification of doubt in regard to the claim
made by certain manufacturers that there were no statutory requirements for
declaration of retail sale price on such packages under the Standards of Weights and
Measures Act, 1976 and the Rules framed thereunder, it was stated :-
"Rule 6 of the aforesaid rules requires declarations of certain
particulars to be made on every package intended for retails sale. Retails sale
price of the package is one such detail to be declared by a manufacturer/
Further rule 17 (1) provides for declaration of certain additional details
in respect of multi-piece packages such as sale price of the multi-piece
package and the number of individual pieces of the commodity contained in such
packages. However under rule 34, exemption in respect of certain packages have
been provided. In particular sub rule (b) to rule 34 provides that the MRP
provisions do not apply to a package containing a commodity if the net weight or
measure of a Commodity is 10 grams or 10ml or less, if sold by weight or
measure. Some manufacturers have claimed that the multi-piece package
containing individual pieces of less than 10 grams or 10ml or less, even though
the net quantity of such multi- piece package exceeds 10 grams or 10ml would be
covered by the above exemption. Hence they would not required to be assessed to
excise duty on the MRP prices under section 4A of Central Excise Act, 1994
3. The matter has been examined in consultation with the Law Ministry. The
Law Ministry has given the opinion that the exemption under rule 34(b) is
applicable to a package containing a commodity and this exemption does not
appear to be applicable to multi piece packages.
4. Based on the above opinion of the Law Ministry, it is clarified that the
declaration of retail sale price of multi- piece packages and individual pieces
contained in such multi-piece package (if such individual pieces are capable of
being sold separately) is statutorily required under rule 17 (1) of the
Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
5. In view of the above statutory requirements for declaration of retail
sale price under the Standards of Weights and Measures (Packaged Commodities)
Rules, 1977 for multi-piece packages, it is clarified that in respect of
multi-piece packages of a commodity intended for retail sale and which are
notified under section 4A, they shall be assessed to excise duty under the
provisions of section 4A of Central Excise Act, 1944."
20. The opinion of the Law Ministry is not based on any legal principle.
Evidently in so doing it did not take into consideration the effect of Rule
It proceeded on the premise that Rule 34(b) would be applicable to a package
containing a commodity and as such the exemption would not be applicable to
"multi piece package". "Multi piece package" in terms of
Rule 2(j) is also a package containing a common commodity. To hold it otherwise
would be violating the plain language of the statutory Rules.
21. Rule 34(b) provides for exemption from the application of the Rules.
The expression contained therein "that nothing contained in these rules
shall apply to any package containing a commodity" is of wide amplitude.
There cannot be any doubt whatsoever that Rule 34 would apply in a case of this
nature if it is sold by weight or measure. The respondents not only do so, they
are permitted to do in terms of Schedule V read with sub-rule (2) of Rule 12 of
22. In Jayanti Food Processing (P) Ltd. v. Commissioner of C.Ex., Rajasthan
[2007 (215) E.L.T. 327 (S.C.)], wherein one of us (Sirpurkar, J.) was a member,
this Court stated the law, thus:
"We have already explained earlier that 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 or the Rules made
thereunder or any other law for displaying the MRP on such package. We find the
requirement to be only under Rule 6(1)(f) which applies to 'retail package'
meant for 'retail sale'. What is required to be printed under Rule 6(1)(f) is
the 'retail sale price' of the package. '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 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 appellant 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)(f) to mention the
'retail sale price' on the package."
In Varnica Herbs (supra) whereupon reliance has been placed by the learned
counsel for the appellant, the Madras High Court opined :- "13. The next
contention of the learned counsel for the petitioner is that the effect of the
circular is to whittle down the exemption contemplated under Rule 34(1)(b)of
the Rules. Relying upon the said rule, it is the contention of the petitioner
that since the weight of the individual package is 8 grams, which is less than
10 grams, the petitioner is not expected to declare MRP or the net weight of
the individual package. It is also the contention of the petitioner that merely
because sachets are placed in a mono-carton that would not make the pack a
multi- piece package and Rule 17 is not applicable."
Construing Rule 2(j) read with Rule 6 the learned Judge opined :- "15.
A perusal of these provisions makes it clear that articles kept in separate
pouches by the petitioner can be termed as multi piece package and such pouches
can be sold individually in single piece or together in a mono- carton of six
pouches. The contention of the petitioner that exemption under Rule 34 would be
applicable is not acceptable. Even though the net weight is less than 10 grams,
it is evident that article is not intended to be sold either by weight or by
measure as contemplated under Rule 34(b). The contention that clarification
issued by the respondent No.1 has the effect of whittling down the exemption
granted under Section 34 is not at all acceptable."
23. We have noticed hereinbefore that each package offered to sell to the
customer contains three sachets. Net weight of all the three sachets are stated
thereon. It is a "multi piece package" which is capable of being
offered to sell as such only because a package is a "multi piece
package", the same cannot be taken out of the umbrage of exemption clause
contained in Rule 34 of the Rules. Why the commodity cannot independently be
sold either by weight or measure is beyond our comprehension particularly when
Rule 12(2) permits the same. The illustration appended to Rule 2(j) bring out a
clearer picture. It states that the combined net weight shall be taken into
consideration for the purposes mentioned therein. After combined weight is
taken into consideration for the purpose of applicability of the Rules, there
is no reason as to why the said purpose shall not be considered to be a
relevant factor for applying the exemption provision. Assuming Rule 2(j) was
otherwise vague or unambiguous, illustration appended thereto brings out the
true meaning and purport thereof. The reasoning adopted by the Madras High
Court in Varnica Herbs (supra) does not appeal to us.
It was rendered per incuriam. It was held to be so in Urison Cosmetics Ltd.
(supra) by a Larger Bench of the Customs Excise and Service Tax Appellate
Tribunal. We agree with the said opinion of the Tribunal.
24. For the reasons abovementioned the impugned judgment does not warrant
any interference. The Civil Appeal Nos. 2597, 2575, 2703-2704 of 2005, 325-326
of 2006 fail and are dismissed with costs. Counsel's fees assessed at Rs.
25,000/- in each case.
Civil Appeal Nos. 1029, 5069-5073 of 2007 [Re: M/s. Aero Pharma (Silvassa)
Inc.] 25. The assessee manufactures Lip Smoother. Each unit contains 4.3 ml.
They make a package of 72 pieces of lip smoother. The Revenue proceeded on
the basis that a package containing 72 pieces of lip smoother would be a
Civil Appeal No. 1174 of 2007 [Re: M/s. Alfa Packaging] 26. The assessee
manufactures Shampoo which is packed in sachets.
Each sachet contains shampoo below 10 ml. It is packed in a carton
containing more than 500 pieces. Such carton, according to the Revenue, is a
When a lip smoother or a shampoo is packed in a carton keeping in view the
quantity contained therein, the same cannot be said to be for retail sale. No
person would ordinarily purchase for one's own use 72 lip smoothers or 500
pieces of shampoo.
Thus, it is not a case where the goods are being sold in multi-piece
package. Each sachet or each lip smoother must be sold as a unit.
27. Civil Appeal Nos. 1029, 5069-5073 of 2007 and Civil Appeal No.
1174 of 2007 are allowed with costs. Counsel's fees assessed at Rs.
25,000/- in each case.