RALLIS INDIA LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE brief facts of the case are that the appellants are engagerd in the manufacture of pesticides and insecticides which are sold by them in the packaging of 100 ml and 50 ml. On 25 -2 -2003, they entered into agreement with M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. for supply of the pesticides in bulk pack in 100 ml packing for purposes of being supplied free by M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. to farmers along with B.T. cotton seed sold by M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. to the farmers. As per agreement M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. was required to purchase minimum 2,50,000 bottles during the course of 2003. The gooas in packing of 100 ml cleared by M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. had legend thereon "specially packed for Mahyco Monsanto" and "Not for retail sale". On 1st March, 2003, the Central Government in exercise of its powers under Sub -section (1) and (2) of Section 4A of Central Excise Act, 1944 issued a Notification bearing No. 10/2003 -CE (NT) dated 1 -3 -2003 to include all items falling under sub -heading 3808.10 of the Central Excise Tariff Act, 1985 for valuation on the basis of maximum retail price under Section 4A of Central Excise Act, 1944. In view of this notification, the appellants started paying duty on pesticides of 100 ml packing sold to persons other than M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. on the basis of maximum retail price as per Section 4A of the Act. However, in respect of the goods being sold in bulk though in individual packing of 100 ml to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd., the appellants continued to value the same under Section 4 of the Act at transaction value on the understanding that since these packs were not intended for retail sale and also did not bear any retail price, the same shall not come under the purview of Section 4A. Similar agreements were entered into with M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. for subsequent period and selling pattern continued to be the same. They were issued a show cause notice stating that since the pesticides were the notified items under Section 4A of the Act, the duty was chargeable on the basis of MRP even in respect of sales made to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd., as once the goods were specified under Section 4A, it is not necessary that the goods should be sold in retail and that only exemption provided is under Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and since the appellants did not come under any of the exceptions provided under Rule 34, the duty was required to be paid in terms of maximum retail price. The demand of Rs. 77,19,856/ - was accordingly confirmed and penalty of equivalent amount was imposed under Section 11AC and interest was ordered under Section 11AB of the Act.

(2.) THE learned Advocate for the appellants submits that in terms of Section 4A, the Central Government may by Notification in the official gazette specify any goods in relation to which it is required under the provisions of Standards of Weights and Measures Act, 1976 or the rules made thereunder or 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. It was submitted that as per this section, there were two requirements, first that the goods should be specified by Central Government by Notification and second is that the goods should be one in relation to which it is required 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 to declare on the package thereof the retail sale price of such goods. It was submitted that though the pesticides were notified by the Central Government as the goods to which the provisions of Sub -section (2) of Section 4A shall apply, they were not the goods in relation to which under the provisions of Standards of Weights and Measures Act, 1976 or the rules made thereunder or any other law for the time being in force they were required to declare on the package thereof the retail sale price of such goods. He invited our attention to the provisions of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 whereunder Rule 3 it has been stated that 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. Therefore, it was submitted that the subject provisions apply only if the packages are intended for retail sale. The retail sale has further been defined under Rule 2(q) of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 as "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". It was submitted that since the pesticides supplied to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. were not intended for sale but for free distribution by M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. they were not covered by the provisions of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and were under no obligation to declare maximum retail price and therefore the provisions of Section 4A in respect of the supply made to M/s. Mahyco Monsanto Biotech (India) Pvt. Ltd. were not attracted. In support, he refers to the clarification issued by the CBEC vide Circular No. 625 -16 -2002 -CX, dated 28 -2 -2002 where the applicability of Section 4A in the following situations was considered: (1) Bulk supplies for personal as well as industrial use. (2) Supplies in bulk against contracts to. DGS & D, Government Department, restaurants/hotels, etc. (3) Supplies to canteen stores depots (CSD) of the defence services (4) Items supplied free with another consumer items as marketing strategy. Example, one Lux soap free with one box of surf. (5) Items supplied free as marketing strategy or for gauging the market response. Example, physician samples, bubble gums etc. (6) Items meant for export, etc.

(3.) IN para 4 of the circular it was clarified that the wording of Section 4A(1) makes it very clear that it will apply only to such goods.."In relation to which it is required, under the provisions of the Standards of Weights 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.." In other words, if there is no statutory requirement under the provisions of Weights and Measures Act to declare the retail sale price on the packages, Section 4A will not apply. As for example, in respect of bulk sale of icecream to hotels/restaurants which are not meant for retail sale as such, the provisions of the Weights and Measures Act will not apply. Chapter V of the Weights and Measures (Packaged Commodity) Rules, 1977 mentions the instances where MRP is not required to be printed on the packages. Thus, in these cases valuation will have to be done under Section 4 of the Act.