NAISA INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE, DAMAN

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of toiletries and cosmetics which are marketed by M/s. Amway India Enterprises (hearinafter referred to as Amway). The three products in dispute before us are car wash, G&H body shampoo and Satinique 2 -in -1 shampoo. Till April 2003, the appellants were putting 30 sachets each containing less than 10 gms. of the product in a box which was clearly marked to show that the goods are manufactured by the appellants for Amway and the box was also marked in capital letter with the words Wholesale Pack and each box was thereafter put into a shipper carton. After April 2003, instead of a mono carton box containing 30 sachets, the appellants started packing sachets directly into a shipper and between 540 to 900 sachets are put in a shipper which was boldly marked in capital letters with the words Wholesale Pack. The appellants paid excise duty under Section 4 of the Central Excise Act, 1944 at the time of removal. Amway in turn sold the products to the distributors and distributors further sold the individual sachets to the consumers through retailers at the retail sales price marked on the each of the sachets. Four show cause notices came to be issued starting from 16 June 2004 with one of them invoking extended period and involved a demand for differential duty of Rs. 1,38,37,327/ - and the subsequent three show cause notices were issued on the same issue periodically. The total demand in the four show cause notices for the period from 1st September 2000 to March 2005 amounts Rs. 2,29,89,046/ -. The four show cause notices culminated in the impugned order involving a total duty demand of Rs. 2,29,89,046/ - with interest thereon and a penalty of Rs. 1,58,37,327/ -.

(2.) SHRI Hardik Modh, learned advocate, appearing on behalf of the appellants submitted that the mono carton containing 20 to 30 sachets up to March 2003 was a wholesale pack and cannot be considered as a multi piece package as defined under Rule 2(j) of Standards of Weights and Measures (PC) Rules, 1977 (PC Rules for short). The package is covered by the definition of wholesale package as contained in it PC Rules. The mono carton was not intended for retail sale either in individual form or package as a whole. After April 2003, the number of sachets in a carton was increased to 540 to 900 and such a package is clearly a wholesale package and cannot be considered as a multi piece package. Extended period has been wrongly invoked since there was no intention to evade duty and therefore no penalty was leviable. The learned DR reiterates the findings of the Commissioner.

(3.) THERE is no dispute that provisions of Section 4A requiring assessment on the basis of M.R.P. would apply to the products only if such goods are covered by the PC Rules as regards declaration of R.S.P on such goods and the same have been notified under Section 4A and in this case the relevant tariff heading have been notified for the purpose of M.R.P. based valuation under Section 4A of the said Act. The appellants are claiming exemption under Rule 34 of PC Rules which provides that nothing contained in PC Rules shall apply to a package if the net weight or measure of the commodity is 10 gms or 10 ml if sold by weight or measure. Again there is no dispute that the sachets contain less than 10 ml and therefore exempted from the provisions of PC Rules. However, Rule 2(j) defines multi piece package which are excluded from exemption under Rule 34. According to Rule 2(j) multi piece package means a package containing two or more individual packages or pieces of the same commodities of identical quantity, intended for retail sale, whether in individual pieces or the package as a whole. Rule 2(x) defines wholesale package as a package containing a number of retail packages where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer, (ii) a commodity sold to an intermediary in bulk to enable such intermediary to cell, distribute or deliver such commodity to the consumer in smaller quantities and packages containing 10 or more than 10 retail packages provided that the retail packages are required under the Rules. The contention of the appellants is that the packages in dispute are covered by the definition of wholesale package and therefore they are excluded from the application of PC Rules in view of the fact that provisions are applicable only to packages intended for retail sale. We find that the Commissioner has quoted Rule 17 of PC Rules which gives the details of additional declaration to be made on combination packages. But before going to Rule 17, he should have determined whether the package in dispute can be considered as a retail sale package or a wholesale package. In view of the definition of wholesale package in Rule 2(x), unless the package is intended to be sold directly to an individual consumer, it cannot be considered as a multi piece package but has to be treated as a wholesale package. The Commissioner has observed in para 29 of his order that he further found that such multi piece packages are capable of being sold directly to the retailers and as such it seems to be a wholesale package. This is not the conclusion that arises from Rule 2(x) which defines wholesale package. The Rule also makes it clear that to be classified as a wholesale package, the package must be intended for sale, distribution or delivery to an intermediary. No evidence has been put forth by the Revenue to show that the packages in dispute are being sold directly to the ultimate consumers. In the absence of such evidence, Revenue has no case. We also find that the decision of the Tribunal in the case of C.C.E., Mumbai -II Overseas Karishma Cosmetics Private Ltd. in Order No. A/484/WZB/ MUM/ 2006/C -lV = 2006 (201) E.L.T. 564 (Tribunal) is relevant. In this order it was held that the boxes containing 24 pieces of lipstick/nail polishes cannot be considered as retail packs. The learned advocate also cited the decision of the Tribunal in M/s. Swan Sweets Pvt. Ltd. and others vide Order Nos. A/218 -227/WZB/2006/C -III [2006 (198) E.L.T. 565 (Tribunal)] wherein it was held that confectionery packed in pouches of 500 gms or in jars of 720 gms are wholesale packages and cannot be considered as retail packages. We find that both these decisions are applicable to the facts in this case. In view of the above discussion the appeal filed by the appellants is allowed with consequential relief to the appellants.