COMMISSIONER OF CENTRAL EXCISE, JAIPUR -IIversusM/S MIRAJ PRODUCTS PVT. LTD.

                 [2024] 7 S.C.R. 117 : 2024 INSC 470

            Commissioner of Central Excise, Jaipur -II
                              v.
                 M/s Miraj Products Pvt. Ltd.
                    (Civil Appeal Nos. 143-147 of 2010)
                                 08 July 2024
               [Abhay S. Oka* and Pankaj Mithal, JJ.]

                           Issue for Consideration
       Whether the commodity sold by the respondent-assessee will
       attract Section 4A of the Central Excise Act, 1944.

                                  Headnotes†
       Central Excise Act, 1944 – s.4A – Valuation of excisable goods
       with reference to retail sale price – When not applicable –
       Standards of Weight & Measures (Packaged Commodity)
       Rules, 1977 – rr.2 (q), (g), (x)(iii), 34 – HDPE (High-Density
       Polyethylene Bag) bags containing 100 poly packs containing
       33 plus one smaller pack of chewing tobacco sold by the
       respondent, if was meant for retail sale and therefore be
       treated as a group package or it was a wholesale package
       not meant for retail sale:
       Held: In view of sub-section (1) of s.4A of the Excise Act, the
       question is whether there was any requirement in the 1977 Rules
       to declare the retail sale price of the commodity on the package –
       What is relevant is whether the package is of such nature that
       attracts any of the provisions of the 1977 Rules, which mandatorily
       require the mention of retail price on the package – In case of
       a package that does not attract provisions of the 1977 Rules
       regarding mentioning the retail price, even if the retail price is
       mentioned on the package, that itself will not attract sub-section
       (1) of s.4A – However, on facts, there is no requirement to deal
       with the issue of whether a poly pack containing 33 plus one small
       package was intended for retail sale as the specific case made
       out by the respondent in reply to the show cause notices that it
       was selling HDPE bags containing 100 poly packs containing 33
       plus one smaller pack was not rejected by the Commissioner –
       Therefore, the respondent was selling HDPE bags containing 100
       poly packs each to the distributors and dealers – The 1977 Rules
       do not require the display of price on such HDPE bags – Even
* Author
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       assuming that 100 poly packs were retail packages, HDPE bags
       would be covered by the definition of ‘wholesale package’ as defined
       in clause (iii) of r.2(x) of the 1977 Rules – Thus, the HDPE bags
       are not group packages within the meaning of r.2(g) – s.4A(1) of
       the Excise Act was not applicable to the goods subject matter of
       the show cause notices – Impugned judgment of the Tribunal not
       interfered with. [Paras 15-18]

                                Case Law Cited
       M/s.Varnica Herbs v. Central Board of Excise & Customs, New
       Delhi, 2004 (163) ELT 160 (Madras); Commissioner of Central
       Excise, Vapi v. Kraftech Products Inc. [2008] 5 SCR 251 : (2008)
       12 SCC 321 – referred to.

                                   List of Acts
       Central Excise Act, 1944; Standards of Weight & Measures
       (Packaged Commodity) Rules, 1977.

                                List of Keywords
       Excisable goods; Excise duty; Customs, Excise and Service Tax
       Appellate Tribunal; Show cause notices; Retail Sale; Retail sale
       price; Chewing tobacco; Poly packs; HDPE bags; Retail packages,
       Group packages; Wholesale package; MRP on poly packs; Retail
       sale of the poly packs; Display of price; Retail dealers; Retail price
       of the goods; Packages intended for retail sale; Declaration of retail
       sale price of the commodity on package.

                               Case Arising From
       CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 143-147 of
       2010
       From the Judgment and Order dated 07.11.2008 of the Customs,
       Excise and Service Tax Appellate Tribunal, Principal Bench, New
       Delhi in Final Order Nos.861-865 of 2008 in Appeal Nos. E/3675,
       3313/2005 – Ex. [DB] & 245/06 & 979-980/07
                           Appearances for Parties
       Ms. Nisha Bagchi, Ms. B. Sunita Rao, Ms. Gunmaya S. Mann, Tarun
       Kumar Sobti, Shambhavi Singh, Mukesh Kumar Maroria, Siddhant
       Kohli, Ms. Chinmayee Chandra, Ms. Aakansha Kaul, Shiv Mangal
       Sharma, Rupesh Kumar, Randhir Singh, Advs. for the Appellant.
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     Commissioner of Central Excise, Jaipur -II v. M/s Miraj Products
                               Pvt. Ltd.

      V. Lakshmikumaran, Ms. Charanya Lakshmikumaran, Ms. Apeksha
      Mehta, Ms. Neha Choudhary, Ms. Falguni Gupta, Ms. Umang Motiyani,
      M.P. Devanath, Punit Dutt Tyagi, Advs. for the Respondent.
                 Judgment / Order of the Supreme Court
                                 Judgment
      Abhay S. Oka, J.

      FACTUAL DETAILS
1.    These appeals take exception to the judgment and order dated 7th
      November 2008 passed by the Customs, Excise and Service Tax
      Appellate Tribunal (for short, ‘the Tribunal’). The issue involved, in
      short, is whether the goods sold by the respondent-assessee are
      covered by Section 4 or Section 4A of the Central Excise Act, 1944
      (for short, ‘The Excise Act’). The proceedings commenced based
      on the show cause notices issued to the respondent-assessee. The
      first show cause notice issued on 22nd April 2004, pertains to a brief
      period in April 2003. The second show cause notice is of 31st May
      2004 covering the period from May 2003 till December 2003. By a
      notification dated 1st March 2002 issued under sub-section (1) of
      Section 4A of the Excise Act, tobacco was notified by including the
      same at Sr.no.24A in the Notification with effect from 1st March 2003.
      The allegations made in both the show cause notices are similar.
      The show cause notice dated 22nd April 2004 was supplemented
      by an addendum dated 10th June 2004. The allegation against
      the respondent-assessee in the show cause notices was that the
      assessee was packing 33 pouches of 6 gms each of chewing tobacco
      and one pouch of 15 gms of chewing tobacco in a larger poly pack.
      It is alleged that MRP (maximum retail price) of Rs. 1 per pouch is
      mentioned on the pouches carrying a quantity of 6 gms, and MRP
      of Rs. 3 was mentioned on the pouch carrying 15 gms quantity. It is
      alleged that on the larger poly pack, a weight of 213 gms and MRP
      of Rs. 36 was mentioned. It is alleged in the show cause notice that
      the larger poly packs are group packages as defined in Rule 2(g) of
      the Standards of Weight & Measures (Packaged Commodity) Rules,
      1977 (for short, ‘the said Rules’). It is alleged that the group package
      made by the respondent was intended for retail sale. Further allegation
      in the show cause notice is that the weight of each group package
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       exceeds 10 gms. Therefore, the group packages of the respondent-
       assessee are not covered by the exemption under Rule 34(b) of the
       said Rules. Reliance was placed on a decision of the Madras High
       Court in the case of M/s.Varnica Herbs v. Central Board of Excise
       & Customs, New Delhi 1. Therefore, the respondent-assessee was
       called upon to pay duty on the poly pack sold by the assessee in
       the manner provided under Section 4A of the Excise Act. Apart from
       the differential duty, a demand was made for interest and penalty.
2.     The respondent replied to the show cause notice by contending
       that 100 poly packs, each containing 33 small pouches of 6 gms
       each, and one pouch of 15 gms are being put into one HDPE bag
       (High-Density Polyethylene Bag). The quantity of 15 gms is kept
       in a zipper pouch, on which duty is paid under Section 4A of the
       Excise Act on MRP. A factual contention was raised in the reply by
       the respondent-assessee that it is not selling poly packs of 33 small
       pouches directly to the customers. It is stated that the assessee is
       clearing only HDPE bags containing 100 poly packs, and HDPE bags
       are being sold to distributors or dealers. Therefore, the assessee
       did not make a retail sale. It is contended by the respondent that
       poly packs containing 33 pouches of 6 gms quantity are not group
       packages within the meaning of Rule 2(g) of the said Rules, and
       the said poly packs and HDPE bags are wholesale packages as
       defined in Rule 2(x) of the said Rules. Therefore, the contention is
       that Section 4A will have no application.
3.     After hearing the respondent, the order-in-original was passed
       by the Commissioner. By the said order dated 19th July 2005, the
       contentions raised by the respondent-assessee were rejected, and
       the demand made in the show cause notices was confirmed. The
       Commissioner referred to the declarations made on poly pack and
       held that it was in terms of Rule 16 of the said Rules, and Rule
       16 is a part of Chapter II of the said Rules, which deals with retail
       sales. It was held that a declaration on the poly packs confirms the
       requirement of Rule 6 and Rule 16 of Chapter II of the said Rules,
       and therefore, poly packs were intended for retail sale. The order
       further records that the sale price was mentioned on the poly pack,


1    2004 (163) ELT 160 (Madras)
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     Commissioner of Central Excise, Jaipur -II v. M/s Miraj Products
                               Pvt. Ltd.

      which was not the requirement of Rule 29 of the said Rules, which
      deals with declarations on the wholesale packages. However, the
      Commissioner held that the assessee’s HDPE bags, which contain
      100 larger poly pack packages and do not declare the sale price,
      would be wholesale packages. The Commissioner rejected the
      respondent’s contention that the poly packs were not sold in retail
      by holding that whether the manufacturer sold them in retail or not
      is relevant and what is material is whether the goods were intended
      for retail sale.
4.    By the impugned judgment, the Tribunal held that the decision of the
      Madras High Court in the case of Varnica Herbs1 was not a binding
      precedent. The Tribunal relied upon a decision of this Court in the case
      of Commissioner of Central Excise, Vapi v. Kraftech Products
      Inc.2. The Tribunal proceeded to set aside the Commissioner’s order.
      SUBMISSIONS
5.    The learned counsel appearing for the appellant submitted that the
      decision of this Court in the case of Commissioner of Central
      Excise, Vapi2, has no application as the assessee in the said case
      was selling three sachets of 3 gms of hair dye in one pack. Learned
      counsel pointed out that thus the total weight of the pack was 9 gms,
      which was covered by the exemption under Section 34(b) of the
      said Rules. The learned counsel pointed out that the weight of poly
      packs and HDPE bags is much more than 10 gms in the present
      case. Learned counsel submitted that what was being sold by the
      respondent was a group package meant for retail sale, and therefore,
      Section 4A was rightly applied by the Commissioner. Learned counsel
      submitted that even otherwise, as the poly packs are not sold by
      weight or measure, Rule 34 (b) of the said Rules has no application.
      Learned counsel submitted that the Tribunal had not considered the
      factual position in this case, which the Commissioner considered
      in detail. Learned counsel further submitted that one pouch of 15
      gms quantity of chewable tobacco forms part of the poly pack on
      which the respondent was admittedly paying duty in accordance with
      Section 4A of the Excise Act. Learned counsel has taken us through
      the relevant provisions of the said Rules.


2    [2008] 5 SCR 251 : (2008) 12 SCC 321
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6.     The learned counsel representing the respondent supported the
       impugned judgment and urged that the principles laid down by this
       Court in the case of Commissioner of Central Excise, Vapi 2, will
       squarely apply. It was submitted that HDPE bags containing 100 poly
       packs containing 34 pouches was not meant for retail sale; therefore,
       it cannot be treated as a group package, and it has to be a wholesale
       package that is not meant for retail sale. Learned counsel submitted
       that there is no need to interfere with the impugned judgment, which
       takes the correct view.
       CONSIDERATION OF SUBMISSIONS
7.     It is not in dispute that the respondent is dealing with chewing tobacco.
       From 7th April 2003, the respondent started the practice of packing
       together 33 pouches of 6 gms each and one pouch of 15 gms of
       chewing tobacco in a larger poly pack. The Revenue contends that
       as the larger poly pack has weight and MRP printed on it, the same
       was a group package intended for retail sale. The case made out
       in the show cause notices is that the poly pack contains a quantity
       of more than 10 gms of chewing tobacco, and therefore, exemption
       under Rule 34(b) of the said Rules will not apply. As can be seen
       from Clause (b) of Rule 34 of the said Rules, the exemption will
       apply to any package containing a commodity if the net weight of
       the commodity is 10 gms or less and if the same is being sold by
       weight. The stand of the respondent-assessee in reply to the show
       cause notices is that though the poly packs may have MRP printed
       on it, it was never intended for retail sale. Moreover, the respondent
       was packing 100 poly packs in one HDPE bag, and the HDPE bags
       were sold to distributors. The weight of the chewing tobacco in one
       poly pack or HDPE bag is more than 10 gms. Therefore, Rule 34(b)
       of the said Rules has no application.
8.     As far as facts are concerned, even in the order-in-original passed
       by the Commissioner, which was impugned before the Tribunal
       and in particular, clause (d) of paragraph 16, it is accepted that the
       respondent is packing 100 poly pack packages in one HDPE bag.
9.     The real controversy is whether the commodity sold by the respondent
       will attract Section 4A of the Excise Act. Sub-section (1) of Section
       4A of the Excise Act reads thus:
            “Section 4A. Valuation of excisable goods with
            reference to retail sale price. –
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   Commissioner of Central Excise, Jaipur -II v. M/s Miraj Products
                             Pvt. Ltd.

           (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 Measure (PC) Rules, 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.”
                                                   (emphasis added)
10. In the facts of the case, chewable tobacco has been notified
    under sub-section (1) of Section 4A. The question is whether the
    provisions of the said Rules framed under the Standards of Weights
    and Measure (PC) Rules, 1977, require a declaration of retail sale
    on the packages of the respondent. In short, the controversy is
    whether the packages made by the respondent-assessee are such
    that under the said Rules, there is a requirement to declare the
    retail price of the goods on the packages.
11. Now, we turn to the said Rules. Chapter II of the said Rules deals
    with the provisions applicable to packages intended for retail sale.
    Retail sale is defined in Rule 2(q) of the said Rules, which reads
    thus:
           “(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 group of individuals
           or any other consumer;”
     Therefore, to attract the definition of retail sale, a commodity has to
     be sold, distributed, or delivered for consumption by an individual,
     a group of individuals, or any other consumer. Thus, the sale
     or distribution of a commodity to a dealer who, in turn, sells the
     commodity to retail dealers will not be a retail sale.
12. Rule 2(g) defines group package which reads thus:
           “2(g) “group package” means a package intended for
           retail sale, containing two or more individual packages, or
           individual pieces, of similar, but not identical (whether in
           quantity or size), commodities;
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            Explanation.- Commodities which are generally the same
            but differ in weight, measure or volume, appearance or
            quality are similar but not identical commodities;”
       Therefore, a package can become a group package, provided
       it is intended for retail sale. In this case, there is no dispute that
       the respondent’s poly packs and HDPE bags contain more than 2
       individual packages of similar commodities but are not identical in
       quantity. The question is whether the package made by the respondent
       was intended for retail sale.
13. Rule 2(x) of the said Rule defines “wholesale package”, which reads
    thus:
            “(x) “wholesale package” means a package containing-
            (i) 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; or
            (ii) a commodity sold to an intermediary in bulk to enable
            such intermediary to sell, distribute or deliver such
            commodity to the consumer in smaller quantities; or
            (iii) packages containing ten or more than ten retail
            packages provided that the retail packages are labelled
            as required under the rules.”
14. Now, we turn to the order-in-original and the findings recorded
    therein. The Commissioner held that Rules 6 and 16 form a part of
    Chapter II of the said Rules and, therefore, apply to the packages
    intended for retail sale. The Commissioner found that the poly packs
    contained a declaration in terms of both Rule 6 and Rule 16. The
    Commissioner referred to the format of declaration to be made under
    Rule 29, which is a part of Chapter IV of the said Rules, which did
    not apply to packages intended for retail sale. The Commissioner
    held that Rule 29 does not require a declaration of sale price on
    the wholesale package. The Commissioner found that the poly pack
    containing 33 plus one small packages contained a declaration of the
    price. Therefore, the Commissioner held that the poly packs were
    intended for retail sale. Otherwise, there was no reason to mention
    MRP on the poly packs. The Commissioner held that the intention to
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   Commissioner of Central Excise, Jaipur -II v. M/s Miraj Products
                             Pvt. Ltd.

     make retail sale of the poly packs was clear, and, therefore, whether
     poly packs were sold by way of retail sale was irrelevant.
15. As noted earlier, in view of sub-section (1) of Section 4A, the question
    is whether there is any requirement in the said Rules to declare the
    retail sale price of the commodity on the package. What is relevant
    is whether the package is of such nature that attracts any of the
    provisions of the said Rules, which mandatorily require the mention
    of retail price on the package. In case of a package that does not
    attract provisions of the said Rules regarding mentioning the retail
    price, even if the retail price is mentioned on the package, that itself
    will not attract sub-section (1) of Section 4A of the Excise Act.
16. However, on facts, we may not be required to deal with the issue
    of whether a poly pack containing 33 plus one small package was
    intended for retail sale. The reason is that the specific case made
    out by the respondent in reply to the show cause notices was that
    the respondent was selling HDPE bags containing 100 poly packs
    containing 33 plus one smaller pack has not been rejected by the
    Commissioner. In fact, the Commissioner seems to have accepted
    the contention, as seen from Clause (d) of paragraph 16 of the order-
    in-original. In clause (d), the Commissioner held thus:
           “(d) Further the intentions of the assessee that HDPE
           bag is a wholesale package and the larger polypack
           packages are group packages intended for retail
           sale is also expressed from the fact that there is
           no requirement under Rule 29 of the Standards of
           Weights & Measures (Packaged Commodities), Rules,
           1977 of mentioning sale price or unit sale price or the
           MRP on a wholesale package whereas their larger
           polypack package contains the declaration “MAX
           UNIT SALE PRICE” and they are not declaring sale
           price on HDPE bag (it has also been admitted by them
           in the reply to Show Cause Notice that their HDPE bag
           is a wholesale package), therefore, this larger polypack
           package containing the declaration “MAX UNIT SALE
           PRICE” cannot be considered as a wholesale package
           but can be considered only a group package intended
           for retail sale. Only the HDPE bag of the assessee,
           which contains 100 larger polypack packages and
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               does not contain declaration of sale price, would be
               a wholesale package.”
                                                    (emphasis added)
17. In so many words, the Commissioner held that an HDPE bag
    containing 100 poly packs does not contain a declaration of selling
    price and therefore, it would be a wholesale package. There is no
    finding recorded that what is distributed or sold by the respondent
    is a poly pack containing 33 plus one small pack. The respondent’s
    case that 100 poly pack packages are being put in one HDPE bag
    has been accepted by the Commissioner. Therefore, the respondent
    is selling HDPE bags containing 100 poly packs each to the
    distributors and dealers. The said Rules do not require the display
    of price on such HDPE bags. Even assuming that 100 poly packs
    were retail packages, HDPE bags would be covered by the definition
    of ‘wholesale package’ as defined in clause (iii) of Rule 2(x) of the
    said Rules. Thus, the HDPE bags are not group packages within
    the meaning of Rule 2(g).
18. Though the impugned judgment is not satisfactorily worded, for the
    reasons which were recorded above, the ultimate conclusion recorded
    in the impugned judgment that Section 4A(1) of the Excise Act was
    not applicable to the goods subject matter of the show cause notices,
    cannot be faulted with. Hence, there is no reason to interfere with
    the impugned judgment.
19. Accordingly, the appeals are dismissed with no order as to costs.
       Result of the case: Appeals dismissed.



       †
           Headnotes prepared by: Divya Pandey