Holding

Section 4A governs valuation only when the goods are excisable, packaged, subject to a statutory requirement to print the retail sale price, notified by the Government, and the price is used for valuation; otherwise valuation falls under Section 4.

Summary

The Supreme Court examined the scope of Sections 4 and 4A of the Central Excise Act, 1944 in relation to the Standards of Weights and Measures Act, 1976 and its Packaged Commodities Rules. It held that Section 4A applies only when five conditions are satisfied: the goods are excisable, sold in packages, a statutory requirement exists to print the retail sale price on the package, the Central Government has notified the goods, and valuation is based on the declared retail price less any abatement. The nature of the sale (wholesale or retail) is irrelevant; the key is the requirement to display MRP. Applying this test, the Court allowed the appeals of Jayanti Food (ice‑cream) and Nestle (KITKAT) and held that Section 4A did not apply to them, while it dismissed the revenue appeals concerning telephones, refrigerators, mineral water and electric lamps where the conditions for Section 4A were met.

Issues considered

The applicability of Section 4A to goods sold in bulk or to intermediaries where MRP is not printed on the package.
Whether the Standards of Weights and Measures (Packaged Commodities) Rules require declaration of retail sale price on the specific packages in question.
The interpretation of "retail package", "retail sale", "wholesale package" and the exemption under Rule 34 of the Rules.
The correct valuation basis – Section 4A (retail price) versus Section 4 (transaction value) – for the various categories of goods.
The effect of Board Circulars and notifications on the assessment of duty.

Legislation cited

Central Excise Act, 1944s. 4, s. 4A
Standards of Weights and Measures Act, 1976s. 2(v)
Standards of Weights and Measures (Packaged Commodities) Rules, 1977s. 15, s. 16, s. 17, s. 23, s. 24, s. 2(o), s. 2(p), s. 2(q), s. 2(r), s. 2(x), s. 3, s. 34, s. 6

Subjects

Central ExciseSection 4ARetail Sale PriceMaximum Retail PriceStandards of Weights and MeasuresPackaged Commodities RulesWholesale vs RetailRule 34 exemptionValuation of excisable goods

Judgment

JAYANTI FOOD PROCESSING (P) LTD. A
v.
COMMISSIONER OF CENTRAL EXCISE, RAJASTHAN

AUGUST 22, 2007

[ASHOK BHAN AND V.S. SIRPURKAR, JJ.] B

Central Excise Act, 1944; Ss. 4, 4A/Standards of Weights and Measures
Act, 1976/Standards of Weights and Measures (Packaged Commodities) Rules,
1977; Rr. 2(o), 2(p), 2(q), 2(r), 2(w), 2(x), 3, 6, 15, 16, 17, 23, 24 & 34 and C
Notification No.62511612002-CA dated 28.2.2002:

Valuation of excisable goods-Declaration of retail sale price on
packages-Ss.4 and 4A of 1944 Act and r.34 of 1977 Rules-Scope and
ambit of-Held: In terms ofS.4A of 1944 Act, valuation ofthe excisable goods
for the purpose of assessment could be made when the goods are being sold D
in packages-In terms of provisions uls.4A(i) of 1994 Act and SWM Act!
Rules, declaration ofretail sale price on the package ofgoods is a requirement
provided the goods are not covered under general exception ulr.34 of the
Rules-If assessee is successful in showing that there is no such requirement
under the Act and the Rules, then S.4A would not be applied-Nature of sale
is of r.io consequence, the material consideration is that such sale of the E
goods should be in package for displaying MRP on package-Jn the facts
and circumstances of th'e present cases, MRP of the goods in question rightly
declared by the assesset!S, and hence, valuation of goods should be made ul
s.4A of the 1944 Act.

Words and Phrases: F

'retail dealer~ 'retail package', 'retail sale', 'retail sale price', 'wholesale
dealer', and 'wholesale package'-Meaning of in the context of the Standards
of Weights and Measures (packaged Commodities) Rules, 1977.

Civil Appeal Nos.2819 of 2002 and 1738 of 2004 were filed by the G
assessee challenging the order of the Tribunal pertaining to levy of excise
duty on the sale of ice-creams and KITKAT Chocolates respectively; remaining
13 appeals were filed by the Revenue challenging the order of the Tribunal in
favour of the assessee regarding levy of excise duty on the sale of telephone
n1 H
222 SUPREME COURT REPORTS [2007} 9 S.C.R.

A instruments, Refrigerators, bottled mineral water and electric filament lamps.
The issue in all these appeals pertains to the interpretation of Sections 4 and
4A of the Central Excise Act, 1944 and the provisions of Standards of Weights
and Measures Act, 1976 as also the Standards of Weights and Measures
(Packaged Commodities) Rules, 1977. ·

B The question which arose for determination in all these appeals was
relating to the scope and ambit ofS.4A as added in the Central Excise Act,
1944 by way of amendment by Act 26of1997.

Allowing the appeals filed by the assessees and dismissing the appeals
C filed by the Revenue, the Court

HELD: 1.1. Sectio~ 4A was introduced in the Central Excise Act with
the sole idea to end the uncertainty caused in determining the value of the
go;,ds under Section 4 and then assessing the duty under that Section. Section
4 was the basic formula for valuation of excisable goods and for the purposes
D of charging of the duty of excise. It provided the mechanism of determining
the valuation of the goods under various circumstances.
(Para 2) (233-D, EJ

1.2. Sub-section (1) of Section 4A of the Act was linked with the
packages of the goods in respect of which the retail sale price was required
E to be printed under the Standards of Weights and Measures Act and the Rules
made thereunder or any other law. (Para 2) (233-F, G]

l.3. After introduction of Section 4A in the Act, the nature of sale lost
its relevancy in the sense that the valuation did not depend upon the factor
whether it was a wholesale or sale in bulk or a retail sale. The whole section
F covered the goods which were packaged and sold as such with the rider that
such package had to have a retail price thereupon under the provisions of
SWM Act, Rules made thereunder or under any other law. Thus, viewed from
the plain language of the Section, where the goods are excisable goods and
are packaged and further such packages are required to mention the price
G thereof under the SWM Act, Rules made thereunder or under any other law
and further such goods are specified by the Central Government. by
notification in the Official Gazette, then the valuation of such goods would be
on the basis of the retail sale price of such goods and only to such goods the
provisions ofsub-section (2) of Section 4A of the Act shall apply.
(Para 2) (233-H; 234-A-CJ
H
JAYANTI fOOO PROCESSING (P) LTD. v. COMMNR. Of CENTIIAL liXCISE. RAJASTHAN 223

1.4. If under-mentioned factors are applicable to any goods, then alone A
the valuation of the goods and the assessment of duty would be under Section
4A of the Act:

(i) The gobds should be excisable goods;
(ii) They should be such as are sold in the package;
B
(iii) There should be requirement in the SWM Act or the Rules
made thereunder or any other law to declare the price of such
goods ·relating to their retail price on the package.
(iv) The Central Government must have specified such goods by
notifica(ion in the Official Gazette; C
(v) The valuation of such goods would be as per the declared retail
sale price on the packages less the amount of abatement.
[Para 2) [234-D-F)

1.5. When the Rules under the Standards of Weights and Measures D
(Packaged Commodities) Rules are read along with provisions of Section 4A
of the Act are read, it would be clear that where there is a general exemption
as under Rule 34 of the Rules such goods and/or packages of such goods
shall not be covered by Section 4A (1) and (2) of the Act. However, all such
packages which are covered under Chapter II, more particularly under rules
6(l)(t), 15, 16 and 17 of the Rules, would be governed under Section 4A of E
the Act as such packages are required to declare the retail sale price on the
packages. The packages covered by Rule 29 would be outside the purview of
the retail sales as under that Rule retail prices are not required to be
mentioned on the package. !Para 5) 1237-F, G)

Civil Appeal No.2819 of2002: F

2.1. The plain la~guage of Section 4A(l) unambiguously declares that
for its application there has to be the "requirement" under the SWM Act or
the Rules made thereunder or any other law to declare the MRP on the
package. If there is no such requirement under the Act and the Rules, there
would be no question of application of Section 4A. Thus if the appellant is G
successful in showing that there is no requirement under the SWM Act or
the Rules made thereunder for declaration of MRP on the package, then there
would be no question of applicability of Section 4A(l) & (2) of the Act. Even
if the assessee voluntarily displays on the pack the MRP, that would be of no
use if otherwise there is, no requirement under the SWM Act and the Rules H
224 SUPREME COURT REPORTS (2007] 9 S.C.R.

A made thereunder to declare such a price. (Para 12) (240-B, DJ

2.2. In this case, the four litre pack of ice cream is not meant to be sold
to the consumer directly. The definition of "retail package" and one look at
Rule 2(p) would show that in order to be covered under that definition such
package must have been intended for retail sale for consumption by an
B individual or a group of individuals. These two definitions would have to be
read together to properly understand the scope thereof. In order that the
package should be properly described as a "retail package", the sale has to
be through the "retail sale" for consumption by an individual or a group of
individuals. In the present case, the sale of the package of ice cream was only
C to the hotel. It may be that the hotel may ultimately sell the commodity therein,
i.e., the ice-cream (not the package) to the individuals or the group of
individuals. This was not a sale in favour of an individual or group of
individuals. (Para 13) (240-G-H; 241-A)

2.3. It is undoubtedly true that for a sale being a "retail sale" it need
D not contain material for the consumption of a single individual only, it can be
for a group of individuals also. However, a hotel to which the package is
supplied cannot be covered in the term "individual or group of individuals"
as contemplated in Rule 2(p) defining "retail package". However, 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
E or the Rules made thereunder or any other law for displaying the MRP on
such package. (Para 13) (241-B, q

2.4. 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 >
F 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 assessee 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)(1) to mention the "retail
G sale price" on the package. (Para 13) (241-D, E)

2.5. It is true that if the unamended section is to be made applicable, the
ice-cream pack of four litres would certainly be covered under Rule 2A.
However, Rule 3 explains that provisions of Chapter II would apply to packages
intended for "retail sale" and expression "package" wherever it occurs in
H
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJ AST 1JAN 22 5

the chapter shall be construed accordingly. It is, therefore, clear that the A
"package" which was sold by the assessee could not be termed as "retail
package" nor the sale thereof be termed as a "retail sale" and as such there
was no requireme._t of mentioning the "retail sale price" on that package.
All this has been completely missed in the order of the Tribunal.
(Para 14) (241-H; 242-A-B) B
2.6. The package in question would certainly come within the definition
of "wholesale package" as defined in Rule 2(x)(ii) as it contained the
commodity (ice-cream) and was sold to intermediary (Hotel) for selling the
same to the consumer in small quantities. Then Rule 29 would apply to such
package which does not require the price to be displayed on the package. What C
is required to be stated is (a)name and address of the manufacturer (b) identity
ofcommodity and (c) total number of retail packages or net quantity.
(Para 15) (242-8, CJ

2.7. Though the ice-cream cannot be termed as "raw material" for any
industry. However, the words "or for the purposes of servicing any industry" D
are broad enough to include the transaction in question, i.e., the sale of a
pack of ice-cream to the retail industry. Hotel does not manufacture the ice-
cream and is depended entirely upon the sale of ice-cream to it by the assessee
for ultimately catering the commodity in the package, i.e. ice-cream to the
ultimate consumer. Hence, this can ~ squarely covered in the term "servicing
any industry". (Para 16) (242-G, H; 243-A) E
2.8. A hotel is a hospitality industry and undoubtedly supplies food and
eatables to the consumers. Therefore, to supply the ice-cream to such a hotel
would be doing what is required for the hotel. In that sense the supply by way
of sale of ice-cream which is ultimately sold to the "ultimate consumers" F
would, no doubt, be c;overed in the term "servicing the hotel industry". It is
an act of helpful activity - help, aid. or to do something. It also includes
supplying of utilities or commodities. Thus, a narrow interpretation to the
term "service any industry" cannot be given. Hence, the "package" sold by
the assessee to the hotel was, apart from being for the exclusive use of the
hotel was, also "for the purpose of servicing that industry". If that is so, then G
the SWM (PC) Rules ,would not apply at all. (Para 16) (243-C; 243-E-F)

Coal Mines Provident Fund Commissioner v. Ramesh Chander Jha, AIR
(1990) SC 648, relied on.

H.
226 SUPREME COURT REPORTS (2007) 9 S.C.R.

A 2.9. The Tribunal has given very narrow meaning to Rule 34 by firstly
holding that ice-cream is not a "raw material". There the Tribunal was right
but the Tribunal was not right by holding that the words "servicing any
industry" were not applicable to s~ch "package". If that is so, Section 4A
will not apply to the ice-cream sold by the assessee. (Para 17) (243-G-Hl

B Civil Appeal No.1738 of 2004:

3.1. The KITKAT chocolate, though a notified commodity, need not, in
all cases be assessed under Section 4A of the Act. (Para 26) (246-H)

Commissioner of Central Excise Ludhiana v. Pepsi Foods Ltd, (2005)
C 186 ELT 603 and CC£, Vadodara v. Dhiren Chemical Industries, (2002) 139
ELT 3, referred to.

3.2. It may be that Chocolates manufactured by the assessee are required
to bear the declaration of MRP but that cannot be true of all the chocolates.
D In this the Tribunal has ignored para 6 of the Notification No.625/16/2002-
CX dated 28.2.2002 wherein it is specifically provided that there would be
instances where the same notified commodity would be partly assessed on the
basis of MRP under Section 4A of the Act and partly on the basis of normal
price prior to 1.7.2000 or transaction value from 1.7.2000.
(Para 27) [248-B-C)
E
3.3. Merely because the goods are specified items under Section 4A(i),
that by itself will not be a be all and end all of the matter as before such goQds
are brought in the arena of Section 4A(i), there would have to be the
satisfaction of a particular condition that the packages of such goods are
"required" under the SWM Act and the Rules made thereunder to declare
F the MRP. The Tribunal has even erred in holding that the circular dated
28.2.2002 is not applicable to the present case. A cursory glance at the
circular would suggest that it is applicable to the present case where two
commodities have been sold as a market strategy. (Para 27] [248-C-D]
3.4. The Tribunal has ·held, relying on the expression "may be" in contra-
G distinction to the expression "shall be" that even if a portion of the goods are
sold at a lower rate than the MRP affixed therein, the assessable value in
respect of such percentage of goods will not be lowered on the ground that
they have actually been sold at a lower rate. But, the thrust of the Explanation ,,-.
I is not as the Tribunal has shown but is more on as to what retail price should
H be. The explanation provides that the "retail price", i.e., the maximum price
JAY ANTI FOOD PROCESSING (P) LTD. '· COMMNll. OF CENTRAL EXCISE, RAJASTHAN 227

would include all taxes, local or otherwise, freight, transport charges, A
·-: commission payable to dealers and all charges towards advertisements,
delivery, packing, forwarding and the like. The further thrust of the
explanation is on the notion that the price is the sole consideration of such
sale. The Tribunal has mixed up Explanation I with Explanation II which is
not permissible. (Para 28) (248-F-H)
B
3.5. The case of the assessee has been consistent from the beginning
that the chocolates were sold to Pepsi under a contract for a particular value
and the said chocolates were to be offered as a free gift to the one who
purchased a particular bottle of Pepsi (1.5 litres). The Tribunal has further
expressed that the argument that the bar of KITKATwas n,ot to be sold b{ C
Pepsi in the retail market but was to be given as a free gift, would be of no
consequence as even if the assessee itself intended to give the bar of KITKAT
as a free gift to its customers along with other item, the appellant would not
be in a position to claim that there is no assessable value of the goods and as
such no duty of excise shall be charged on the same. The logic is clearly
faulty. In the given. circumstances, the assessee would undoubtedly be l.J
I •
assessable to duty un,der Section 4 of the Act. (Para 28) (249-A-C)

3.6. It was rightly contended before the Tribunal that the thrust of
Section 4A is on the packages and not on the commodity and it is only where
the goods are sold in ,the packages that the section would be attracted. The
submission was undoubtedly right. The Tribu11 'tile rejecting this E
submission, has clearly ignored the language of Se'-·- .• 4A(i) of the Act.
(Para 28) (249-C-D)

3.7. What is material is the definition of "retail sale price". The
requirement of Rule 6(l)(f) is specific. It requires the retail sale price of the F
package be printed or displayed on the package. If there is no sale involved of
the package, there would be no question of Rule 6(1)(t) being attracted.
(Para 29) (249-E)

3.8. Unless there is an element of sale, as contemplated in Section 2(v),
Rule 6(1)(t) will not be attracted and thus such package would not be governed G
under the provisions of SWM (PC) Rules which would clearly take such
package out of the restricted arena of Section 4A(l) of the Act and would put
it in the broader arena of Section 4 of the Act. (Para 29) (249-F-G)

Civil Appeal Nos. 2150-2151/2004; 1144/2004; 384712005 and 6425/
H
228 SUPREME COURT REPORTS [2007) 9 S.C.R.

A ·2005:
4.1. The nature of sale is not important, what is important is the
requirement of printing the MRP on the packages. It was not and indeed
cannot be disputed that the telephones in question are also sold in the retail
market in the same form and the same package and that there is a
B requirement of printing the MRP on each package of the Push Button
Telephone. If that is so, the package would be covered under the relevant
SWM (PC) Rules. (Para 33) [252-8-CJ
4.2. Nothing found in the SWM (PC) Rules that where a customer
purchase a large number of packages, such bulk purchase itself rules out
C the applicability of the SWM (PC) Rules. (Para 33) [252-CJ

4.3. There can be no doubt that the telephone instruments were to be
used by the consumers. Therefore, the telephones were sold to the three
instrumentalities, there is no escape from the fact that these telephones were
meant to be ultimately used by the consumers and it is only with that object
D that the said telephones were purchased by the three instrumentalities from
its manufacturers. Therefore, the sale of the telephone instruments would
be covered in the term "retail sale". (Para 33) [252-D, El . ,., .

4.4. When a "retail package" containing any commodity is produced,
E distributed, displayed, delivered or stored for sale for consumption by an
individual or group of individuals, it would be a "retail package". In this case,
admittedly, assessees provided these instruments to the individual customers,
though not by way of a "sale" but for their use. The "package", therefore,
undoubtedly be a "retail package". [Para 33( (253-A-BJ

F 4.5. It cannot be said that the assessees are not the "ultimate ...
consumer". The purchasers, in this case, undoubtedly, used the telephone
instruments for supply to their customers on rental basis or on some other
basis. It cannot be, therefore, said that they would be excluded from the term
"ultimate consumer". [Para 331 [253-C(

G 4.6. It is open to the Revenue to check this factual position again and
to proceed if the MRP is not printed on the part of any particular assessee.
(Para 33) [253-Fl

4.7. On the contention that some of the assessees had not paid the duty
on the MRP but on the contract price it is clarified that if that is so, then the
H
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJASTHAN 229

Revenue would be free to take action against the concerned assessees. A
(Para 33) (253-FJ

4.8. There does not appear any factual assertion on the part of the
Revenue that the packages contained a declaration that they were specially
packed for a particular industry for servicing the same. In the absence of
this factual background the applicability of Rule 34 is completely ruled out. B
(Para 34) (254-8-C]

Civil Appeal Nos. 2877of2005; 6168 of2005 and 5840 of2006:

5. The Tribunal has held that these cases are identical with the cases
involving the s~le of telephone. Since the judgment of the Tribunal pertaining C
to the sale of teiephones in the earlier part of this judgment has already been
approved, no reasons are found to take a different view in case of the
Refrigerators in the present appeals. However, it is open to the Revenue to
take an action bi accordance with law if it is found that the duty is paid on the
contract price ~nd not on MRP. (Para 35) (255-8-C) D
Civil Appeal No. 498 of 2006:

6. This c~se is also identical with the case involving the manufacture
and sale of telephones by ITEL. It is admitted position that the goods here
were sold with the MRP declared on the packages as per the SWM (Pq Rules. E
No reason is found to take any different view. (Para 361 (255-Fl

Civil Appeal Nos.6559-60 of2005:

7.1. In fact, the package of mineral water bottles in question cannot be
viewed as a "wholesale package". It does not come within the definition of F
Rule 2(x)(i) as the "package" was not intended for sale, distribution or delivery
to an intermediary. On the other hand it is sold directly by the assessee to
Jet Airways and the Jet Airways supplied the said bottles to their passengers,
and thus, there is no further sale by the Jet Airways of these mineral water
bottles. Theref(lre, it is obvious that after the first sale bottles go diredly to
the "ultimate consumers". There would be, therefore, no question of G
application of Rule 2(x)(i). Rule 2(x)(ii) will also not apply as this does not
amount to a commodity sold to an intermediary in bulk so as to enable such
intermediary to sell, distribute or deliver, the said commodity to the consumer
in smaller quan,tities. The concerned period regarding which the show cause
notice was given is April, 2002 to September, 2002. Therefore, Rule 2(x)(iii) H
230 SUPREME COURT REPORTS [2007] 9 S.C.R.

A which came by way of an amendment into 2000 would also have to be
considered. However, even that clause is not applicable as the said "package"
though contains more than 10 bottles, those bottles cannot be viewed as the
"retail package" nor is there any rule requiring labeling ·the said "retail
package" and declaring the price thereof. In fact there is no price involved as
B it is specifically written on the package "not meant for sale". It is, therefore,
obvious that the "package" containing 12 bottles cannot, therefore, be viewed
as a "wholesale package". Hence, there is no question of the applicability of
Section 4 of the Act as the "package" as it is a retail sale of the package to
the assessee which supplies the same to the passengers on demand.
(Para 38) (257-A-D)
c 7.2. Twelve bottles were packed in a wrapper and the wrapper contained
the MRP price though the bottles themselves did not have the price. Therefore,
the view taken by the Commissioner (Appeals) and the Tribunal is accepted
that the MRP was correctly mentioned and as such the assessment should
have been under Section 4A of the Act and not for the reasons given by the
D Tribunal that the ultimate verdict of the Tribunal that the valuation should be
under Section 4A of the Act is upheld. (Para 38) (257-G-H; 258-A)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2819 of2002.

From the final Order No. 1912000-A dated 10.1.2002 of the Customs
E Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. El
18971200 l-A.

WITH

Civil Appeal Nos. 2150-2151/2004, ll44/2004, 1738/2004, 1385/2005, 28771
F 2005, 384712005, 616812005,.612512005, 6559-6012005, 49812006, 475412006, 58401
2006.

Joseph Vellapally, Ravinder Narain, Sonu Bhaniagar, Ajay Aggarwal
Rajan Narain, A. Subba Rao, Ashok K. Srivastava, B. Sunita Rao, K. Subba
Rao, B.K. Prasad, Ritin Rai (for Mis K.J. John & Co.) Subrat Birla, S.C. Birla,
G A.V. Palli, Rekha Palli, Alok Yadav, Rajesh Kumar, M.P. Devanath, Vinay Garg,
Deepam Garg, Renu Choudhary, Shiv Khoma, Amit Sharma, Saravavanan
Anupam Lal Dass, C. Sarvana, Nikhil Nayyar, Anikt Slghal, Tarun Gulati,
Praveen Kumar, Jaiveer Shergil and Raghvesh Singh for the appearing parties.

The Judgment of the Court was delivered by
H
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE, RAJASTIIAN 1v.s. SIRPURKAR.1.1 231

V.S. SIRPURKAR, J l. This judgment will dispose of in all 15 appeals. A
They can be classified in two groups. Two appeals are filed by the Assessees
challenging the order of Customs, Excise & Gold (Control).Appellate Tribunal
(hereinafter referred to as "the Tribunal"), they being CA 2819/2002 tiled on
behalf of Jayanti Food Processing (P) Ltd., for sale of Ice-creams ·and CA
1738/2004 filed on behalf of Nestle India Limited pertaining to KITKAT
Chocolates. The remaining appeals are filed by the Commissioners of Central B
Excise from various places and they are CA 2150-51/2004 and CA6425/2005
against ITEL Industries, CA 1144/2004 and CA 4754/2006 against BPL Telecom
Ltd., CA 1385/2005 against Himachal Exicom Communication Ltd. These appeals
by themselves fonnulate into one group relating to the sale of telephone
instruments by the assesses. CA 2877/2005, CA6168/2005 and CA5840/2006 C
against Electrolux Kelvinator and Electrolux India relate to the sale of
Refrigerators. Further CA6559-6560/2005 against Explicit Trading and Marketing
Pvt.Ltd., pertain to the sale of bottled mineral water. Lastly CA498/2006
against Ramani Power Cables Pvt., Ltd. relate to the sale of Electric Filament
Lamps.
D
2. All these appeals pertain to the interpretation of Section 4 and 4A
)r of the Central Excise Act, 1944 (hereinafter referred to as "the Act") and the
provisions of Standards of Weights & Measures Act, 1976 (hereinafter referred
to as "the SWM Act") as also the Standards of Weights & Measures (Packaged
Commodities) Rules, 1977 (hereinafter referred to as "the SWM (PC) Rules"). E
In the appeals tiled by the Assessees, Jayanti Foods and Nestle India the
Tribunal has accepted the contention of the Department that these Assessees
should be assessed under Section 4A while the contention of the Assessees
is that they should be assessed and taxed under Section 4 of the Act. In the
appeals filed by the Department pertaining to sale of Telephone Instruments,
the contention of the Department is that they should also be taxed and F
assessed under Section 4 and not under Section 4A of the Act as ordered
by the Tribunal. Similar is the case in respect of appeals pertaining to the sale
of Refrigerators where the Tribunal has ordered the assessment under Section
4A of the Act. In the case of sale of Bottled Mineral Water while the Tribunal
has ordered the 'assessment under Section 4, the Department suggests that G
the assessment should be under Section 4A of the Act. Lastly CA 498/2006
pertain to the sale of Electric Filament Lamps where the assessment is ordered
under Section 4A of the Act. In short unless an authoritative interpretation
is handed out, it will not be possible to settle the issues between the assessees
and the Department. In respect of some of the items, as the assessment under
H
232 SUPREME COURT REPORTS (2007) 9 S.C.R.

A Section 4A is less, the same is being insisted upon by the Assessee while
in some cases the assessment being more beneficial ufider Section 4, the
Assessees insisted on the assessment under Section 4 of the Act. Eventually
-
the stand of the Department is to the contrary. All these appeals, therefore,
would depend upon the interpretation of the scope of Section 4A which is
inextricably connected with the provisions of PC Rules under the SWM Act.
B We would, therefore, first explain the interpretation and scope of Section 4A
more particularly sub-sections (I) and (2) thereof. Section 4A was added by
Section 82 of the Finance Act, 1997 (Act 26 of 1997) which amendment was
with effect from 14.5.1997. Section 4A, as it originally stood, and relevant for
our purposes, is as under:
c "Section 4A. Valuation of excisable goods with reference to retail
sale price - (1) The Central Government may, by notification in the
Official Gazett~, specify any goods, Jn relation to which it is required,
under the provisions of the Standards of Weights al).d Measures Act,
1976 (60 of 1976) or the rules made th_sreunder or under any other law
D for the time being in force, to declare ~n the package thereof the retail
sale price of such goods, to which the provisions of sub-section (2)
shall apply.

(2) Where the goods specified under sub-section (I) are excisable
goods and are chargeable to duty of excise with reference to value,
E 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.

(3) The Central Government may, for the purpose of allowing any
F abatement under sub-section (2) take into account the amount of duty
of excise, sales tax and other taxes, if any, payable on such goods.

(4) 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
G 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"
H
JAY ANTI FOOD PROCESSING (P) LTD. v. COMMNR. OF CENTRAL EXCISE. RAJASTIIAN JV.S. SIRPURKAR, I.( -23 3
means the maximum price at which the excisable goods in packaged A
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.
B
Explanation 2 (a) 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 purpose of this
section.

(b) Where different retail sale prices are declared on different packages C
for the sale of any excisable goods in packaged form in different areas,
each such retail sale prices shall be the retail price for the purposes
of valuatfon of the excisable goods intended to be sold in the area to
which the, retail sale price relates."

This Section was introduced with the sole idea to end the uncertainty D
)r
caused in determining the value of the goods under Section 4 and then
assessing the duty under that Section. Sect.ion 4 was the basic formula for
valuation of excisable goods and for the purposes of charging of the duty
of excise. It provided the mechanism of determining the valuation of the
goods under various circumstances, e.g., in the matter of wholesale trade or E
in the matter of sales being at the different prices for different places of
removal or in case where the assessee sold the goods only to related persons,
etc. Section 4A of the Act, as would be clear from the language ofsub-section
(1), linked the valuation of the goods to the provisions of SWM Act or the
Rules made thereunder by firstly providing that it would, be for the Central
Government to specify any goods in respect of which the declaration of price F
on the package was required under the provisions of SWM Act, Rules made
thereunder or any law for the time being in force. In short sub-section ( l) was
linked with the packages of the goods in respect of which the retail sale price
was required to be printed under SWM Act and the Rules made thereunder
or any other law. Sub-section (2) then provides that such specified goods G
where they are excisable goods would be valued not on any other basis but
on the basis of the retail sale price declared on such packages. The Section
also provides that the assessee would be entitled to the deduction from such
valuation the amount of abatement provided by the Central Government by
a notification in the Official Gazette. In short after introduction of Section 4A,
the nature of sale lost its relevancy in the sense that the valuation did not H
234 SUPREME COURT REPORTS [2007] 9 S.C.R.

A depend upon the factor whether it was a wholesale or sale in bulk or a retail
sale. The whole section covered the goods which were packaged and sold. as
such with the rider that such package had to have a retail price thereupon
under the provisions of SWM Act, Rules made thereunder or under any other
law. Thus, viewed from the plain language of the Section, where the goods
B are excisable goods and are packaged and further such packages are required
to mention the price thereof under the SWM Act, Rules made thereunder or
under any other law and further such goods are specified by the Central
Government by notification in the Official Gazette, then the valuation of such
goods would be on the basis of the retail sale price of such goods and only
to such goods the provisions of sub-section (2) shall apply whereby it is
C provided that the value of such goods would be deemed to be the such retail
price declared on the packages. Of course, the assessee shall be entitled to
have a reduction of abatement as declared by the Central Government by the
notification in the Official Gazette. Even at the cost of repetition the following
would be factors to include the goods in Section 4A(l) & (2) of the Act:

D (i) The goods should be excisable goods;
-.:
(ii) They should be such as are sold in the package;
(iii) There should be requirement in the SWM Act or the Rules made
thereunder or any other law to declare the price of such goods
relating to their retail price on the package.
E
(iv) The Central Government must have specified such goods by
notification in the Official Gazette;
(v) The valuation of such goods would be as per the declared retail
sale price on the packages less the amount of abatement.
F If all these factors are applicable to any goods, then alone the valuation
of the goods and the assessment of duty would be under Section 4A of the
Act.

3. It is not in dispute that all the goods with which we are concerned
G in these appeals are excisable goods and they are specified by the Central
Government by issuing a notification in the Official Gazette.

4. Since the language of Section 4A(l) of the Act specifically mentions
that there would be a requirement under SWM Act .or Rules made thereunder
or under any other law to declare on the package of the goods the retail sale
H price of such goods for being covered by the Section, it would be better to
,.\

IAYANTI FOOD PROCESSING (P) LTD.•. <;OMMNR. OF CENTRAL EXCISE. RAJASTilAN 1v.s. SIRPURKAR, 1.1 235

see the various provisions of the said Act and the Rules made thereunder. A
Section 83 of the SWM Act empowers the Central Government to make Rules
on the subjects provided in Section 83(2). Accordingly, the Central Government
framed the Rules. called "The Standards of Weights and Measures (Packaged
Commodities) Rules, 1977". As would be suggestive from the title itself, Rule
1(3) provided that these Rules would apply to the commodities in packaged
form which are, or are intended or likely to be sold, distributed, delivered or B
offered or displayed for sale, distribution or delivery, or stored for sale or for
distribution or delivery in the course of inter-State trade and commerce.

Definition of "retail dealer" under Rule 2(o) is as under:

"retail dealer" in relation to any commodity in packaged form means C
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."

Definition of "retail package" under Rule 2(p) is as under:
D
"retail package" means a package containing any commodity which is
produced, distributed, displayed, delivered or stored for sale through
retail sales,.agencies or other instrumentalities for consumption by an
individual or a group of individuals".

Definition of "retail sale" under Rule 2(q) is as under: E
"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."
F
Definition of "retail sale price" under Rule 2(r) is as under:

"retail sale p~ice" 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 G
taxes or in the form MRP Rs ... incl., of all taxes".

Explanation: F.or 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, H
236 SUPREME COURT REPORTS [2007) 9 S.C.R.

A and all charges towards advertisement, delivery, packing, forwarding
and the like, as the case may be."

Definition of "wholesale dealer" under Rule 2(w) is as under:

·~wholesale dealer" in relation to any commodity in packaged fonn

B means a dealer who does not directly sell such commodity to any
consumer but distributes or sells snch commodity through one or
more intermediaries.

Explanation: Nothing m this clause shall be construed as preventing
a wholesale dealer from functioning as a retail dealer in relation to any
C commodity, but where he functions in relation to any commodity as
a retail dealer, he shall comply with all the provisions of these rules
which a retail dealer is required by these rules to comply.''.

Definition of "wholesale package" under Rule 2(x) is as under:

D "wholesale package" means a package containing -

(i) a nun.aer 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
E 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 labeled as required under the rules.''

F Chapter II of these Rules is applicable to the packages intended for
retail sale. Rule 3 provides that the expression "package" wherever occurring
in the Chapter shall be construed as "packages intended for retails sale". Rule
6( I) provides for the declaration to be made on every package and sub-rule
(t) thereof is as under:

G "(f) the retail sale price of the package"

Rules 15 and 16 pertain to the declarations required to be made on combination
packages and group packages. A glance at these Rules suggests that the sale
price is required to be mentioned on both. Rule 17 deal with multi-pieces
packages also requiring to declare the sale price on the same. Rule 23(1) and
H
IAYANTI FOOD PR.OCESSING (P) LTD.•· COMMNR. OF CENTRAL EXCISE, RAll\SlllAN (V.S. SIRPURKAR.1.1 23 7

(2) provide as under: A
"23. Provisions relating to wholesale dealer and retail dealer''

(I) No wholesale dealer or retail dealer shall sell, distribute, deliver,
display or store for sale any commodity in the packaged form unless
the package complies within all respects, the provisions of the Act B
and these rules.

(2) No retail dealer or other person including manufacturer, packer and
wholesale dealer shall make any sale of any commodity in packed form
at a price exceeding the retail sale price thereof.
: .

Explanation: For the removal of doubts, it is hereby declared that a
c
sale, distribution or delivery by a wholesale dealer to a retail dealer
or other person is a "retail sale" within the meaning of this sub-rule."

Chapter Ill deals with the provisions applicable to wholesale packages.
Rule 29 pertains to the declaration required to be made on every wholesale D
package. Chapter V deals with the exemptions. Rule 34 thereof is extremely
important. It runs as under:

"34. Exemptions in respect of certain packages

Nothing contained in these rules shall apply to any package E
containing a commodity if, -

(a) the marking on the package unambiguously indicates that it has
been specially packed for the exclusive use of any industry as
a raw material or for the purpose of servicing any industry, mine
or quarry".
F
5. When we read these Rules along with provisions of Section 4A of
the Act, it would be clear that where there is a general exemption like Section
34 under the SWM (PC) Rules such goods and/or packages of such goods
shall not be covered by Section 4A (I) and (2) of the Act. However, all such
packages which are covered under Chapter II, more particularly under Rule G
6(1 )(f), Rules 15, 16 and 17, would be governed under Section 4A as such
packages are required to declare the retail sale price on the packages. The
packages covered by Rule 29 would be outside the purview of the retail sales
as under that Rule retail prices are not required to be mentioned on the
package. However, again those packages which enjoy the exemption under
Rule 34 shall also be outside the scope of Section 4A of the Act as the Rules H
238 SUPREME COURT REPORTS . [2007) 9 S.C.R.

A do not apply to the said packages.

6. Shri Subba Rao, learned Advocate urged that where the goods are
sold in bulk, Section 4A would not apply and the assessment would have to
be done under Section 4 of the Act. We have already clarified above that it
is not the nature of sale which is relevant factor for application of Section 4A
B but the applicability would depend upon five factors which we have enumerated
in para 2 above.

7. It was tried to be argued by Shri Joseph Vellapally, Senior Counsel
that Section 4A was introduced for simplification and to reduce complications
in valuing and assessing under Section 4 of the Act. According to the learned
C Senior Counsel once the goods are specified under the notification, that itself
will be a deciding factor, for such goods to be valued and assessed under
_Section 4A of the Act. We do not think that the question can be solved on
such a broad proposition. We have already indicated the scope of Section 4A
above. On that basis and in the light of the various provisions under the
D SWM (PC) Rules as also in the light of some of the circulars which were relied
upon by the parties and referred to in the impugned orders of the Tribunal,
we would now proceed to decide the individual cases.

8. We would first deal with the appeals filed by the assessees against
the order of the Tribunal wherein the Tribunal has found that the valuation
E and assessment should be under Section 4A of the Act rejecting the contention
of the assessee that it should be under Section 4 of the Act.

Civil Appeal No.2819 of 2002

9. The assessee is engaged in manufacturing of Ice-cream falling under
F Sub-heading 2105 of the Central Excise Tariff Act, 1985. It used to supply the
ice-cream in four litres pack to the Catering Industry or as the case may be
hotels, the hotel used to sell the said ice-cream in scoops. The assessee used
to specifically display on the said packs that "the pack was not meant for
retail sale". The ice-cream contained in the said pack of four litres used to be
G sold in unpacked fotrtl by the hotel to which the said ice-cream used to be
supplied. The contention -of the· assessee, therefore, was that since the pack
which could be described as the bulk·pack of four litres, was not meant t9 .
be sold in retail', it was bound to be treated as a wholesale transaction and
as such the assessee was not required under SWM Act and the Rules made
thereunder to print the Maximum Retail Price("hereinafter referred to as "MRP'')
H
JAY ANTI FOOD PROCESSING (PJ ~TD. v. COMMNR. OF CE~ EXCISE. RAJASTHAN IY.S. SIRPURKAR, I.I 23 9

which was a pre-condition for application of section 4A of the Act for the A
purposes of valuation and assessment. The further contention of the assessee
is that the assessee is entitled to exemption under Rule 34 of the SWM (PC)
Rules. This stand was not accepted by the Assessing Authority or the
Appellate Authority who held that the valuation would have to be under
Section 4A and not under Section 4 of the .Act (perhaps because that would
yield more revenue). The Tribunal has upheld those orders dismissing the B
appeals filed by the present appellant. That is how the matter has come before
us.

10. Shri Ravinder Narain, the learned counsel appearing on behalf of the
appellant contends that the Tribunal has wrongly given a finding that the four C
litres pack would come under the definition of term "retail package" as it is
produced and distributed for consumption by a group of individuals. Learned
counsel further urged that the Tribunal had erred in holding that the appellant
is not entitled to exemption under Rule 34 of SWM (PC) Rules. Learned
counsel was at pains to point out that this pack which is manufactured by
the appellant is also sold to Hindustan Lever Limited who in turn supplies D
the same to various dealers and ultimately from dealers the commodity reaches
the consumers. According to the learned counsel the Tribunal erred in holding
that the ice-cream is not supplied to the hotel industry for servicing it.
Learned counsel criticized the order of the Tribunal and urged that after the
order of the Tribunal was passed, the clarificatory Board Circular dated E
28.2.2002 came into existence thereby binding the authorities under the Act
and as such the appeal was liable to be allowed.

11. As against this Shri Subba Rao supported the order of the Tribunal
and pointed out that actually the MRP was displayed on the four litres pack
which suggests that even as per the assessee the pack was for retail sale p
itself. Learned counsel further submits that once the MRP was displayed on
the pack, it was obvious that the pack was meant for retail sale and ice-cream
having been included in the notification under Section 4A(2), the assessment
would have to be under Section 4A as held by all the three authorities
including the Tribunal. Learned counsel further supported the reasoning
given by the Tribunal regarding non applicability of Rule 34 of SWM (PC) G
Rules. Lastly, the learned counsel contended that the said Board Circular
dated 28.2.2002 was further clarified by Circular dated 17.1.2007 bearing No.843/
1/2007-CX. Learned counsel very heavily relied on para 4 of the said circular
and contended that since the tis was continuing, there was no question of
any benefit being given under the Board Circular dated 28.2.2002 and the H
i'>...

240 SUPREME COURT REPORTS [2007] 9 S.C.R.

A matters would have to be governed by the Circular dated 17.1.2007.

12. We have already referred to the fa~ts ~ppearing in the orders of the
authorities.below which suggest that at Qne~ pointof time the assessee used
to display the MRP on the four litres pack voluntarily. Shri Subba Rao very
heavily relied on this fact. We do not think that merely because the assessee
B displayed the MRP pn the four litres pack, that would negate the case of the
appellant altogether. We have already shown in the earlier part of the judgment
the conditions required for application of Section 4A. The plain language of
Section 4A( l) unambiguously declares that for its application there has to be
the "requirement'.' under the SWM Act or the Rules made thereunder or any
C . other law to declare the MRP on the package. If there is no such requirement
under the Act and the Rules, there would be no question of application of
Section 4A. Thus if the appellant is successful in showing that there is no
requirement under the SWM Act or the Rules made thereunder for declaration
of MRP on the package, then there would be no question of applicability of
Section 4A(l) & (2) of the Act. Even if the assessee voluntarily displays on
D the pack the MRP, that would be of no use if otherwise there is no requirement
under the SWM Act and the Rules made thereunder tO declare such a price.

13. Learned counsel for appellant took us through the Rules extensively
which Rules we have already quoted above. The thrust of the argument was
that firstly the assessee could not be said to be a "retail dealer" as contemplated
E in Rule 2(o) of the SWM (PC) Rules nor could the package be described as
"retail package" to be covered under Rule 2(p ). Learned counsel firstly
suggested that the assessee was not directly selling the package ·to the
consumer; he was in fact supplying the package to the intennediary for being
sold to the hotel industry. Learned counsel, therefore, argues that there was
F no connection in between the assessee and the consumer nor was the package
meant to be sold as a "package". The counsel is undoubtedly right as Rule
.....
2(o) contemplates the sale of commodity in a packaged fonn directly to the
consumer. The definition also includes a wholesale dealer provided again that
the package is to be sold to the consumer directly as a package. ThaHs not
a case here as the 4 litre pack is not meant to be sold to the consumer directly..
G We would have to essentially go through to the definitiop of"retail package"
and one look at Rule 2(p) would show that in order to be covered under that
definition such package must have been intended for retail sale for consumption
by an individual or a group of individuals. In our view these two definitions
would have to be read together to properly understand the scope thereof. In
H order that the package should be properly described as a "retail package", the
IAYANTI FOOD PROCESSING (P) LTD.•· COMMNR. OF CENTRAL EXCISE. RAJASTIIAN (V.S. SIRPURKAR. 1.J 241

sale has to be through the "retail sale" for consumption by an individual or A
a group of individuals. In the present case, admittedly, the sale of the
package was only to the hotel. It may be that the hotel may ultimately sell
the commodity there.in, i.e., the ice-cream (not the package) to the individuals
or the group of individuals. This was not a sale in favour of an individual
or group of i.ndividuals. We would have to understand the scope of the term
"consumer" used in Rule 2(o) to be the individual or group of individuals B
who consume the commodity. It is undoubtedly true that for a sale being a
"retail sale" it need not contain material for the consumption of a single
individual only, it can be for a group of individuals also. Howev~r. a hotel
to which the package is supplied cannot be covered in the term "individual
.or group of individuals" as contemplated in Rule 2(p) defining "retail package". C
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)(t) which applies to "retail package"
meant for "retail sale". What is required to be printed under Rule 6(l)(t) is D
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 E
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 )(t) to
mention the "retail sale price" on the package.

14. It was tried to be suggested, relying on the language of the F
unamended Rule 2A, that the four litres pack of ice-cream would be
appropriately covered under Rule 2A. Rule 2A before the amendment was as
under:

"2A. The provisions of this Chapter shall apply to all pre-packed
commodities except in respect of grains and pulses containing quantity G
more than' 15 kg."

It is true that if the unamended section is to be made applicable, the ice-cream
pack of four litres would certainly be covered under Section 2A. However,
Rule 3 explains that provisions of Chapter II would apply to packages
H
242 SUPREME COURT REPORTS [2007) 9 S.C.R.

A intended for "retail. sale" and expression "package" wherever it occurs in the
chapter shall be construed accordingly. It is, therefore, clear that the "package" -...
which was sold by the assessee could not be tenned as "retail package" nor
the sale thereof be tenned as a "retail sale" and as such there was no
requirement of mentioning the "retail sale price" on that package. All this has
B been completely missed in the order of the Tribunal.

15. On the other hand the package in question would certainly come
within the definition of "wholesale package" as defined in Rule 2(x)(ii) as it
contained the commodity (ice-cream) and was sold to intennediary (Hotel) for
selling the same to the consumer in small quantities. Then Rule 29 would
C apply to such package which does not require the price to be displayed on
the package. What is required to be stated is (a) name and address of the
manufacturer (b) identity of commodity and (c) total number of retail packages
or net quantity. Shri Ravindra Narain is quite justified inrelying on Rule 2(x)
and Rule 2(q). The Tribunal does not refer to these vital Rules.

D 16. There is one more substantial reason supporting the appellant. Shri
Ravinder Nan1in invited our attention to Rule 34 in Chapter V of SWM (PC)
Rules which provides for exemptions. We ha:ve quoted Rule 34 earlier. The
Rule has now been amended: However, under the unamended Rule there is
a specific declaration that the SWM (PC) Rules shall not apply to any
"package" containing a commodity if the marking on the package
E unambiguously indicates that it has been specially packed for the exclusive
use of any industry as a raw-material or for the purpose of "servicing any
industry, mine or quarry". Learned counsel points out that the "package"
. which is sold by the assessee mentions that it is specially packed for the
exclusive use of the catering industry. Learned counsel further argues that
p such "package" was for the purposes of "servicing the hotel industry or
catering industry" as the case may be. Learned counsel is undoubtedly right
when he seeks to rely on Rule 34 which ·provides for exemption of the
"packages" which are specially packed for the exclusive use of any industry
for the purposes of "servicing that industry". Shri Subba Rao supported the
view expressed by the Tribunal that the words "servicing any industry" could
G not cover the present case and he further suggested that ice-cream cannot
be a "raw material" for any industry. He is undoubtedly right that the ice-
cream cannot be tenned as "raw material" for any industry. However, the
words "or for the purposes of servicing any industry" are broad enough to
include the transaction in question, i.e., the sale of a pack of ice-cream to the
H retail indu'stry. Hotel does riot manufacture the ice-cream and is depended
IA YANTI FOOD PROCESSING (P) LTD. "· COMMNR. OF CENTRAL EXCISE. RAJASTHAN fV.S. SIRPURKAR. l.f 243

entirely upon the sale of ice-cream to it by the assessee for ultimately catering A
the commodity in the package, i.e. ice-cream to the ultimate consumer. In our
view this can be squarely covered in the term "servicing any industry". The
word "service" is a noun of the verb "to serve". This Court in Coal Mines
Provident Fund Commissioner v. Ramesh Chander Jha, AIR (1990) SC 648
in a different context, observed as under:
B
"The word 'service' in section 2(17)(h) must necessarily mean
something more than being merely subject to the orders of Government
or control of the Government. To serve means 'to perform functions;
do what is required for'. " [Emphasis supplied]

A hotel is a hospitality industry and undoubtedly supplies food and eatables C
to the consumers. Therefore, to supply the ice-cream to such a hotel would
be doing what is required for the hotel. In that sense the supply by way of
sale of ice-cream which is ultimately sold to the "ultimate consumers" would,
no doubt, be covered in the term "servicing the hotel industry". Even otherwise
the word "service" as per Concise Oxford English Dictionary means: D
(i) perform routine maintenance or repair work on (a vehicle or
machine);
(ii) provide a service or services for;

It is an act of helpful activity - help, aid or to do something. It also includes E,
supplying of utilities or commodities. In that view we are not prepared to give
a narrow interpretation to the term "service any industry". We, therefore,
accept the arguments advanced by Shri Ravinder Narain that the "package"
sold by the assessee to the hotel was, apart from being for the exclusive use
of the hotel was, also "for the purpose of servicing that industry". If that is
so, then the SWM (PC) Rules would not apply at all. F
17. The Tribunal has given very narrow meaning to Rule 34 by firstly
holding that ice-cream is not a "raw material". There the Tribunal was right
but the Tribunal was not right by holding that the words "servicing any
industry" were not applicable to such "package". We, therefore, accept the G
arguments of the learned counsel and reject the contention raised by Shri
Subba Rao. If that is so, the appeal would have to be allowed and it would
v
have to be held that Section 4A will not apply to the ice-cream sold by the
assessee.

18. This takes us to the last argument regarding the applicability of the H
244 SUPREME COURT REPORTS [2007) 9 S.C.R.

A Circular dated 282.2002. However, it is not necessary for us to delve on that
issue in view of the findings which we have recorded earlier holding that the
assessment would have to be ·under Section 4 of the Act and not under
Section 4A. In fact the tenor of the notification is to the same effect. However,
considering the fact that the notification came after the order of the Tribunal
B and further it was sought to be explained by the subsequent notification
dated 17 .1.2007, we are not going into that question.

19. In the result the.Civil Appeal No.2819 of2002 is allowed.

Civil Appeal No.1738 of 2004

C 20. This takes us to the next appeal which is filed by Nestle India Ltd.
The appellant Mis.Nestle India Ltd., are engaged in the manufacture of wafers
covered with milk chocolate under the brand name "KIT KAT'' falling under
Chapter I 9 of Central Excise Tariff Act, 1985. This product is a specified
product under the provisions of Section 4A and is included in the notification
D and accordingly the duty was being paid on the said Chocolate in terms of
Section 4A based upon the "retail sale price" after claiming the deductions
on account of abatements. Mis.Nestle India entered into a contract with M/ --.:
s.Pepsico Ingia Holdings Ltd., where the agreed price of the KITKAT packet
was Rs.4.80 and the chocolate so purchased at that price by Mis.Pepsico was
meant for free supply of the same along with one bottle of Pepsi of 1.5 litres
E in pursuance of their Sales Promotion Scheme. The appellant cleared the
disputed goods after payment of duty at Rs.4.80 per chocolate in terms of
Section 4 of the Act after filing the due declaration on the premise that since
the chocolates were being sold to Mis.Pepsico, this was not a "retail sale"
and on such chocolates supply there was no requirement to display the
F maximum retail price and as such the chocolates could not be covered under
Section 4A and would eventually be assessable under Section 4 of the Act.
However, the Department did not accept this and it issued a show cause ·
notice dated 14.8.2001 raising a demand of Rs.48,95,370/- along with the
proposal to impose penalty upon the appellant with interest. This proposal
was contested by the assessee on the aforementioned plea that it was not
G required to print the MRP under the provisions of SWM Act and the Rules
made thereunder. The Commissioner did not accept this and confirmed the
demand. The appellant having failed in its appeal before the Tribunal has now
approached this Court by way of this appeal.

21. The Tribunal came to the conclusion that the duty was rightly
H
· JAY ANTI FOOD PROCESSING (P) LTD.••. COMMNR. OF CENTRAL EXCISE. RAlASl' S. SIRPURKAR. l.I 245

demanded in terms of Section 4A of the Act. A
22. At the outset the learned counsel Shri Lakshmi Kumaranan accepted
the position that when such chocolates are sold in the market, they would
undoubtedly be required to print the MRP on each chocolate as the SWM
(PC) Rules and more particular Rule 6(1)(f) would be applicable to them.
Learned counsel, however, says that his contention is restricted only to the B
supply made by the assessee to Pepsico. He points out that the said chocolates
were not being sold by the manufacturer in retail but were supplied to another
company under a contract and the purchaser company was not to sell the said
chocolates as the chocolates but to offer as a free gift along with its product,
namely, a 1.5 litres bottle of Pepsi. Learned counsel also criticized the order C
of the Tribunal. Learned counsel also relied on the aforementioned Board
Circular dated 28.2.2002.

23. The Tribunal formulated a question as to whether the package of
KITKAT sold by the appellant to Mis.Pepsico India Holdings Ltd., under a
contract of Rs.4.80 per KITKA T are required to be assessed at that price in D
terms of Section 4 of the Act or the assessable value of the same is required
to be arrived at in terms of Section 4 A of the Act. The Trib 11 while
accepting the case of the Revenue simply went on to hold t' .1t once the
goods are specified items under Section 4A(l) of the Act and are excisable
goods, the chargeable duty would be required to be assessed on the MRP.
The Tribunal also recorded that the only exception where a manufacturer can E
deviate from the general rule of printing MRP on the package would be Rule
34 of SWM (PC) Rules. It further held that the said Rule did not app1J to ti
case of the assessee. The Tribunal also relied upon the first Explanation to
Section 4A of the Act and came to the conclusion that even if a portion of
goods is sold at a lower rate than the MRP affixed thereon, the assessable F
value in respect of such percentage of goods will not be lowered on that
ground. The Tribunal also referred to the advertisements issued by Pepiso
wherein it was displayed that KITKA T worth Rs.12 will be given free with one
1.5 litres bottle of Pepsi. The Tribunal also held that the circular dated
28.2.2002 did not apply to the case of the assessee. Holding thus, the Tribunal
dismissed the appeal. G
24. Shri Lakshmi Kumaran firstly pointed out that the KITKA T chocolate
sold to Pepsico was for free distribution along with 1.5 litre bottle of Pepsi
"'' and, therefore, there is no MRP affixed on the chocolate which accompanied
the bottle. He further submits, relying on Section 2(v) of the SWM Act that H
246 SUPREME COURT REPORTS (2007) 9 S.C.R.

A there is no "sale" of the chocolate to the consumers as it is offered free as
a gift by Pepsi, which purchased the same from the assessee on contract
basis.

25. As against this the learned counsel Shri Subba Rao supported the
order of the Tribunal and poi~ted;.qut that thi~ could be viewed as a "retail
B sale". He adopted the reasoning given by the Tribunal on the definition of
"retail sale" holding that the transaction in the prese.nt case amounti1Jg to
"retail sale" since the chocolates were meant for distribution for consumption
by "an individual .or group of. individuals by retails' sale" and therefore,
. covered in. SWM (PC) Rules.
c 26. At the outset Shri Lakshmi .Kumaran invited our attention to the
notification dated 28.2.2002 bearing No.625/16/2002-CX. He pointed out that
by that notification clarification was issued regarding various queries raised
expressing the doubts about the assessability of the commodities under
Section 4A or Section 4 of the Act. A reference is made to para l, Entry 4
D of which is as under:

"Items supplied free with another consumer items as marketing strategy.
Example, one Lux soap free with on box of surf."

Para 6 of the notification is as under:
E "It is, therefore, clarified that, in respect of all goods (whether notified
u/s.4A or not) which are not statutorily required to print/declare the
retail sale price on the packages under the provisions of the Standards
of Weight & Measures Act, 1976, or the rules made thereunder or any
other law for the time being in force, valuation will be done u/s 4 of
F the CE Act, 1944 (or under Section 3(2) of the Central Excise Act, 1944,
if tariff values have been fixed for the commodity). Thus, there could
be instances where the same notified commodity would be partly
assessed on the basis of MRP u/s 4A and partly on the basis of
normal price (prior to l. 7.2000) or transaction value (from 1.7 .2000), u/
s 4 of the CE Act, 1944."
G
Learned counsel very heavily relied on the last sentence of para 6 of the
notification and pointed out that the KITKA T chocolate though a notified
commodity, need not, in all cases be assessed under Section 4A. According
to the learned counsel stated that this had a direct reference to Entry 4 in para
H 1 of the Circular which we have extracted above. Our attention was also
JAYANTI FOOD PROCESSING (P) LTD. '· COMMNR. OF CENTRAL EXCISE. RAJASTHAN IV.S. SIRPURKAR. J I 24 7

invited to a ruling of the Tribunal reported in Commissioner of Central Excise A
Ludhiana v. Pepsi Foods Ltd., [2005] 186 EL T 603] wherein a view has been
taken, relying on the aforementioned circular, that the packet of Lays (Potato
Chips) which was to be supplied free along with Pepsi of 1.5 litre was bound
to be assessed under Section 4 and not under Section 4A of the Act. Learned
counsel points out that this judgment is not challenged by the Revenue and
\ has become final. He further suggests that in keeping with the law laid down B
. by this Court in CCE, Vadodara v. Dhiren Chemical Industries (2002) 139
ELT 3] the Department cannot now tum back and take a contrary stand. There
is no doubt that the judgment of the Tribunal cited supra was attempted ·to
be distinguished in the impugned judgment of the Tribunal on the ground
that there appeared a price printed on labels affixed on Pepsi bottle and sold C
by M/s.Varun Beverages indicating that KITKAT worth Rs.12 is given free
with the said Pepsi Bottle. In our view this printing-of the price on the labels
of Pepsi wou_ld be of no consequence for the simple reason that it is clearly
meant for the advertisement of Pepsi and the MRP is not printed on the
chocolate. It may be a move on the part of the Pepsi for advertising its
product but that cannot be said to be binding vis-a-vis Nestle. What is D
required is the requirement under the Rules of printing the price. Therefore,
the true test is not as to whether the price is printed on the labels of the
accompanying product like Pepsi but whether there was a requirement under
the SWM Act or the Rules made thereunder to print the MRP on the wrappers
of KITKA T chocolates. The reason given by the Tribunal in para l 0 for E
distinguishing the earlier judgment in Pepsi Food'i; case, therefore, has to be
ignored as not relevant to the controversy. Once that position is clear, we are
left with the notification alone and the aforementioned ruling in Pepsi's case.
If the ruling has not been challenged by the Department, the same becomes
binding as against the Department. Similar is the situation of the circular. The
circular becomes binding as held in the case of Dhiren Chemical Industries F
(supra).

27. The Tribunal in para 8 of its judgment has observed:

"Once the goods are specified items under Section 4A(l) and are
excisable goods chargeable duty (sic) with reference value, then such G
value shall be deemed to be the retail sale price declared on such
goods, less amounts of abat~mcnts etc. As we have already observed
that Weights & Measures Act requires chocolate manufactured by
the appellant to be printed with MRP on the same, we are of the view
that the duty of excise on such goods is required to be assessed in H
248 SUPREME COURT REPORTS [2007) 9 S.C.R.

A terms of th' MRP. The only exception where a manufacturer can
deviate from the general rule of printing of MRP on the package is
Rule 34 of Standards of Weights & Measures (Packaged Commodity)
Rules, 1977."

We are afraid the law is too broadly stated here. It may be that Chocolates
B manufactured by the appellant are required to bear the declaration of MRP
but that cannot be true of all the chocolates. In this the Tribunal has ignored
para 6 of the aforementioned circular dated 28.2.2002 wherein it is specifically
provided that there would be instances where the same notified commodity >
would be partly assessed on the basis of MRP under Section 4A and partly
C on the basis of normal price prior to I. 7.2000 or transaction value from
l.7.2000. Again merely because the goods are specified items under Section
4A(l ), that by itself will not be a be all and end all of the matter as before
such goods are brought in the arena of Section 4A(I ), there would have to
be the satisfaction of a particular condition that the packages of such goods
are "required" under the SWM Act and the Rules made thereunder to declare
D the MRP. The Tribunal has even erred in holding that the circular dated
28.2.2002 is not applicable to the present case. A cursory glance at the circular
would suggest that it is applicable to the present case where two commodities
have been sold as a market strategy.

28. Shri Subba Rao also heavily relied on para 9 of the impugned·
E judgment and further relied on the first Explanation of Section 4A and suggested
that the "retail sale Price" would be the maximupi price at which the excisable
goods in packaged form may be sold to the ultimate consumers and includes
all taxes, local or otherwise. The Tribunal has held, relying on the expression
"may be" in contra-distinction to the expression "shall be" that even if a
F portion of the goods are sold at a lower rate than the MRP affixed therein,
the assessable value in respect of such percentage of goods will not be
lowered on the ground that they have actually been sold at a lower rate. In
our opinion the thrust of the Explanation I is not as the Tribunal has shown
but is more on as to what retail price should be. The explanation provides that
the "retail price", i.e., the maximum price would include all taxes, local or
G otherwise, freight, tranc ,Jort charges, commission payable to dealers and all
charges towards advertisements, delivery, packing, forwarding and the like.
'1e further thrust of the explanation is on the notion that the price is :~1e sole
nsideration of such sale. The Tribunal has mixed up Explanation I with
E.:.zplanation II which is not permissible. This was not a case under Section
H 4A, Explanation II (b) because we do not find different sale prices declared
JAYANTI FOOD PROCESSING (Pl LTD. v. COMMNR. OF CENTRAL EXCISE. RAJAS1l!AN 1v.s. SIRPURKAR. J.t 249

on the different packages of the chocolates. The case of the assessee has A
been consistent from the beginning that these chocolates were sold to Pepsi
under a contract for a particular value and the said chocolates were to be
offered as a free gift to the one who purchased a particular bottle of Pepsi
(1.5 litres). The Tribunal has further expressed that the argument that the bar
of KITKA T was not to be sold by Pepsi in the retail market but was to be
given as a free gift, would be of no consequence as even ifthe appellant itself B
intended to give the bar of KITKA T as a free gift to its customers along with
other item, the appellant w1:mld not be in a position to claim that there is no
assessable value of the goods and as such no duty of excise shall be charged
on the same. The logic is clearly faulty. In the given circumstances, the
appellant would undoubtedly be assessable to duty under Section 4 of the C
Act. It is not as if the appellant would be totally exempt from paying "any"
duty on such goods. It was rightly contended before the Tribunal that the
thrust of Section 4A is on the packages and not on the commodity and it is
only where the goods are sold in the packages that the section would be
attracted. The submission was undoubtedly right. The Tribunal, while rejecting
this submission, has clearly ignored the language of Section 4A(l) of the Act. D
29. It was then suggested that the free gift by Pepsi to its customers
would amount to distribution and would, therefore, be amounting to "retail
sale" and the package of KITKA T would be "retail package". However, what
is material is the definition of "retail sale price". The requirement of Rule E
6( 1)(f) is specific. It requires the retail sale price of the package be printed or
displayed on the package. If there is no sale involved of the package, there
would be no question of Rule 6(l)(f) being attracted. There is a clear indication
in the definition of "retail sale price" as provided in Rule 2(r) which clearly
explains that the MRP means the maximum price at which the commodity in
packaged form "may be sold" to the ultimate consumer. Thus, the definition F
of"sale" in Section 2(v) of the SWM Act becomes relevant. Therefore, unless
there is an element of sale, as contemplated in Section 2(v), Rule 6(1 )(t) will
not be attracted and thus such package would not be governed under the
provisions of SWM (PC) Rules which would clearly take such package out
of the restricted arena of Section 4A(l) of the Act and would put it in the G
broader arena of Section 4 of the Act.

30. Shri Lakshmi Kumaran lastly relied on Rule 34 (a) of the SWM (PC)
Rules and pointed out that the case was completely covered under that Rule
since firstly the package in this case specifically declared that "it was specially
packed for Pepsi". The thrust of the argument was that there appears such H
250 SUPREME COURT REPORTS [2007) 9 S.C.R.

A declaration on the package of KITKA T and secondly it was for the purpose
of servicing Pepsi thereby satisfying both the conditions for applicability of
Rule 34(a). The Tribunal has rejected this argument in a very casual manner
. by observing:

"Admittedly, the situation in the present case is not covered by any
B of the conditions noticed in the said Rule 34."

Learned counsel Shri Laxmi Kumaran pointed out that there was no question
of the application of SWM (PC) Rules apart from any other reasons, because
of the applicability of Rule 34. We accept the argument.· After-all if the
contract of the chocolates was for the purpose of advertising of a particular
C product of the particular industry, it would be covered within the expression
"servicing any industry". We have already dilated upon the expression
"servicing any industry" in the earlier part of our judgment. Those observations
would similarly apply to the present appeal also. With the result this appeal
has to be allowed by setting aside the order of the Tribunal. We accordingly
D allow this appeal without any order as to costs.

CIVIL APPEAL NOS.2150-2151OF2004

CIVIL APPEAL N0.1144 OF 2004

CIVIL APPEAL N0.1385 OF 2005
E
CIVIL APPEAL N0.3847 OF 2005

CIVIL APPEAL N0.6425 OF 2005

31. The next group of appeals that we .take into consideration is in
F relation to the sale of telephones by the companies like ITEL, BPL Telecom,
Himachal Exicom and Uniword Telecom. In all the cases the Tribunal has
found in favour of the assesses holding on the facts that the assessment
should be under Section 4A and not under Section 4. The Revenue pleaded
that the assessment should be under Section 4 of the Act (perhaps for
G attracting more revenue). In arriving at this conclusion, the Tribunal took note
of the factual situation that all the-"telephone instruments were specified
goods under Section 4A of the Act and that all the telephone instruments
were packed and every package declared the MRP thereupon.

32. It is an admitted case that all these telephone manufacturing
H companies sold the instruments (Push Button Telephones) to Department of
JAY ANTI FOOD PROCESSING (P} Llt>. •· COMMNR. Of CENTRAL EXCISE. RAIASTHAN (V.S. SIRPURKAR. l.( 251

Telecommunications (hereinafter referred to as the "DoT"), Mahanagar A
Telephone Nigam Limited (hereinafter referred to as the "MTNL") and Bharat
Sanchar Nigam Limited (hereinafter referred to as the "BSNL"). The purchaser
did not sell these instruments to the general public but instead provided the
instruments on rental basis or otherwise to their customers, meaning thereby
that there was no further sale of these instruments. The product falls under
sub-heading 8517 and is covered under Notification No. 9/2000-CE (NT) dateci B
1.3 .2000 and subsequently by Notification No.5/200 I dated 1.3 .200 I. It was,
therefore, an admitted position that from l.3.2000 Electronic Push Button
Telephones manufactured by the assesses were specified goods and were
bound to be valued for assessment with reference to the retail price under
Section 4A of the Act. It is also an admitted position that on all the telephone C
pieces sold to DoT, MTNL and BSNL, as the case may be, the assesses had
declared the MRP. The assesses got the advantage of the abatement and
because of that they were required to pay lesser duty under Section 4A as
compared to the duty chargeable under Section 4 of the Act on the basis of
contract price. The abatement was 40% on the retail price. It was undoubtedly
true that bulk supply was made by the telephone manufacturing assesses to D
DoT, MTNL and BSNL and perhaps because of that the Department averred
that since this was a wholesale transaction, the duty was assessable on the
contract price and not on the MRP. Before the Tribunal Revenue relied upon
various provisions and more particularly on Rules 2(q), 2(x), 3, 6(l)(t), etc., of
the SWM (PC) Rules. A reference was made to the Board Circular dated E
28.2.2002 also. There was a difference Of opinion amongst the two Members
of the Tribunal in Appeal No.F.170112002 & F.1962 of2002 (Civil Appeal No.2150-
51 of 2004 before this Court) as to the applicability of Section 4A vis-a-vis
Section 4A of the Act to the transactions. The matter, therefore, was considered
by the third Member who came to the conclusion that the only applicable
provision would be Section 4A. The Third Member found that the goods were F
cleared with the MRP having been declared on the package. The third Member
of the Tribunal further observed that unless the packages themselves were
exempt under the SWM (PC) Rules, the assessment would have to be under
Se_ction 4A and that the goods were sold in bulk under contract cannot be
the criteria.
G
33. Learned counsel Shri Subba Rao, however, reiterated his argument
that since the goods were sold in bulk the valuation should be under Section
4 of the Act. We have already explained earlier the scope of Section 4A
suggesting that the Section would apply to the package if it is required under
SWM Act and the Rules made thereunder to declare the MRP thereon. We H
252 SUPREME COURT REPORTS [2007) 9 S.C.R.

A are not in a position to ac\:ept the arguments of learned counsel that merely
because there is a bulk sale to DoT, MTNL and BSNL, the assessment should
be under Section 4 of the Act. We again mention it at the cost of repetition
that the nature of sale is not important, what is important is the requirement
of printing the MRP on the packages. It was not and indeed cannot be
disputed that these telephones are also sold in the retail market in the same
form and the same package and that there is a requirement of printing the
MRP on each package of tht. Push Button Telephone. Learned counsel Shri
Subba Rao also did not dispute before us the necessity of printing the MRP
on the package of each telephone which is sold in the market. If that is so,
the package would be covered under the relevant SWM (PC) Rules. We do
C not find anything in the SWM (PC) Rules that where a customer purchase a
large number of packages, such bulk purchase itself rules out the applicability
of the SWM (PC) Rules. Under Rule 2A, as it then stood, it was provided that
Chapter II apply to all pre-packaged commodities. Rule 3 thereof provided that
the provisions of Chapter apply to the packages intended for "retail sale"
which would mean that the sale would be for consumption by an individual
D or group of individual or any other consumer. There can be no doubt that the
telephone instruments were to be used by the consumers. Therefore, the
telephones were sold to these three instrumentalities, there is no escape from
the fact that these telephones were meant to be ultimately used by the
consumers and it is only with that object that the .said telephones were
E purchased by the three instrumentalities from its manufacturers. Therefore,
the sale of the telephone instruments would be covered in the term "retail
sale". Rule 6 is thereafter very clear which requires every package to make
certain declarations including the declaration of the "retail sale price" on the
package. There is also no dispute that the said declaration was indeed made
on the package of each piece of telephone. If this be so, then it is obvious
F, that Rule 6 could apply and there will be a requirement under the Rules as
provided in Section 4A(l) of the Act for printing the MRP on the package.
Shri Subba Rao argued that the transaction between the assessee companies
and DoT, MTNL & BSNL did not satisfy the requirement of definition of
"retail sale" as there was no retail sale agency or other ·instrumentalities
G involved in the said transaction. We are afraid the specific language of"retail
sale" is not being perceived properly. The "retail sale" does not have to be
only through the "retail sale agencies" or other "instrumentalities". One look
at the definition of "retail sale", as provided in Rule 2( q) is sufficient to justify
this inference. Die argument is, therefore, rejected. According to Shri Subba
Rao further the package would not be a "retail package" as contemplated in
H Rule 2(p) as the DoT, MTNL & BSNL cannot be viewed as an individual or
JA YANTI FOOD PROCESSING (P) LTD. •. COMMNR. OF CENTRAL EXCISE. RAJASTHAN 1v.s. SIRPURKAR. I.I 25 3
group of individuals. We are afraid again the unamended definition of Rule A
2(p) is not read properly. When a "retail package" containing any com~odity
is produced, distributed, displayed, delivered or stored for sale for
consumption by an individual or group of individuals, it would be a "retail
package". In this case, admittedly, DoT, MTNL & BSNL provided these
instruments, after they have purchased the instruments , to the individual B
customers, though not by way of a "sale" but for their use. The "package",
therefore, undoubtedly be a "retail package". It was further suggested, relying
on the definition of"retail sale price" in Rule 2(r) that DoT, MTNL & BSNL
are not the "ultimate consumers" as contemplated in the definition. We are
afraid even there the definition is not being read properly as it cannot be said
that DoT, MTNL & BSNL are not the "ultimate consumer". The purchasers, C
in this case, undoubtedly, used the telephone instruments for supply to their
customers on rental basis or on some other basis. It cannot be, therefore, said
that they would be excluded from the term "ultimate consumer". It was
thereafter contended that the MRP was not printed whereas it is asserted on
behalf of the learned counsel for the assessees that each package was carrying
the MRP and duty was paid with reference to the MRP and this is how the D
goods were cleared. We are not prepared to accept a bald statement made
before us that the packages did not have the MRP on them as from the orders
of the Tribunal we do not find such factual position emerging. That was the
most relevant factor and we are sure that the Tribunal could not have missed
it. Again we do not find that such a factual position was canvassed before E
the Tribunal. We, therefore, reject this contention and accept the assertion on
the part of the counsel for the assessees that the MRP was displayed on each
package. However, we leave it open to the Department to check this factual
position again and the Department would be free to proceed if the MRP is
not printed on the part of any particular assessee. It was also asserted by Shri
Subba Rao further that some of the assessees had not paid the duty on the F
MRP but on the contract price. There is no reference of this assertion even
before the Tribunal. Instead we have the affidavits before us that in each case
the duty has been assessed not on the contract price but on the MRP. We
do not wish to go into that question now at this juncture but we only clarify
that if that is so, then the Department would be free to take action against G
the co11cerned assessees. All the learned counsel for the assesses accepted
that if at all they have made the payment of the duty not on the MRP but
'I. on the contract price, they would be liable to be proceeded against by the
Department in accordance with law. We leave the question on the basis of
this assertion. However, we must reiterate that we do not find any such
I H
254 SUPREME COURT REPORTS [2007) 9 S.C.R.

A reiteration in the order of the Tribunal. We, therefore, leave it to the Revenue
Department to ascertain this position and to proceed against the erring
assessees, if any.

34. Lastly Shri Subba Rao, by way of almost a desperate argument tried
to rely on Rule 34 of the SWM (PC) Rules suggesting therein that the Rules
B did not apply as the transactions in the sets of telephone instruments was
covered under Rule 34 of the SWM (PC) Rules. We do not accept the
argument for the simple reason that there does not appear any factual assertion
on the part of the Department that the packages contained a declaration that .
they were specially packed for a particular industry for servicing the same.
C In the -absence of this factual background the applicability of Rule 34 is
completely ruled out. We, therefore, dismiss all the appeals of the Department
subject to the observations which we have made as regarding the printing of
MRP and also as regards the payment of_ duty on the basis of contract price
and not on MRP in the earlier part. In the facts and circumstances of the case,
there will be no order as to costs.
D
Civil Appeal No.2877/2005

Civil Appeal No.6168/2005

Civil Appeal No.5840/2006
E
35. These appeals filed by the Revenue Department are against the
Electrolux Kelvinator Ltd., and Electrolux India Ltd.,. These cases pertain to
the valuation of the Refrigerators manufactured by the assesses. It is a
common plea that after the manufacture of these Refrigerators, they are sold
to the Bottling Companies like Pepsi, Coca Cola and other soft drink
F manufacturers under the contract. It is further admitted position that all the
Refrigerators which are sold are packed in a package declaring the MRP on
them. The MRP and the contract price are different. It was the claim of the
assesses that they have paid the duty under Section 4A(l) of the Act on the
MRP. The goods are specified goods under Section 4A(l) of the Act. However,
G because of the abatements they have to bear lesser duty which abatements
are not available to the contract price. Therefore, if the duty is assessed 011
the basis of the contract price under Section 4 of the Act, the duty would
be more than the duty paid under Section 4A( I) of the Act. The Tribunal, in y

all the three cases, has held in favour of the assesses holding that these cases
would be governed by the decision of the Tribunal in ITEL Industries Pvt.
H
JA YANTI FOOO PROCESSING (Pl LTD. v. COMMNR. OF CENTRAL EXCISE. RAJAS111AN (V.S. SIRPURKAR. J.I 25 5

Ltd v. CCE reported in (2004 (169) ELT 219] in which case the sale of A
telephones by the telephone manufacturing companies to DoT, MTNL &
BSNL was considered and it was held that the duty will be under Section 4A
of the Act and not under Section 4. Relying on that decision, the Tribunal
in Civil Appeal No.2877 /2005 has held in favour of the assessees. It is also
held by the Tribunal that Rule 34(a) of SWM (PC) Rules wou:d not be
attracted in these cases. In short the Tribunal has held that these cases are B
identical with the cases involving the sale of telephone. We have already
approved the judgment of the Tribunal pertaining to the sale of telephones
in the earlier part of this judgment. We do not see any reason to take a
different view in case of the Refrigerators. It was feebly stated by Shri Subba
Rao that the assesses have paid the duty based on contract price and not C
on the MRP. We do not think so as there is material placed before us by the
learned counsel appearing for the assesses that the duty has been paid not
on the contract price but on the MRP. However, we leave it open to the
Department to take an action in accordance with law if it is found that the
duty is paid on the contract price and not on MRP. Needless to mention that
reasonable opportunity would be given to the assessees to put their say in D
case the Department decides to proceed against the assesses on this ground.
However, the appeals filed by the Revenue would have to be dismissed and
are accordingly dismissed. In the facts and circumstances of the case there
will be no order as to costs.
E
Civil Appeal No.49812006

36. This appeal relates to the manufacture and sale of Electric Filament
Lamps. The Tribunal has allowed the claim of- the assessee relying on the
decision in ITEL Industries Pvt. Ltd v. CCE, reported in (2004) 169 EL T 219.
A perusal of the order of the authorities below suggest that this case is_ F
identical with the case involving the manufacture and sale of telephones by
ITEL. It is admitted position that the goods here were sold with the MRP
declared on the packages as per the SWM (PC) Rules. We see no reason to
take any different view. Nothing was stated before us by Shri Subba Rao as
to why we should take any different view in this matter. In that view we would
chose to dismiss the appeal filed by the Department but without any order G
as to costs.

Civil Appeal Nos.6559-6012005

37. These appeals are in respect of Mineral Water bottles. The
manufacturer used to pack 12 200ml. bottles in a single package and used to H
i-

256 SUPREME COURT REPORTS [2007) 9 S.C.R.

A mention the MRP on the said package. The assessee was paying the duty
under Section 4A(l) of the Act. The Tribunal, relying on the judgment in
Jayanti Food Processing Pvt'. Ltd. vs. CCE, Jaipur [2002 (141) ELT 162] held
that the assessment was bound to be under Section 4A(I) and not under
Section 4 of the Act as the package amounted to a "retail package" in view
B of the provisions of Rule 2(p) of the SWM (PC) Rules. On that basis the
Tribunal came to the conclusion that the valuation was bound to be under
Section 4A(I) and "not under Section 4 of the Act. Aggriev~d by that, the
Department has come up before us in the present appeals. Shri Su_bba Rao,
learned counsel appearing on behalf of the appellant Revenue drew a parallel
with J~yanti Food's case and urged that the valuation is bound to be under
C Section 4 of the Act as the Tribunal had incorrectly held that the "package"
would be a "retail _package". 1:-eamed counsel relied on the definition of
"wholesale package" under Rule 2(x) of the SWM (PC) Rules and pointed out
that the "package" in question came within the definition of "wholesale
package" as there are a number of retail packages in the form of Mineral Water
Bottles .in that one package and further the said package is not intended for
D sale directly to a single consumer. These bottles which were of 200 ml.
capacity were not meant for sale directly to a single consumer. He, therefore,
urges that this matter was identical with Jayanti Foods' case and, therefore,
we should take a view that the valuation should be on the basis of Section
4 and not under Section 4A of the Act as has been done by the Tribunal.
E Though the Tribunal has relied on the judgment passed by it in the case of
Jayanti Foods, we find that there is no parallel in between Jayanti Foods and
the present case. In a way there is a conflict in these two cases in the sense
that while Jayanti Foods would want its valuation under Section 4, the
present assessee would want it under Section 4A of the Act.

F 38. The factual scenario is that though the MRP was declared on the
package of 12 bottles, the bottles did not have any MRP instead it was
written: (a) not for re-sale; (b) specially packed for Jet Airways. No retail price
was written on 200 ml. Bottle. There is further no dispute that the assessee
had entered into a contract with Jet Airways dated 13.2.2002 and the contracted
G price of sale for the goods was Rs.2.6 l. It was the condition in the contract
that each bottle to be supplied shall have a printed label "specially packed
for Jet Airways". On the basi-s of these facts Shri Subba Rao urged that this
case, if it was identical with Jayanti Foods case, then it was bound to be held
that the MRP based assumption could not be the correct assessment and it
should be under Section 4 of the Act. The contention is incorrect and as in
H fact the "package" cannot be viewed as a "wholesale package". It does not
JAY ANTI FOOD PROCESSING (P) LTD.•. COMMNR. OF CENTRAL EXCISE. RAIASlltAN 1v.s. SIRPURKAR. 1.1 25 7

come within the definition of Rule 2(x)(i) as the "package" was not intended A
~·
for sale, distribution or delivery to an intermediary. On the other hand it is
sold directly to Jet Airway and the Jet Airways supplied the said bottles to
their passengers and thus there is no further sale by the Jet Airways of these
bottles. Therefore, it is obvious that after the first .sale bottles go directly to
the "ultimate consumers". There would be, therefore, no question of application B
of Rule 2(x)(i). Rule 2(x)(ii) will also not apply as this does not amount to a
commodity sole to an intermediary in bulk so as to enable such intermediary
to sell, distribute or deliver, the said commodity to the consumer in smaller
quantities. The concerned period regarding which the show cause notice was
given is April, 2002 to September, 2002. Therefore, Rule 2(x)(iii) which came
by way of an amendment into 2000 would also have to be considered. C
However, even that clause is not applicable as the said "package" though,
contains more than 10 bottles, those bottles cannot be viewed as the "retail
package" nor is there any rule requiring labeling the said "retail package" and
·declaring the price thereof. In fact there is no price involved as it is specifically
written on the package "not meant for sale". It is, therefore, obvious that the
"package" containing 12 bottles cannot, therefore, be viewed as a "wholesale D
package". Once that position is clear, there is no question of the applicability
of Section 4 of the Act as the "package" as it is a retail sale of the package
to the Jet Airways which supplies the same to the passengers on demand.
Therefore, the contention of Shri Subba Rao has to be rejected that we should
draw a parallel in this case with the appeal of Jayanti Foods and hold that E
Section 4 is applicable to the transactions. Once that position is clear, the
"package" will be covered under Section 6 requiring the declaration of "retail
sale price" which appears on the package. In this behalf we must take into
consideration the definition of"commodity in packaged form" as provided in
Section 2(b) of the SWM Act. The definition is as under:
F
"2(b) "commodity in packaged form" means commodity packaged,
whether in any bottle, tin, wrapper or otherwise, in units suitable for
sale, whether wholesale or retail."

Twelve bottles were packed in a wrapper and the wrapper contained the MRP
price though the bottles themselves did not have the price. Therefore, we G
accept the view taken by the Commissioner (Appeals) and the Tribunal that
the MRP was correctly mentioned and as such the assessment should h:i ··t:
been under Section 4A of the Act and not for the reasons given by the
"::"ribunal that we uphold the ultimate verdict of the Tribunal that the valuation
should be unc.er Section 4A of the Act. We accordingly dismiss the appeals H
i
258 SUPREME COURT REPORTS [2007) 9 S.C.R.

A filed by the Department but without any order as to costs.
39. In the result Civil Appeal Nos.2819/2002 and Civil Appeal No.1738/
,2004 are allowed and Civil ~ppeal Nos.2050-51/2004, 1144/2004, 4754/2004,
1385/2005)847/2005, 6425/2005, 2877/2005, 6168/2005, 5840/2006, 498/2006
and 6559-60/2005 are dism.issed. In the facts and circumstances of the case,
B there will be no order as to costs.
S.K.S. Civil Appeal Nos. 2819/2002, 1738/04
allowed.
CivilAppeal Nos. 2050-5112004, 1144/2004,
475412004, 1385 of2005, 3847 of2005, 6425
c of2005, 2877 of2005, 6168 of2005, 5840
of 2006, 498 of 2006, 4559-60 of 2005
dismissed.