Section 4A(1) Central Excise Act Is Attracted When Rules Mandatorily Require The Mention Of Retail Price On A Package: Supreme Court

The Court was hearing Civil Appeals that were filed to take exception to the judgment and order passed by the Customs, Excise and Service Tax Appellate Tribunal.

The bench of Justice Abhay S. Oka and Justice Pankaj Mithal observed, “In case of a package that does not attract provisions of the said Rules regarding mentioning the retail price, even if the retail price is mentioned on the package, that itself will not attract sub-section (1) of Section 4A of the Excise Act.”

Brief Facts-

In the present case, the core issue is whether the goods sold by the respondent-assessee fall under Section 4 or Section 4A of the Central Excise Act, 1944. The proceedings started after the respondent served with show-cause notices alleging that the respondent was selling larger poly packs of chewing tobacco, which should be taxed under Section 4A due to retail sale requirements. The respondent argued that these poly packs were sold in bulk to distributors, not directly to consumers, and thus should be considered as wholesale packages. The Commissioner initially rejected the defence and confirmed the demand for differential duty, interest, and penalty. However, the Tribunal set aside the Commissioner's order. Hence, this appeal

The Court noted that exemption under Rule 34 (b) of the Standards of Weight & Measures (Packaged Commodity) Rules, 1977 will apply to any package containing a commodity if the net weight of the commodity is 10 gms or less and if the same is being sold by weight.

The Court perused rule 2(q) ‘retail sale’ of the said rules and noted that to attract the definition of retail sale, a commodity has to be sold, distributed, or delivered for consumption by an individual, a group of individuals, or any other consumer. Thus, according to the Court, the sale or distribution of a commodity to a dealer who, in turn, sells the commodity to retail dealers will not be a retail sale.

According to the Court what is relevant is whether the package is of such nature that attracts any of the provisions of the said Rules, which mandatorily require the mention of retail price on the package.

The Court said that even assuming that 100 poly packs were retail packages, HDPE bags would be covered by the definition of ‘wholesale package’ as defined in clause (iii) of Rule 2(x). Thus, according to the Court, the HDPE bags are not group packages within the meaning of Rule 2(g).

Accordingly, the Court concluded that the conclusion recorded in the impugned judgment that Section 4A(1) of the Excise Act did not apply to the goods the subject matter of the show cause notices, cannot be faulted with.

Finally, the Court dismissed the appeals.