Respondent is a firm engaged in the manufacture of computer stationery, business forms, etc., [carbonless or with carbon]. The respondent claims that the goods produced by them, namely, computer stationery, business forms and other allied products fall under sub-Heading Nos. 4901.90 and 4820.00 of the Schedule to the Central Excise Tariff Act, 1985 [for short "the Tariff Act"] and, therefore, the said articles are chargeable to NIL rate of duty. 4. Multi copies of computer stationery are manufactured either by inserting carbon paper between the two sheets of paper or by chemical treatment of the paper to make itself copying [carbonless stationery].

                                                             REPORTABLE


                IN THE SUPREME COURT OF INDIA

                  CIVIL APPELLATE JURISDICTION



                 CIVIL APPEAL NOS. 4077 OF 2003





COMMNR. OF CENTRAL EXCISE, MEERUT-II     ...APPELLANT




                                 VERSUS




M/S. SUNDSTRAND FORMS P. LTD.                        

...RESPONDENT





                                 JUDGMENT




Dr. MUKUNDAKAM SHARMA, J.





1.    The   present   appeal   arises   out   of   the   judgment   and   order


      dated   14.5.2002   of   Customs,   Excise   and   Gold   [Control]



      Appellate   Tribunal,   New   Delhi   [for   short   "the   Tribunal"]



      allowing   the   appeal   filed   by   the   Respondent-assessee   and





                                  Page 1 of 23


      setting   aside   the   order   dated   28.12.2000   of   the



      Commissioner, Central Excise, Meerut-II, U.P..




2.    In order to decide the issues arising in the present case in


      proper   perspective,   basic   facts   leading   to   filing   of   the



      present appeal are being recapitulated hereunder.




3.    Respondent   is   a   firm   engaged   in   the   manufacture   of


      computer   stationery,   business   forms,   etc.,   [carbonless   or



      with   carbon].     The   respondent   claims   that   the   goods



      produced   by   them,   namely,   computer   stationery,   business



      forms and other allied products fall under sub-Heading Nos.



      4901.90 and 4820.00 of the Schedule to the Central Excise



      Tariff   Act,   1985   [for   short   "the   Tariff   Act"]   and,   therefore,



      the said articles are chargeable to NIL rate of duty.




4.    Multi copies of computer stationery are manufactured either


      by inserting carbon paper between the two sheets of paper



      or by chemical treatment of the paper to make itself copying



      [carbonless stationery].





                                     Page 2 of 23


5.    The carbonless paper is a chemically treated paper used for


      producing   impression   of   the   writing   or   manuscript   of   the



      original   paper   on   the   other   paper   sheet.     Such   carbonless



      paper, which is a kind of copying paper is processed firstly



      by   printing,   which   is   done   at  pre-fixed  places   of  the  paper



      with   the   purpose   of   printing   names   of   the   buyers,   logo   or



      some   other   words   as   desired   by   the   buyers   and   after   the



      said   process   is   over   the   printing   paper   is   then   passed



      through   coating   unit   for   applying   chemical   to   develop   the



      character of self-copying paper. The backside of the paper is



      coated to  obtain top  copy  and front coating is done  on the



      sheet   which   is   to   be   used   as   bottom   copy.   The   next   step,



      which   is   the   final   step,   is   to   get   chemically   coated   copy



      passed   through   the   coating   unit   for   perforation,   punching



      and fan-folding.




6.    There   is   also   no   dispute   with   regard   to   the   fact   that   the


      carbonless   paper   or   self-copy   paper   emerges   at   the



      intermediate stage and has its own life but the same could



      be   further   used   in   the   manufacture   of   stationery   in





                                     Page 3 of 23


      continuous process.  There is also no dispute with regard to



      the   fact   that   the   carbonless   paper   is   a   well   known



      marketable   commodity   as   is   evident   from   the   process   of



      manufacturing.     The   carbonless   paper   or   other   paper



      cannot   be   treated   as   the   computer   stationery   unless   it   is



      subjected to the second stage of processing, i.e., the process



      of  perforation,   punching   and  fan-folding   etc.     Therefore,   in



      common   trade   parlance   the   computer   stationery   is



      processed through various modes of processing as indicated



      hereinbefore.




7.    On intelligence, a team of Central Excise Officers visited the


      factory   premises   of   the   respondent   herein   at   Noida   and



      examined   the   manufacturing   process   of   the   carbonless



      stationery.   It  was  found   that  the   respondent-company   was



      purchasing   carbonless   paper   in   roll   form,   coated   with



      chemical   on   backside   or   front   side   or   on   both   sides,   from



      the market and such carbonless paper was subjected to the



      process   of   only   printing   and   perforation,   etc.,   for   the



      manufacture of the stationery.





                                    Page 4 of 23


8.    The Commissioner, Central Excise, Meerut-II issued a show


      cause   notice   dated   30.04.1998   wherein   it   was   alleged   that



      the   respondents   were   engaged   in   evasion   of   duty   on



      carbonless   paper   which   emerged   at   the   intermediate   stage



      during   the   course   of   manufacture   of   carbonless   stationery



      from   the   plain   paper.   Therefore,   they   were   asked   to   show



      cause as to why duty amounting to Rs. 49,05,335.00 which



      was   allegedly   not   paid   on   the   carbonless   paper



      manufactured   and   removed   from   their   factory   during   the



      period from 1993-94 to 1997-98 [upto 12/97] should not be



      recovered  from  them  under  Rule  9(2)  of the Central Excise



      Rules,   1944   read   with   provisions   of   Section   11A(1)   of   the



      Central   Excise   Act,   1944   invoking   extended   period   of   5



      years and also to show cause as to why penalty and interest



      on the evaded duty should not be imposed upon it. The said



      notice proposed to charge duty on the said carbonless paper



      emerging   at   the   intermediate   stage   under   sub-heading   No.



      4816.00   to   the   Schedule   to   the   Central   Excise   Tariff   Act,



      1985.





                                   Page 5 of 23


9.    Simultaneously, proceedings were initiated against MD and


      Deputy   MD   of   the   respondent-company   for   imposing



      penalty upon them. Thereafter, six other show cause notices



      were  also  issued  on  the  same  issue  to  the   respondents  for



      raising   the   demand   of   duty   in   terms   of   Rule   9(2)   of   the



      Central   Excise   Rules,   1944   read   with   Section   11A   of   the



      Central Excise Act, 1944 and invoking penal provisions.




10. Notice   issued   by   the   Department   mentioned   that   the



      respondent-company   is   engaged   in   evasion   of   duty   on



      carbonless   paper   which   emerged   at   the   intermediate   stage



      during   the   course   of   manufacture   of   carbonless   stationery



      from the plain paper. Therefore, the Department demanded



      Central   Excise   duty   at   the   intermediate   stage   when   the



      paper is coated to make it carbon less paper or self-copying



      paper. Notice alleged that the carbonless paper is a separate



      commodity,  different from  plain paper, and  its user  is also



      different   from   the   ordinary   paper.   The   carbonless   paper



      emerged   on   subjecting   certain   process,   i.e.,   application   of



      chemicals   and   printing   which   was   done   to   describe   the





                                    Page 6 of 23


  name   of   the   buyer   and   other   details   relating   to   which



  ultimately the paper was to be used for in the present case.



  The   printing   was   only   incidental   to   the   carbonless   paper



  emerging   at   the   intermediate   stage   and   that   the   printing



  was   not   in   any   way   necessary   for   the   manufacturing   of



  carbonless   paper   which   emerged   at   intermediate   stage.



  According to the Department, such carbonless papers could



  be further used into the manufacturing of the stationery in



  continuous   process,   as   it   was   evident   from   the   process   of



  manufacture and statement of the party that the process of



  perforation, punching and fan folding, etc., was responsible



  to   convert   carbonless   paper/other   paper   into   computer



  stationery.




11.The   Department   classified   the   product   as   "the   coated



  paper" at the intermediate stage under Heading 48.16 of the



  Tariff Act which applies to carbon paper, self-copying paper



  and other copying or transfer papers. Notice alleged that the



  printing   of   certain   words   only   specified   the   buyer   but   it



  would   not   in   any   way   make   them   unmarketable,   as   the





                               Page 7 of 23


   carbonless   paper   which   emerged   at   the   intermediate   stage



   in   the   course   of   the   manufacture   of   the   carbonless



   stationery  was similar  to carbonless paper purchased  from



   the  market and  the  only  difference  was  that  in  the   case   of



   the respondent the carbonless paper manufactured at their



   end was printed with some words relating to the buyers.




12. Thereafter, the Commissioner in its Order-In-Original dated



   28.12.2000   confirmed   the   demand   of   the   department   and



   imposed   penalty   of   Rs.   50   lakhs   on   the   respondent-



   assessee.




13. Aggrieved   by   the   same   the   respondent-assessee   filed   an



   appeal   before   the   Customs,   Excise   and   Gold   [Control]



   Appellate   Tribunal,   New   Delhi   which   vide   its   order   dated



   14.05.2002   held   that   the   impugned   product   is   not



   classifiable   under   heading   48.16   as   carbonless   paper   and



   allowed the appeal of the respondent.




14. Being   aggrieved   by   the   said   order   of   the   Tribunal,   the



   Department has filed the present appeal, on which we heard





                                Page 8 of 23


   learned   counsel   appearing   for   the   parties,   who   have   taken



   us through all the materials available in the record.




15. There   are   two   specific   issues   which   arise   for   our



   consideration in the present appeal and the same were also



   argued extensively by the counsel appearing for the parties.



   The   first   issue,   relates   to   under   which   particular   heading



   the intermediary product would fall or is it to be treated as



   a   final   or   end   product,   under   heading   4820.00   of   the



   Schedule to the Central Excise Tariff Act.  The second issue



   arising   for   our   consideration   is   as   to   whether   or   not   the



   intermediary   product   in   question   has   a   marketability



   prospect and capability.




16. The   counsel   appearing   for   the   appellant   argued   that   the



   intermediary   product   with   which   we   are   concerned   falls



   under Heading No. 48.09 read with 48.16 of the Schedule to



   the   Central   Excise   Tariff   Act  whereas   according   to   the



   counsel   appearing   for   the   respondent-company   the   same



   falls   under   the   Heading   48.20   or   under   sub   heading



   4901.90 of the Schedule.





                                 Page 9 of 23


17. In   support   of   his   contention,   counsel   appearing   for   the



   respondent-assessee   relied   upon   the   Circular   dated



   15.10.1991   issued   by   the   Central   Board   of   Excise   and



   Customs,   Government   of   India,   New   Delhi,   which   was



   issued   in   relation   to   classification   of   paper   printed   with   a



   format   of   air   line   tickets   or   embarkation/disembarkation



   cards and submitted that they were under a bona fide belief



   in   view   of   the   said   circular   that   no   duty   was   attracted   on



   the printed  coated  paper arising at  the inter  mediate stage



   during the continuous process of manufacture of carbonless



   computer   stationery   and   that   in   the   said   circular   it   was



   clarified that formats (of airline tickets, embarkation cards,



   etc.) which have ink deposited at appropriate places on the



   reverse   side,   instead   of   being   classified   under   Heading



   48.09   or   48.16,   would   be   classifiable   under   sub-Heading



   4820.00 or 4901.90 attracting nil rate of duty and  that the



   Department   is   bound   by   its   own   Circular   issued   by   the



   Board.





                                  Page 10 of 23


18. On   the   other   hand,  counsel   appearing   for   the   appellant



   vehemently argued that the said Circular has no application



   to the facts of the present case as the Circular neither deals



   with   continuous   carbonless  computer   stationery   paper   nor



   with   the   carbonless   stationery   and   that   it   actually   deals



   with plain continuous computer stationery.




19. It   is   the   case   of   the   appellant   that   the   product



   manufactured   by   the   respondent   company   is   carbonless



   paper/self-copying paper, which is coated and therefore the



   same should fall under Heading 48.09 for which excise duty



   at   the   rate   of   20%   is   payable.     However,   heading   48.09



   prescribes   a   particular   size   of   paper   in   rolls   of   a   width



   exceeding 36 cm or in rectangular (including square) sheets



   with   at   least   one   side   exceeding   36   cm   in   unfolded   state.



   Consequently,   the   said   heading   would   not   be   applicable



   exactly to the product of the respondent in the present case.



   However, what is applicable is Heading 48.16, which reads



   as follows:





                                Page 11 of 23


     "48.16 4816.00        Carbon   paper,   self-copy   paper

                           and   other   copying   or   transfer

                           papers   (other   than   those   of

                           heading   No.   48.09),   duplicator

                           stencils   and   offset   plates,   of

                           paper,   whether   or   not   put   in

                           boxes.


                                               Rate of Duty 20%"





20. The respondent, however, submitted that they manufacture



  Registers,   account   books,   note   books   and   other   allied



  products   for   which   Nil   duty   is   prescribed   under   Heading



  49.01   of   the   Schedule,   where   the   description   of   goods   is



  printed   books,  newspapers, pictures  and other  products  of



  the   printing   industry;   manuscripts,   typescripts   and   plans.



  According   to   the   counsel   appearing   for   the   respondent   the



  products   manufactured   by   them   should   be   treated   falling



  under Heading No. 49.01. Reference was also drawn to the



  opinion   of   the   Institute   of   Paper   Technology,   Saharanpur,



  U.P.




21. The said opinion clearly indicates  that computer stationery



  is different from carbonless paper and self copying paper.  It



  was   also   indicated   therein   that   carbonless   papers   or   self



                              Page 12 of 23


   copying   papers   are   fully   coated   throughout   and   are



   available in reel/sheet form.




22. There   is   a   set   of   Interpretative   Rules   for   interpreting



   headings   of   the  Schedule   to   the   Central   Excise   Tariff   Act.



   Para   2A   of   the   same   provides   that   any   reference   in   a



   heading to the goods shall be taken to include a reference to



   those   goods   incomplete   or   unfinished,   provided   that,   the



   incomplete or unfinished goods have the essential character



   of the complete  or finished goods.     Para  3 thereof  provides



   that   when   goods   are   classifiable   under   two   or   more



   headings, classification should be effected by relying on the



   heading   which   provides   the   most   specific   description   and



   the same  would be  preferred to headings providing a more



   general description.



23. In   the   tariff   provided   under   Chapter   48,   there   are   certain



   notes which are relevant for the purpose of interpreting the



   subject   matter   of   various   headings.     Note   7   thereof,



   provides,   that   paper,   paperboard,   cellulose   wadding   and



   webs of cellulose fibres answering to a description in two or





                                 Page 13 of 23


  more of the heading nos. 48.01 to 48.11 are to be classified



  under   one   of   such   headings   which   occurs   last   in   the



  numerical   order   in   the   Schedule.     Note   11   thereof   also



  provides that except for the goods of Heading No. 48.14   or



  48.21,   paper,   paperboard,   cellulose   wadding   and   articles



  thereof,   printed   with   motifs,   characters   or   pictorial



  representations,   which   are   not   merely   incidental   to   the



  primary use of the goods, fall in Chapter 49.





24. Strong reliance was placed by the counsel appearing for the



  respondent on the Circular dated 15th October, 1991, issued



  by   the  Central   Board   of   Excise   and   Customs,   Government



  of India, New Delhi.  The said circular relates to levy of duty



  on   paper   sheets   printed   with   format   of   airline   tickets   or



  embarkation/disembarkation   cards   and   classification



  thereof.       The   said   circular   clarifies   and   relates   to   airline



  tickets.     A   bare   glance   on   the   aforesaid   circular   makes   it



  crystal   clear   that   the   intermediary   products   referred   to   in



  the   present   appeal   are   not   directly   relatable   to   airlines



  tickets  or  embarkation/disembarkation   cards.   Besides,   the





                                Page 14 of 23


  aforesaid   circular   deals   with   the   end   product,   namely,   the



  computer   stationery   which   is   classifiable   under   Heading



  48.20.     If   the   end   product   is   classifiable   under   Heading



  48.20 then it would be difficult to say that the intermediary



  product   would   also   fall   under   heading   48.20.   In   our   view,



  the   appropriate   specific   heading   for   the   intermediary



  product would be Heading 48.16.





25. The Commissioner of Customs, who has passed the Order-



  In-Original   was   conscious   of   the   aforesaid   fact.     According



  to   him,   the   carbonless   paper/self   copying   paper,   which   is



  an   intermediary   product   is   classifiable   under   Headings



  48.09   and   48.16   depending   upon   the   size   of   the   papers



  manufactured by the respondent company whereas the end



  product   i.e.   the   computer   stationery   is   classifiable   under



  Heading 48.20, which attracts NIL rate of duty.   According



  to   him   although   the   final   product   is   not   dutiable,   as   the



  same is classifiable under Heading 48.20, where NIL rate of



  duty   is   prescribed,   but   so   far   as   intermediary   product   is



  concerned it is  to be classifiable under  Heading 48.16  and





                               Page 15 of 23


   the duty payable for such intermediary goods is prescribed



   as 20%.





26. The  Commissioner   has  given   cogent   reasons   as to   why  the



   carbonless   paper   emerging   at   intermediate   stage  would   be



   classifiable   under   heading   48.16.     According   to   him   goods



   covered under Headings 48.09 and 48.16 are of same kind



   except   that   in   latter   heading   the   goods,   other   than   in   roll



   form or in rectangular sheet with at least one side exceeding



   36   cm   fall   and   that   applying   the   principle   of  ejusdem



   generis, the carbonless paper whether printed or not which



   is   not   in   roll   form   or   in   the   sheet   form   with   one   side



   exceeding  36   cm  would  be  covered   under   sub  heading   No.



   4816.00.




27. Having   decided   the   aforesaid   classification   in   the   aforesaid



   manner,   so   far,   intermediary   product   is   concerned   the



   Commissioner also considered the scope of marketability of



   the   intermediary   product   in   question.     Relying   on   the



   statements   made   by   the   Director   of   the   respondent-



   company   themselves   and   other   relevant   documents   on




                                 Page 16 of 23


  record   the   Commissioner   came   to   a   finding   that   the



  carbonless   paper   even   in   printed   form   could   be   sold   or



  purchased   although   the   number   of   the   customers   is



  restricted.  He also found on appreciation of the documents



  on  record   that carbonless   paper   invariably   emerges  during



  the course of manufacture of computer stationery and such



  carbonless   paper   emerging   at   the   intermediary   stage   is



  known to the market, has a distinct and very well-identified



  market and is capable of being marketed.





28. It has been indicated from the findings of the Commissioner



  that   the   respondent   company   not   only   manufactures   the



  end   product   but   it   also   manufactures   the   intermediary



  products which are sold by them even in the roll form in the



  market.       Invoices   indicating   sale   by   the   respondent   have



  also been placed on record and from scrutiny of the same it



  appears   that   such   intermediary   products   were   sold   in   roll



  forms only. It is also an undisputed fact in the present case



  that   the   respondent   themselves   purchased   intermediary



  products  from  the  open market.       But then  only difference





                              Page 17 of 23


   even according to  them   also is that such carbonless  paper



   with   coating   purchased   from   the   market   is   of   inferior



   quality.




29. The   Tribunal,   however,   while   dealing   with   the   appeal   filed



   before   it   upset   the   aforesaid   findings   holding   that



   respondent-   assessee   was   engaged   in   the   manufacture   of



   printed computer stationery and not self copying paper, and



   therefore,   the   intermediary   products   of   the   respondent



   cannot be classified under Heading 48.16.




30.The   Tribunal   also   relied   upon   the   Circular   dated



   15.10.1991   issued   by   the   Central   Board   of   Excise   and



   Customs   for   coming   to   a   finding   that   provided   tickets,



   printed   circulars,   letters,   forms   etc.   which   are   essentially



   printed   matters   requiring   filing   up   of   only   minor   details



   would be covered by sub heading 4901.90.




31. Having   examined   the   record   and   the   description   of   the



   goods   in   the   headings   and   upon   noticing   rules   of



   interpretation   of   the  Schedule   to   the   Central   Excise   Tariff



   Act,   we   are   of   the   considered   opinion   that   although   the



                                Page 18 of 23


   respondent   company   may   be   registered   for   newspapers,



   etc., but it cannot be said that either the end product or the



   intermediary product would fall under Chapter 49, heading



   49.01.  End product here is admittedly computer stationery



   which   would   specifically   fall   under   Chapter   48,   heading



   48.20, sub heading 4820.00.




32. When we read heading 48.16 with sub heading 4816.00, we



   find   that   it   includes   within   its   extent   carbon   paper,   self-



   copy  paper  and other  copying  or transfer  papers but other



   than   those   articles   included   in   heading   48.09   which   is



   specifically   relatable   to   a   particular   size   of   paper   and



   therefore we are in agreement with the findings recorded by



   the   Commissioner   that   the   intermediary   products   in   the



   present   case   would   fall   and   are   classifiable   under   heading



   48.16.




33.The   next   issue   that   is   required   to   be   decided   is   as   to



   whether the intermediary products are marketable or not.




34. Evidence   in   the   nature   of   documents   and   statements



   recorded   in   that   regard   indicates   that   such   intermediary



                                Page 19 of 23


   products   are   available   in   the   market   and   are   brought   and



   sold in the open market.  The Commissioner has referred to



   such   evidence   on   record   and   even   the   invoices   of   the



   respondents themselves clearly indicate that they have sold



   intermediary products of the nature in question in the open



   market in roll forms.




35. In   the   present   case,   there   is   enough   evidence   available   on



   record   to   show   that   not   only   the   intermediary   products   in



   the present case are capable of being bought and sold in the



   market but they are in fact sold and purchased in the open



   market. Even the respondents have admitted that they have



   themselves purchased such intermediary products from the



   market although the products available in the market were



   of   inferior   quality.   But   the   fact   remains   that   there   are



   enough   people   like   the   respondents   willing   to   purchase



   such material from the market.




36. During   the   course   of   arguments   reference   was   made   to   a



   number   of   decisions   of   this   Court   on   the   issue   relating   to



   marketability of a product.





                                 Page 20 of 23


37. We   have   a   recent   decision   of   this   Court   in   the   case   of



   Medley
               P
               harmaceuticals   Ltd.   Vs.  The   Commissioner   of


   Central Excise and Customs, Daman, reported in  (2011)


   2   SCC   601.     This   Court   in   the   said   decision   has   very



   carefully considered almost all the previous decisions of this



   Court   on   the   issue   of   the   levy/payment   of   Excise   Duty



   Valuation   on   articles   manufactured   by   the   assessee



   company   therein.       After   referring   to   practically   all   the



   decisions on the issue this Court in the aforesaid case held



   that   the       consistent   view   of   this   Court   is   that   the



   marketability   is   an  essential  criteria   for   charging   duty   and



   that   the   test   of   marketability   is   that   the   product   which   is



   made liable to duty must be marketable in the condition in



   which   it   emerges.   This   Court   also   held   that   the     word



   `Marketable' means saleable or suitable for sale and that it



   need not in fact be marketed but then the article should be



   capable   of   being   sold   to   consumers,   as   it   is   without



   anything more. This Court further went on to hold that the



   essence of marketability of goods is neither in the form nor



   in the shape or condition in which the manufactured article




                                 Page 21 of 23


   is   found   but   it   is   the   commercial   identity   of   the   article



   known to the market for being bought and sold. The Court



   further   held   that   the   product   in   question   is   generally   not



   being   bought   or   sold   or   has   no   demand   in   the   market,



   would   be   irrelevant.   The   aforesaid   conclusions   are   arrived



   at after considering almost all the previous decisions of this



   Court on the issue.




38. When   we   apply   the   ratio   of   the   aforesaid   decision   of   this



   Court in the case of Medley Pharmaceuticals Ltd.  (supra)



   to the facts of the present case it becomes crystal clear that



   the   intermediary   product   in   question   is   generally   being



   bought and sold and there is a demand of such articles in



   the market as the respondents themselves have purchased



   it from the open market for manufacturing the end product.




39. In   terms   of   findings   arrived   at   and   on   appreciation   of   the



   materials   on   record,   we   are   of   the   view   that   the   findings



   arrived   at   by   the   Tribunal   by   upsetting   the   findings   of  the



   Commissioner   vide   its   order   dated   14.05.2002   were



   unjustified   and   uncalled   for.     The   Judgment   and   Order





                                 Page 22 of 23


  passed   by   the   Tribunal     is     therefore     set     aside   and   we



  restore   the   order   dated   28.12.2000   passed   by   the



  Commissioner Central Excise, Meerut-II, U.P.




40.Accordingly, the appeal is allowed but leaving the parties to



  bear their own costs.




                                                    .......................................

                                                                                    .....J

                                               [Dr. Mukundakam Sharma]





                                             ............................................J

                                              [Anil R. Dave]

New Delhi

August 30, 2011





                                    Page 23 of 23

The issue which falls for consideration in the present appeal is whether the treatment given or the process undertaken by the appellant to Helium gas purchased by it from the open market would amount to manufacture, rendering the goods liable to duty under Chapter Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 (hereinafter referred to as `the Act'). Chapter Note 10 of Chapter 28 of the Act, in relation to `manufacture', reads as under: "10. In relation to products of this chapter, labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture."

                                        1



                                                                      REPORTABLE


                IN THE SUPREME COURT OF INDIA


                 CIVIL APPELLATE JURISDICTION


                    CIVIL APPEAL NO. 43  OF 2005




M/S. AIR LIQUIDE NORTH INDIA

PVT. LTD.                                               .....APPELLANT.


                                  VERSUS


COMMISSIONER, CENTRAL EXCISE,

JAIPUR-I                                                  .....RESPONDENT.





                              J U D G M E N T




ANIL R. DAVE, J.



1.    This appeal has been filed against the Judgment and Order dated 31.8.2004


passed in Final  Order No 595/2004-NB(C) by the Customs, Excise & Service Tax


Appellate Tribunal, New Delhi   in Appeal No. E/247/2004-NB(C),   whereby the


Tribunal  has allowed the appeal filed by the Department and reversed the findings


of the Commissioner(Appeals).


                                                  2



2.       The issue which falls for consideration in the present appeal is whether the


treatment   given   or   the   process   undertaken   by   the   appellant   to   Helium   gas


purchased by it from the open market would amount to manufacture,  rendering the


goods liable to duty under Chapter Note 10 of Chapter 28 of the Central  Excise


Tariff Act, 1985 (hereinafter referred to as `the Act').  Chapter Note 10 of Chapter


28 of the Act,  in relation to `manufacture', reads as under:




                "10.    In   relation   to   products   of   this   chapter,   labelling   or

                relabelling of containers and repacking from bulk packs to retail

                packs or adoption of any other treatment to render the product

                marketable to the consumer shall amount to manufacture."


In order to answer the aforesaid issue which arises for our consideration, it would


be necessary to set out some facts giving rise to the present appeal.  The appellant


is   engaged   in   the   manufacture   of   Oxygen,   Nitrogen,   Carbon-di-oxide   and   other


gases   classifiable   under   Chapter   28   of   the   Act.   The   appellant   had   purchased


Helium  gas  during  the  period   commencing  from December,  1998 to  31st  March,


2001, from the market in bulk and repacked the same into smaller cylinders after


giving   different   grades   to   it   and   then   sold   the   same   in   the   open   market.   The


appellant   purchased   the   said   gas   for   Rs.520/-   per   Cum.   Various   tests   were


conducted on the gas so purchased and on the basis of the tests and some treatment


given, the gas was segregated into different grades having distinct properties and


sold at different rates to different customers.


                                                   3



3.      The   adjudicating   authorities   held   that   these   processes   undertaken   by   the


appellants amounted to manufacture and consequently confirmed the demand with


penalty. An appeal filed by the appellant before the Commissioner (Appeals) was


allowed.   Thereafter,   an appeal was filed by the   Department before the Tribunal


and the Tribunal, by its impugned judgment held that the process undertaken or the


treatment given by the appellant amounted to "manufacture"   in terms of Chapter


Note   10   of   Chapter   28   of   the   Act.   The   aforesaid   conclusion   arrived   at   by   the


Tribunal is under challenge in this appeal.




4.      On behalf of the appellant it was vehemently argued that the appellant had


only   conducted   various   tests   like   moisture   test,   etc.   to   determine   quality   and


quantity of Helium gas in the cylinders.  It was further submitted that even after the


activity   of   testing,   Helium   gas   remained   as   Helium   gas   only   and   there   was   no


change in the chemical or physical properties.  No new product,  other than Helium


gas   came   into   existence   and,   therefore,   it   cannot   be   said   that   the   appellant   had


carried on any manufacturing activity.




5.      It was further submitted that the gas, when purchased by the appellant, was


already marketable and, therefore,   it cannot be said that the testing of the gas by


the   appellant   had   rendered   the   product   marketable.     In   the   circumstances,     the


process   of   testing   cannot   be   said   to   be   a   manufacturing   process,   rendering   the


                                                    4



product   marketable.     It   was   also   submitted   that   the   crucial   requirement   for   the


application of the last portion of Chapter Note 10 of Chapter 28 of the Act is that


by   adoption   of   some   treatment,   the   product   should   become   marketable   to   the


consumer.     According   to   the   learned   counsel,   the   product,   i.e.   Helium   gas   was


already   in   a   marketable   state   when   it   was   purchased   by   the   appellant   and,


therefore, it cannot be said that the appellant made it marketable.   To substantiate


his   claim,   the   learned   counsel   for   the   appellant     relied   on   the   cases   of  CCE  v.


LUPIN LABORATORIES  2004 (166) A116 (SC) and LAKME LEVER LTD.  v.


CCE  2001 (127) ELT 790 (T).




6.      The learned counsel for the appellant brought to our attention  a decision of


this Court rendered in the case of  BOC (I) Ltd. v.  CCE  2003 (160) ELT 864  to


substantiate his claim that the issuance of certificate along with the cylinder at the


time of sale does not amount to re-labelling.  He also contended that as there was


no suppression of facts of any sort on the part of the appellant, extended period of


limitation could not have been  invoked in the present case.




7.      Per contra, the learned counsel for the respondent submitted that the testing


of Helium gas comes under the category of "treatment" as mentioned in Chapter


Note 10 of Chapter 28 of the Act and that the Tribunal has clearly given a finding


to that effect.   He also submitted that issuance of a separate certificate along with


                                                          5



cylinder   at   the   time   of   sale   containing   all   the   details   regarding   moisture,


purification, etc.  amounted to re-labelling of the gas cylinders.  He also submitted


that the revenue authorities were fully justified in invoking the extended period of


limitation as there had been willful suppression of facts on the part of the appellant


with an intent to evade payment of duty.




8.            We have heard the learned counsel for the parties and perused the records. In


view   of   Chapter   Note   10   to   Chapter   28   of   the   Act,     the   manufacturing   activity


would mean either;




       (a)        Labelling or re-labelling of containers and repacking from bulk packs to


                  retail packs;  OR


       (b)        An adoption of any other treatment to render the product marketable to


                  the consumer.




9.            Thus,   either   an   activity   of   labelling   or   relabelling   of   containers   and


repacking from bulk packs to retail packs OR adoption of any treatment so as to


render the product marketable to the consumer would amount to "manufacture".




10.           It   is   not   in   dispute   that   the   appellant   had   purchased   Helium   gas   from   the


open   market   and   that   its   quality   control   officer   had   conducted   various   tests   and


issued analysis report/quality test report stating the results of the tests carried out.


                                                    6



It is also not in dispute that the appellant issued  certificates of quality at the time


of sale on the basis of tests carried out by it to the effect that the gas supplied by it


confirmed a level of purity and specifications in conformation with the orders of


the customers. Another undisputed fact is that the appellant had purchased  Helium


gas   under   a   generic   description   but   after   the   tests   and   analysis,   it   was   sold   to


different customers based on their specific requirements at profit margin ranging


from 40% to 60%  in different cylinders.




11.     It is pertinent to note that when the appellant was asked about the process


which was being carried out on Helium gas before selling it to its customers, the


representative   of   the   appellant   had   refused   to   give   any   detail   with   regard   to   the


process because, according to him, that process was a trade secret and he would


not like to reveal the same.   Thus,   the respondent or his subordinate authorities


were   not   informed   as   to   what   was   being   done   by   the   appellant   to   Helium   gas


purchased or what treatment was given to the said gas before selling the same to


different   customers   at   different   rates   with   different   certifications   in   different


containers/cylinders.  It is also pertinent to note that the gas which was purchased


at the rate of about Rs.520/- per Cum. was sold by the appellant at three different


rates namely Rs.700/-, Rs.826/- and Rs.1000/- per Cum. and thereby the appellant


used to get 40% to 60% profit.


                                                     7



12.     From the above undisputed facts, it is clear that the gas cylinders were not


sold as such but they were sold only after certain tests or processes as specified by


the customers of the appellant.   It is also clear that only after the analysis and tests,


it could be ascertained as to whom the gas was to be supplied and at what rate. The


various tests resulted into categorization  of the gas into different  grades  namely,


Helium label 4, high purity Helium and Helium of technical grade. Helium label 4


was sold at higher rate as it matched superior standards.




13.     In the instant case,  Helium gas was having different marketability,  which it


did   not   possess   earlier   and   hence   the   gas   sold   by   the   appellant   was   a     distinct


commercial commodity in the trade, rendering it liable to duty under Chapter Note


10   of   Chapter   28   of   the   Act.       If   the   product/commodity,   after   some   process   is


undertaken or treatment is given, assumes a distinct marketability,   different than


its   original   marketability,     then   it   can   be   said     that   such   process   undertaken   or


treatment   given   to   confer   such   distinct   marketability   would   amount   to


"manufacture" in terms of Chapter note 10 to Chapter 28 of the Act.




14.     The only conclusion from the above is that the tests and "process" conducted


by   the   appellant   would   amount   to   "treatment"   in   terms   of   Chapter   Note   10   of


Chapter   28   of   the   Act.     The   fact   that   the   gas   was   not   sold   as   such   is   further


established from the fact that the gas,   after the tests and treatment, was sold at a


                                                 8



profit of 40% to 60%.  If it was really being sold as such, then the customers of the


appellants   could   have   purchased   the   same   from   the   appellant's   suppliers.   When


this question was put to the officer of the appellant,  he could not offer any cogent


answer but merely stated that it was the customers' preference.  Further, he did not


give proper answer as to how the profit margin was so high.   The appellant  had


supplied   the   gas   not   as   such   and   under   the   grade   and   style   of   the   original


manufacturer but under its own grade and standard. Further, while selling the gas,


different   cylinders   were   given   separate   certificates   with   regard   to   the   pressure,


moisture, purification and quality of the gas. This explains the high price at which


the appellant was selling the gas.




15.    Therefore,   in   our   opinion,   the   Tribunal   has   rightly   observed   that   if   no


treatment   was   given   to   the   gas   purchased   by   the   appellant,   customers   of   the


appellant   would   not   have   been   purchasing   Helium   from   the   appellant   at   a   price


40%  to 60% above the price at which the appellant was purchasing.




16.    As stated hereinabove, it is clear that the appellant was purchasing Helium at


the rate of Rs.520/- per Cum. and was selling the same after adding 40% to 60%


profit.     Further,   the   gas   was   segregated   in   different   cylinders   with   different


properties and,  therefore,  the rate at which the gas was purchased by the appellant


and the rate at  which it was sold to its customers was substantially different.


                                                   9



17.     In the circumstances,   it cannot be said that no treatment was given to the


gas   purchased by the appellant.   For the said reasons, it cannot be said that the


appellant was not carrying out any manufacturing activity within the meaning of


Chapter Note 10 of Chapter 28 of the Act.




18.     It is also pertinent to elucidate on the phrase "marketable to the consumer".


The word "consumer" in this clause refers to the person who purchases the product


for   his   consumption,   as   distinct   from   a   purchaser   who   trades   in   it.   The


marketability of the product to "the purchaser trading in it" is distinguishable from


the   marketability   of   the   product   to   "the   purchaser   purchasing   the   same   for   final


consumption" as in the latter case, the person purchases the product for his own


consumption   and   in  that   case,   he   expects   the   product   to   be  suitable   for   his   own


purpose and the consumer might purchase a product  having  marketability,  which


it did not possess earlier.




19.       Therefore, the phrase "marketable to the consumer" would naturally mean


the marketability of the product to "the person who purchases the product for his


own consumption".  Hence, the argument of the appellant that as the product was


already marketable, the provisions of Chapter Note 10   of Chapter 28 of the Act


would not be attracted,  will have to be rejected.


                                                  1



 20.    For the aforetasted reasons, we agree with the Tribunal in holding that the


appellant   is   liable   to   pay   excise   duty   for   the   reason   that   it   has   manufactured


Helium   within   the   meaning   of   the   term   `manufacture'   as   explained   in   terms   of


Chapter Note 10 of Chapter 28 of the Act.




21.     So   far   as   the   issue   with   regard   to   relabelling   is   concerned,   we   are   in


agreement   with   the   view   expressed   by   the   Tribunal   that   relabelling   would   not


mean   mere   fixing   of   another   label.     When   the   appellant   was   selling   different


cylinders with different marking or different certificates to its different customers,


we   can   say   that   the   appellant   was   virtually   giving   different   marks   or   different


labels to different cylinders having different quality and quantity of gas.




22.     It can be very well said that the Helium purchased by the appellant was in a


marketable   state   but   it   is   equally   true   that   by   giving   different   treatment   and


purifying the gas, the appellant was manufacturing a commercially  different type


of gas or a new type of commodity which would suit a particular purpose.   Thus,


the treatment given by the appellant to the gas sold by it would make a different


commercial   product   and,   therefore,   it   can   surely   be   said   that   the   appellant   was


engaged in  a manufacturing activity.




23.     So   far   as   the   issue   with   regard   to   limitation   is   concerned,   we   are   in


agreement   with   the   findings   arrived   at   by   the   Tribunal   to   the   effect   that   the


                                                         1



appellant did not disclose details about the activities or treatment given to the gas


by the appellant.  No duty was ever paid by the appellant on the Helium sold by it


after giving some treatment so as to make it a different commercial product.  We,


therefore,   do   not   see   any   reason   to   interfere   with   the   finding   with   regard   to


limitation also.




24.       For   the   reasons   stated   hereinabove,   we   are   in   agreement   with   the   order


passed by the Tribunal and dismiss the appeal but without any order as to costs.





                                                              ................................................J.

                                                              (Dr. MUKUNDAKAM SHARMA)





                                                                ....................................................J.

                                                                        (ANIL R. DAVE)

New Delhi

August   30,  2011.

what is the true scope and correct purport of the expression "commodity in packaged form" under Section 2(b) of the Standards of Weights and Measures Act, 1976 (in short `the Act). In Civil Appeal No. 1117 of 2010, the specific question is 1 whether the sun glasses can be considered "pre-packed commodity" under Rule 2(l) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (in short `the Rules). In the connected appeals, the product includes Titan watches, fixed wireless phones, sun glasses, electrical goods, home appliances, consumer electronics and Samsung Microwave Oven. The State of Maharashtra is the appellant in all these appeals. 2) For convenience, let us briefly state the facts in Civil Appeal No. 1117 of 2010. According to the respondent, he is engaged in the business of trading in sun glasses and has a counter on commission basis at Globus Stores, Bandra. On 17.10.2003, the Inspector of Legal Metrology/Appellant No. 2 herein visited the store and seized five Sun glasses belonging to the respondent and issued a seizure memo. At the time of search, it was explained to him that the sun glasses delivered to them were in polythene bags and some in individual openable pouches. According to them, sometimes, at the time of delivery, they are put in a pouch which is normally on display for the customers to identify for the purpose of purchase. It 2 was also explained that the package, therefore, is only a package for protection or safety of the article. The value of sun glasses whether inside the package or outside the package does not alter if the package is opened nor does it undergo a perceptive modification on the package being opened. The testing of the sunglasses by the customer is for the purpose of determining whether he should purchase the same considering various sizes, designs, colours, aesthetic value, makes and companies and after trying and ascertaining the suitability, quality etc.

                                                          REPORTABLE


      


               IN THE SUPREME COURT OF INDIA




                 CIVIL APPELLATE JURISDICTION




                CIVIL APPEAL NO. 1117 OF 2010








State of Maharashtra & Ors                               .... Appellant (s)






            Versus






Subhash Arjundas Kataria                                  .... Respondent(s)








                                     WITH


          CIVIL APPEAL NOs. 1118, 1120, 1121, 1122 


                    AND 1123 OF 2010




                                     WITH


              CRIMINAL APPEAL NO. 118 OF 2010










                            J U D G M E N T 




P. Sathasivam, J.






1)   The principle question which arises in these appeals is as 






to what is the true scope and correct purport of the expression 






"commodity   in   packaged   form"   under   Section   2(b)   of   the 






Standards   of   Weights   and   Measures   Act,   1976   (in   short   `the 






Act).  In Civil Appeal No. 1117 of 2010, the specific question is 










                                                                          1



whether   the   sun   glasses   can   be   considered   "pre-packed 




commodity" under Rule 2(l) of the Standards of Weights and 




Measures   (Packaged   Commodities)   Rules,   1977   (in   short   `the 






Rules).   In the connected appeals, the product includes Titan 






watches,   fixed   wireless   phones,   sun   glasses,   electrical   goods, 






home   appliances,   consumer   electronics   and   Samsung 






Microwave Oven.  The State of Maharashtra is the appellant in 






all these appeals.  






2)  For convenience, let us briefly state the facts in Civil Appeal 






No. 1117 of 2010.  According to the respondent, he is engaged 






in the business of trading in sun glasses and has a counter on 






commission basis at Globus Stores, Bandra.   On 17.10.2003, 






the Inspector of Legal Metrology/Appellant No. 2 herein visited 






the   store   and   seized   five   Sun   glasses   belonging   to   the 






respondent and issued a seizure memo.  At the time of search, 






it was explained to him that the sun glasses delivered to them 






were   in   polythene   bags   and   some   in   individual   openable 






pouches.     According   to   them,   sometimes,   at   the   time   of 






delivery, they are put in a pouch which is normally on display 






for   the   customers   to   identify   for   the   purpose   of  purchase.     It 










                                                                               2



was   also   explained   that   the   package,   therefore,   is   only   a 






package   for   protection   or   safety   of   the   article.     The   value   of 






sun glasses whether inside the package or outside the package 






does not alter if the package is opened nor does it undergo a 






perceptive   modification   on   the   package   being   opened.     The 






testing of the sunglasses by the customer is for the purpose of 






determining   whether   he   should   purchase   the   same 






considering   various   sizes,   designs,   colours,   aesthetic   value, 






makes   and   companies   and   after   trying   and   ascertaining   the 






suitability, quality etc.  






3)  It is the grievance of the respondent that in spite of proper 






explanation,   the   Inspector/Appellant   No.   2   seized   the   sun 






glasses   for   allegedly   not   declaring   name   and   address   of   the 






manufacturer/month   and   year   of   manufacturing   which   is   in 






violation of provisions of the Act and the Rules.  It is the claim 






of the respondent that by force they were compelled to write a 






letter   to   the   authorities   for   compounding   the   offence   and 






directing   them   to   pay   Rs.   3,000/-   as   compounding   fee   by 






order dated 30.10.2003.  










                                                                                3



4)     Aggrieved   by   the   action   of   the   appellant,   the   respondent 






preferred Writ Petition No. 120 of 2004, inter alia, for quashing 






of  the seizure memo dated  17.10.2003 and also for the  order 






dated   30.10.2003   for   the   payment   of   compounding   fee.     By 






order   dated   05.05.2006,   the   High   Court,   by   appreciating   the 






submissions   made   on   behalf   of   the   respondent,   allowed   the 






writ   petition   holding   that   the   sun   glasses,   whether   it   be   a 






frame   or   glass   is   not   a  "pre-packed   commodity"  within   the 






definition   of   the   expression  "pre-packed   commodity"  under 






Rule 2(l) of the Rules.  Aggrieved by the said order of the High 






Court, the appellant-State preferred the present appeal by way 






of special leave petition.






5)   It is the stand of the respondent that the Act brings in its 






purview   not   all   the   items   which   are   kept   in   the   package   to 






protect   or   for   other   reasons   but   is   limited   to   packaged 






commodity as defined under the Act, which are being sold by 






weights or measures or numbers, and which are being sold in 






a packed form without unpacking such packaged commodities 






at the time of sale and the sun glasses do not come within the 






ambit   of   definition   of  "commodity   in   packaged   form"  in 










                                                                             4



terms of Section 2(b) of the Act nor under the purview of "pre-






packed   commodity"   under   Rule   2(l)   of   the   Rules.     It   is   also 






highlighted   that   sunglasses   cannot   be   sold   in   the   packaged 






condition   without   opening   the   packaging   since   the   customer 






will   buy   only   after   comparing,   trying   it   out   for   size   and   after 






checking   its   aesthetic   value,   the   quality   of   glass   and   vision, 






looks etc and therefore, the sun glasses can never be and are 






not sold in packaged condition.






6)   We are concerned about Section 2(b) of the Act and 2(l) of 






the Rules which read as under:-






       "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."






       "2(l)   "pre-packed   commodity",   means   a   commodity,   which 


       without the purchaser being present, is placed in a package 


       of   whatever   nature,   whether   sealed   or   opened,   so   that   the 


       commodity   contained   therein   has   a   pre-determined   value 


       and includes those commodities which could be taken out of 


       the   package   for   testing   or   examining   or   inspecting   the 


       commodity;






       Explanation I - Where, by reason merely of the opening of a 


       package   no   alteration   is   caused   to   the   value,   quantity, 


       nature or characteristic of the commodity contained therein, 


       such commodity shall be deemed, for the purposes of these 


       rules, to be a pre-packed commodity, for example, an electric 


       bulb   or   fluorescent   tube   is   a   pre-packed   commodity,   even 


       though the package containing it is required to be opened for 


       testing the commodity.






       Explanation II. ......"










                                                                                       5



7)   Considering   the   above   definition,   the   High   Court   observed 






that   the   expression  "pre-packaged   commodity"  would   be 






applicable to:-






(i) commodities which are packed, and






(ii) the commodity packaged has a pre-determined value and






(iii)   that   value   cannot   be   altered   without   the   package   sold 






being opened at the time of sale, or






(iv) the product undergoes a modification on being opened.






8)   As rightly argued by Mr. Shekhar Naphade, learned senior 






counsel for the respondent, in the case of sun glasses, whether 






they come in a box or not, insofar as the retailer is concerned, 






at the time when they are being sold to the consumer, are not 






in   packaged   form.     Even   if   we   hold   that   they   come   in   a 






packaged   form,   before   they   are   sold   to   the   consumer   by 






removing them from the box, the value does not alter nor does 






the product undergo a perceptive modification and as such the 






provisions,  particularly,   under   Section  2(b)  of  the  Act  are  not 






applicable.  Further, as rightly observed by the High Court, the 






explanation to the said Rule is also not attracted because the 






package is not opened for the purpose of testing as in the case 










                                                                           6



of electric bulbs.  It was asserted by the learned senior counsel 






for the respondent that the sun glasses are tested by the buyer 






for his suitability.  






9)  Similar arguments were advanced by the respective counsel 






relating   to   their   respective   products.     On   careful   scrutiny   of 






the   provisions   referred   above,   it   is   clear   that   the   expression 




"pre-packed commodity" would be applicable to commodities 




which   are   packed   and   the   commodity   packaged   has   a   pre-






determined value and that value cannot be altered without the 






package  sold being  opened   at the  time  of  sale  or  the  product 






undergoes a modification on being opened.  We are also of the 






view   that   the   Explanation   I   to   Rule   2(l)   of   the   Rules   is   not 






attracted because the package is not opened for the purpose of 






testing as in the case of electric bulbs.  We fully agree that the 






sun   glasses   are   tested   by   the   buyer   for   his   suitability,   and 






therefore, sun glasses, whether it be a frame or glass is not a 






pre-packed  commodity  within  the  definition  of the  expression 




"pre-packed"  under   Rule   2(l)   of   the   Rules,   hence,   the   High 




Court is fully justified in quashing the notice and allowing the 






writ  petition   filed  by  the   respondent.     We  also  agree   with  the 










                                                                                 7



similar   arguments   advanced   relating   to   other   products 






mentioned above.  






10)     Learned   counsel   appearing   for   the   appellant-State 






submitted   that   the   very   same   Rules   fell   for   interpretation 






before   this   Court   in   the   case   of  Whirlpool   of   India   Ltd.   vs. 




Union of India and Ors. (2007) 14 SCC 468.  Heavily relying 




on the said decision, the learned  counsel submitted  that sun 






glasses   are  "pre-packed   commodity"  within   the   meaning   of 






the   Act   and   the   Rules.     He   also   submitted   that   the   other 






products   also   would   come   within   the   above   mentioned 






definition and by applying the ratio in that decision prayed for 






setting aside the impugned order of the High Court.  






11)    In   order   to   consider   the   stand   of   the   State,   let   us 






consider   the   factual   position   and   the   ratio   laid   down   in 




Whirlpool (supra).   The short question in that matter was as 




to   whether   `refrigerator'   is   a   "packaged   commodity"   or   not. 






The   appellant-Whirlpool   was   engaged   in   manufacturing 






refrigerators.   The Central Government issued Notification No. 






9   of   2000   dated   01.03.2000   under   Sections   4-A(1)   and   (2)   of 






the   Central   Excise   Act   and   specified   the   goods   mentioned   in 










                                                                              8



Column   3   of   the   said   notification.   Entry   48   pertains   to   the 






refrigerators whereby the refrigerators invited valuation under 






Section   4-A   of   the   Central   Excise   Act   with   the   abatement   of 






40%. Sections 4-A(1) and (2) of the Central Excise Act require 






that any goods included in the notification shall be valued on 






the basis of the maximum retail price (for short "MRP") which 






is  required to be  printed  on  the  packages  of  such  goods. The 






five conditions for inclusion of the goods are:






      "(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 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 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."










                                                                            9



12)    The   appellant   felt   aggrieved   by   the   fact   that   the 






refrigerators were covered and included in the aforementioned 






Notification   dated   01.03.2000   as,   according   to   the   appellant, 






the   refrigerator   is   not   such   a   commodity   which   is   sold   in   a 






package.   Significantly,   the   appellant   is   not   aggrieved   by   its 






valuation  being  under  Sections  4-A(1)   and (2)  of  the  Act.  The 






only   complaint   that   the   appellant   made   is   that   the   appellant 






should   not   be   required   to   print   MRP   on   the   package   of   the 






refrigerator manufactured by it. The appellant, therefore, filed 






a   writ   petition   before   the   High   Court   of   Punjab   and   Haryana 






praying,  inter   alia,   for   a   writ   of   certiorarified   mandamus 






restraining   the   authorities   for   taking   any   coercive   measures 






against   the   appellant   or   its   Directors,   officers,   servants   or 






agents   for   not   declaring   MRP   on   the   refrigerators 






manufactured   and   cleared   by   the   appellant   from   its   factory. 






The   Notification   dated   01.03.2000   was   challenged   to   this 






limited   extent   only.   Before   the   High   Court,   the   appellant 






pleaded   that   refrigerator   is   not   such   a   commodity   which   can 






be   termed   to   be   a   "packaged   commodity"   and   further   the 






provisions   of   the   Act   or   the   Rules   made   thereunder   are   not 










                                                                              10



applicable   to   the   refrigerator   at   all.   It   was,   therefore,   prayed 






that   the   notification   was   liable   to   be   quashed   only   to   the 






extent that it included the refrigerator and the requirement of 






declaring MRP on the refrigerator.






13)    The respondent authorities, however, maintained that the 






refrigerator   was   in   fact   sold   in   a   package   of   polythene   cover, 






thermocol,   hardboard   cartons,   etc.   and   thus   it   falls   in   the 






category   of   "pre-packed   commodity".   On   that   basis   it   was 






contended that since every packaged commodity was included 






in   the   Act   and   the   Rules   made   thereunder,   there   can   be   no 






escape   from   printing   MRP   on   the   package.   The   High   Court 






rejected the contention and dismissed the petition filed by the 






appellant. 






14)   It was vehemently contended before a three-Judge Bench 






by the counsel for the appellant that a `refrigerator' is not sold 






in a "packaged form".   It was further contended that even if it 






is   sold   in   the   packaged   form,   when   it   is   displayed   by   the 






dealers, it is not in the packaged form and the customers can 






take   the   inspection   of   the   refrigerator   and   at   least   for   that 






purpose   the   package   has   to   be   opened   and,   therefore,   there 










                                                                               11



would be no question of the refrigerator being included in the 






Act   or   the   Rules   made   thereunder.     Rejecting   the   said 






submission as incorrect, this Court concluded as under:-








      "5. It was not disputed before the High Court and also before 


      us   that   the   appellant   manufacturer   has   to   sell   the 


      refrigerators which are packed in polythene cover, thermocol, 


      etc.   and   placed   in   hardboard   cartons.   In   fact   the   appellant 


      had so  pleaded   before  the  High  Court  in para  3 to  which  a 


      reference   has   been   made   by   the   High   Court.   Once   that 


      position   is   clear,   then   the   refrigerator   clearly   becomes   a 


      commodity   in   the   packaged   form.   The   use   of   the   term   "or 


      otherwise" in the definition would suggest that a commodity 


      if packed in any manner in units suitable for sale, whether 


      wholesale or retail, becomes a "commodity in packed form..."










15)  After adverting to Rule 2(l) "pre-packed commodity" and 






Explanation   I,   their   Lordships   have   held   that   refrigerator   is 






covered   under   the   term  "pre-packed   commodity"  and 






concluded that:








   "6.  ....Even   if   the   package   of  the  refrigerator   is   required   to  be 


   opened for testing, even then the refrigerator would continue to 


   be   a   "pre-packed   commodity".   There   are   various   types   of 


   packages   defined   under   the   Rules   and   ultimately   Rule   3 


   specifically   suggests   that   the   provisions   of   Chapter   II   would 


   apply   to   the   packages   intended   for   "retail   sale"   and   the 


   expression "package" would be construed accordingly.






   7. It is not disputed before us that the sale of the refrigerator is 


   covered under the "retail sale". Once that position is clear Rule 


   6   would   specifically   include   the   refrigerator   and   would   carry 


   along with it the requirements by that Rule of printing certain 


   information including the sale price on the package. Thus it is 


   clear   that   by   being   sold   by   the   manufacturer   in   a   packaged 








                                                                                         12



   form, the refrigerator would be covered by the provisions of the 


   SWM  Act  and  the  SWM  (PC)  Rules  and  it  would   be  imperative 


   that MRP has to be printed in terms of Rule 6 which has been 


   referred to above.






   8.  The   High   Court   has   also   made   a   reference   to   Rule   2(l)   and 


   more particularly, the Explanation to which we have referred to 


   earlier. In our view the reliance by the High Court on Rule 2(l) is 


   correct.   Learned   counsel   tried   to   urge   that   every   customer 


   would like to open the package before finalising to purchase the 


   refrigerator. He would at least get it tested and for that purpose 


   the package would be destroyed. That may be so but it does not 


   change the position as rightly observed by the High Court.






   9.  It   was   tried   to   be   suggested   that   MRP   would   be   different 


   depending upon the area in which it is being sold. That may be 


   so,   however,   that   cannot   absolve   the   manufacturer   from 


   displaying   the   price   i.e.   MRP   on   the   package   in   which   the 


   refrigerator is packed. Whatever be the situation, it is clear that 


   a   refrigerator   is   a   "packaged   commodity"   and   thus   is   covered 


   under the SWM Act and the SWM (PC) Rules and, therefore, the 


   Notification dated 1-3-2000 cannot be faulted on that ground....


   "






16)   By heavily relying on the above dictum with reference to 






the   very   same   provisions   by   this   Court   in   the  Whirlpool  




(supra),  the   appellant-State   submitted   that   in   view   of 




substantive definition of the main section read with the Rules, 






the   sun   glasses   are   "pre-packed   commodity"   within   the 






meaning of the Act and the Rules thereof.  The appellant-State 






also  submitted   that  similar   analogy is  to  be  applied  for  other 






products also.










                                                                                           13



17)     Learned   senior   counsel   appearing   for   the   respondent 






vehemently   submitted   that   the   ratio   of   the   judgment   in 




Whirlpool   (supra)  is   not   at   all   applicable   to   these   cases, 




firstly, because the issue in that case was in context of Central 






Excise Act and, secondly, because none of the aspects stated 






have been taken into consideration by this Court in the matter 






of Whirlpool (supra).  It is also pointed out that the judgment 






is  sub silentio  because the provisions of the Act, specially the 






provisions of Section 2(v) of the Act, have not been taken into 






consideration   in  the   said   case.     In   the   context   of  sub   silentio 






reference is made to the judgment of this Court in  Municipal  




Corporation of Delhi vs. Gurnam Kaur, (1989) 1 SCC 101, 




which   according   to   the   counsel   for   the   respondent,   is   that   a 






sub silentio  judgment does not have  a binding precedent.   By 






pointing out the same, the counsel for the respondent prayed 






that   the   case   of  Whirlpool   (supra)  requires   reconsideration 






and, as a result, the present matter also would be required to 






be considered by a larger Bench.  






18)  Though it was pointed out that the decision in Whirlpool  




(supra) was made in the context of the Central Excise Act, we 








                                                                               14



have   already   extracted   the   question   which   fell   for 






consideration, relevant provisions from the Act and the Rules, 






discussion as to the applicability, and the ultimate conclusion 






in para 9, namely, "whatever be the situation, it is clear that a 






refrigerator   is   a   "packaged   commodity"   and   thus   is   covered 






under the Act and the Rules."   In view of the same, it cannot 






be   claimed   that   the   judgment   in  Whirlpool   (supra)  has   no 






bearing on the issues in these appeals.  Inasmuch as the said 






decision was rendered by a bench of three Hon'ble Judges with 






reference   to  the   very  same   Act  and  Rules,  we  are   of the   view 






that the issue raised in all these appeals have to be heard by a 






larger Bench.






19)     Accordingly,   we   direct   the   Registry   to   place   all   these 






appeals   before   Hon'ble   the   Chief   Justice   of   India   for   listing 






before a larger Bench. 






     






                                         ...........................................


                                       ......J.                                


                                    (P. SATHASIVAM)   
                                                                                            










                                  ..............................................J. 


                                  (H.L. GOKHALE) 










                                                                                                15



NEW DELHI;


AUGUST 26, 2011.     










                         16



                                                           REPORTABLE


      


               IN THE SUPREME COURT OF INDIA




                 CIVIL APPELLATE JURISDICTION




                 CIVIL APPEAL NO. 1119 OF 2010










The State of Maharashtra & Ors                           .... Appellant (s)






             Versus






Raj Marketing & Anr.                                       .... Respondent(s)










                            J U D G M E N T 








P. Sathasivam, J.






1)  This appeal by State of Maharashtra is directed against the 






judgment   and   order   dated   08.12.2006   passed   by   the   High 






Court   of   Judicature   at   Bombay   in   Writ   Petition   No.   2982   of 






2006 whereby the High Court allowed the writ petition of the 






Ist respondent herein. 










                                                                               17



2)    The issue involved in this appeal is whether Candy man, 






Minto-Fresh,   Kitchens   of   India,   Badam   Halwa   and   Ashirvaad 






Atta etc. can be considered as a "wholesale  package" within 






the   definition   of   the   expression  "wholesale   package"  under 






Rule 2(x) of the Standards of Weights and Measures (Packaged 






Commodities)   Rules,   1977   (hereinafter   referred   to   as   "the 






Rules").  










3)    Brief facts:




a)    The   respondent   is   a   firm   carrying   on   the   business   of 






buying   and   selling   various   products   and   they   used   to   store 






these   products   in   their   godown   at   Gali   No.8,   Senior   Tyre 






Compound,   N.S.S.   Road,   Narayan   Nagar,   Ghatkopar   (W) 






Mumbai.






b)    On   31.10.2006,   the   second   appellant/Inspector   of   Legal 






Metrology,   Mumbai   visited   the   first   respondent's   godown   and 






seized various packages of packed commodities such as Candy 






man,   Minto-Fresh,   Kitchens   of   India,   Badam   Halwa   and 






Ashirvaad   Atta   etc.   vide   seizure   memo  bearing   Nos.   0114769 






and   0114770   dated   31.10.2006.     The   reason   for   seizure, 










                                                                          18



according to him, is that on the wholesale packets, the details 






regarding the name and addresses of the manufacturer, cost, 






month, year etc. has not been declared and also the retail sale 






price was not mentioned which is in violation of the Rules.  






c)    A   show   cause   notice   dated   06.11.2006   has   been   issued 






by   the   appellant   to   the   respondent   for   the   violation   of 






Section/Rule   33   and   39   read   with   Rule   23(1)   and   6   of   the 






Rules.   It was mentioned in the said notice that the offence is 






compoundable as per Section 73 of the Standards of Weights 






and   Measures   Act,   1976   and   Section   65   of   the   Standards   of 






Weights and Measures (Enforcement) Act, 1985.  






d)    On 18.11.2006, the respondents, vide their letter, replied 






to the notice dated 06.11.2006. 






e)    On 28.11.2006, the respondents filed Writ Petition being 






W.P.   No.   2982   of   2006,  inter   alia,   for   quashing   the   seizure 






memo dated 31.10.2006 and notice dated 06.11.2006. 






4)    The   High   Court,   by   impugned   order   dated   08.12.2006 






allowed   the   writ   petition   by   holding   that   the   packages 






containing Candy man, Minto-Fresh, Kitchens of India, Badam 






Halwa   and   Ashirvaad   Atta   are   not   wholesale   package   within 










                                                                            19



the   definition   of   the   expression  "wholesale   package"  under 






Rule 2(x) of the Rules. 






5)    Questioning   the   said   order   of   the   High   Court,   the   State 






filed the above appeal by way of special leave. 










                                                                            20



6)    Heard   Mr.   Chinmoy   Khaladkar,   learned   counsel   for   the 






appellant-State and Mr. Ravinder Narain for respondent No.1.






7)    Rule   2(x)   of   the   Rules   define  "wholesale   package"  to 






mean:






      "(x) "wholesale package" means a package containing-






      (i)  a number  of  retail  packages, where such first  mentioned 


      package   is   intended   for   sale,   distribution   or   delivery   to   a 


      intermediary   and   is   not   intended   for   sale   direct   to   a   single 


      consumer; or






      (ii)     a commodity sold to an intermediary in bulk to enable 


      such   intermediary   to   sell,   distribute   or   deliver   such 


      commodity to the consumer in smaller quantities; or 






      (iii)    packages   containing   ten   or   more   than   ten   retail 


      packages   provided   that   the   retail   packages   are   labeled   as 


      required under the rules."










8)    Rule 29 of the Rules read as under:






      "29. Declaration to be made on every wholesale package.- 


      Every   wholesale   package   shall   bear   thereon   a   legible, 


      definite, plain and conspicuous declaration as to,-






      (a)      the   name   and   address   of   the   manufacturer   or   where 


      the manufacturer is not the packer, of the packer;






      (b)      the   identity   of   the   commodity   contained   in   the 


      package; and 






      (c)   the   total   number   of   retail   packages   contained   in   such 


      wholesale  package  or the  net  quantity  in terms  of standard 


      units   of   weights,   measures   or   number   of   the   commodity 


      contained in wholesale package:










                                                                                           21



      Provided that nothing in this rule shall apply in relation to a 


      wholesale package if a declaration similar to the declaration 


      specified   in   this   rule,   is   required   to   be   made   on   such 


      wholesale   packages   by   or   under   any   other   law   for   the   time 


      being in force."










9)    In   order   to   attract   violation   of   the   Rules   referred   above, 






the package seized must fall within the expression "wholesale 




package".     A   package   used   merely   for   protection   during 




conveyance  or  safety   would  not  be  pre-packed   commodity  for 






the purpose of the Act and the Rules.   As rightly observed by 






the   High   Court   that   for   the   package   to   be   treated   as   a 






wholesale   package,   the   package   must   not   be   a   secondary 






package.     In   that   event,   we   have   to   find   out   whether   the 






secondary package is only  for  safety, convenience or the like. 






As demonstrated before the High Court, the counsel appearing 






for the Ist respondent placed all the above-mentioned products 






before us i.e. both the wholesale package as well as the retail 






package.     The   Department's   only   contention   was   that   the 






secondary   package   in   which   the   wholesale   package   was 






packed does not contain the said information.   In the light of 






the   provisions   which   we   have   referred   above   and   on 






verification of the products which were shown to us, we are of 








                                                                                        22



the   view   that   the   secondary   outer   packing   for   transportation 






or for safety of the goods being transported or delivered cannot 






be described as a wholesale package.  










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10)       On going through the statutory provisions which we have 






adverted   to   in   the   earlier   paras   and   on   verification   of   the 






products   which   were   shown   to   us   during   the   course   of 






argument, we fully agree with the conclusion arrived at by the 






High   Court.     Consequently,   the   appeal   fails   and   the   same   is 






dismissed with no order as to costs. 













      






                                  .................................................J. 


                                    (P. SATHASIVAM)   
                                                                                          










                                  ..............................................J. 


                                  (H.L. GOKHALE) 




NEW DELHI;


AUGUST 26, 2011.                                  










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