Whether the applicant is eligible to avail the benefit of exemption from payment of SAD provided under Notification No. 21/2012-Cus.

PJ/Case Law/2018-2019/3472

Case:MIDDLEBY CELFROST INNOVATIONS PVT. LTD.

Citation:2017 (358) E.L.T. 1033 (A.A.R.)
Issue: Whether the applicant is eligible to avail the benefit of exemption from payment of SAD provided under Notification No. 21/2012-Cus.

Brief facts: Middle by Commercial Food Innovations Pvt. Ltd (hereinafter also referred to as applicant) is a private limited company registered in India under Companies Act, 1956. It is a subsidiary of Middle by Europe SL, Spain. Middle by Europe SL, Spain is engaged in the business of food service equipment and is known worldwide for delivering a range of high quality food service equipment. After extending its reach in various other countries, Middle by Europe has now formed the applicant as its wholly owned subsidiary. It has been set up with the aim to establish commercial refrigeration and food service products in India. Its focus is to provide international range of refrigeration, freezing and foodservice products & solutions for hotels, restaurants, bars, frozen yogurt stores, coffee shops, bakeries, ice cream & beverage, food retail and the healthcare segments. The mode of operation of the applicant’s business will include three stages:
(a)   Placement of order :At first, the applicant will place its order on the foreign supplier(s) and will inform the name and the quantity of the products it need.
(b)   Importation :Upon placement of the order, the foreign supplier will export the products in pre-packaged form to the applicant in India.
(c)   In the meanwhile the consumers will place their order on the applicant. Once the product reaches the applicant, it will then supply the product to the consumers on the basis of their demand.

Appellant’s contention:Applicant submits that the business model of the applicant is such that it will not be known at the time of importation whether the goods to be imported will be sold to industrial consumer, institutional consumer or retail consumer. Further, there is always a possibility that the same may be sold to the retail consumer, in which case; there will be a requirement to affix MRP under the Legal Metrology Act read with Legal Metrology (Packaged Commodities) Rules on such packages of goods to be imported.
Applicant submits that he already possesses VAT registration number and State of destination, where goods are intended to be taken immediately after importation, would be declared at the time of subject import. Thus, procedural conditions would be met. Further, it is noticed from the above exemption Notification that substantive conditions include;
(a)   Pre-packaged goods
(b)   Intended for retail sale
(c)   To declare on the package, the RSP as required under Legal Metrology Act or rules made thereunder or any other law for the time being in force.
Pre-packaged goods
Section 2(l) of the Legal Metrology Act, 2009 (L M Act) defines “pre-packaged commodity” as a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity. Applicant has stated that they propose to import pre-packaged goods. This issue has not been disputed.
Intended for retail sale
Chapter II of Legal Metrology (Packaged Commodities) Rules, 2011 (PC Rules), as the heading suggests, is with respect to “Provisions applicable to packages intended for retail sale”. As per Rule 3 of said Rules, provisions of this Chapter II are not to apply to -
(i)    packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up-to 50 kg; and
(ii)   packaged commodities meant for industrial consumers or institutional consumers.
Applicant submits that the business model of the applicant is such that it will not be known at the time of importation whether the goods to be imported will be sold to industrial consumer, institutional consumer or retail consumer. Further, there is always a possibility that the same may be sold to the retail consumer, in which case; there will be a requirement to affix MRP under the LM Act read with PC rules on such packages of goods to be imported. In this regard, applicant relied on the decision in case of H&R Johnson Ltd. v. Commissioner of Central Excise, Raigad reported at 2014 (306) E.L.T. 645, where appellant was manufacturer of ceramic tiles and cleared the same to institutional, industrial and retail buyers. The packages of all tiles were same and MRP was declared. The Tribunal observed that there is no difference in respect of packages of tiles sold to retail consumers and institutional buyers, having MRP declared on them and no such declaration “not meant for retail sale”, etc., on them.

Respondent’s Contention:
We find that jurisdictional officer has made written submission which are as under:-
The thrust of submissions made by Revenue is that the conditions contained in Notification No. 21/2012-Cus., dated 17-3-2012 are not satisfied in respect of the goods proposed to be imported by the applicant, therefore, goods cannot be exempted from additional duty of Customs (SAD) levied under Section 3(5) of the Customs Tariff Act.
Reasoning of Jugement: Tribunal held that supplies made to various institutional buyers are not excluded from the declarations of MRP under the PC Rules. This decision of Tribunal is confirmed by the Hon’ble Supreme Court and reported in 2015 (319) E.L.T. A227. We are in agreement with the views of the Tribunal, which was primarily based on the clarification rendered by the authorities implementing Legal Metrology (Packaged Commodities) Rules, 2011. As the pre-packaged commodities in this case are covered by Chapter II of said Rules, i.e., provisions applicable to packages intended for retail sale, the same should also satisfy all conditions regarding declarations to be made on every package, as per Rule 6 including sub-rule (e) regarding declaring the RSP of the package. As pre-packaged goods to be imported would have declaration of RSP on them, this condition is also met.
Decision: The Advance Authority of Ruling allowed the application submitted by the applicant.
Comment: The analogy of the case is, it is concluded that the applicant is satisfying all the conditions which laid down in Notification No. 21/2012-Cus., dated 17-3-2012. Thus, Applicant is eligible to claim the benefit of exemption from payment of SAD under Notification No. 21/2012-Cus. on import of pre-packaged goods.

Prepared By: Pushpa Choudhary

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