Untitled Document

While TIOL had in its budget analysis brought to the fore the unpleasantness in the imposition of excise duty on baby and clinical diapers and sanitary napkins and done great service to the common man (multinationals included), the present article “ Levy of duty on diapers, sanitary napkins – All is not well ” tries to convolute the imposition by bringing in the applicability of section 4A of the CEA, 1944 viz. Retail sale price assessment.

The author has interpreted the contents of the notification 49/2008-CE(N.T) which notifies the commodities to which section 4A applies. He has tried to cover the impugned goods “Baby and clinical diapers and sanitary napkins” falling under heading 4818 40 10 and 4818 40 90 as being “indirectly notified” under sr. no.55 of the aforesaid notification.

Before we take a closer look at this notification 49/2008-CE(N.T), suffice to say that in terms of section 4A(1) of the CEA, 1944, the Central Government is required to, by notification, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.

Admittedly, such goods would be notified for assessment only when they are chargeable to Advalorem rates of duty and are required to be affixed with the RSP under the SWAM Act or the rules framed thereunder or any other law which mandates the same. When the fact of the matter is that the impugned goods were subjected to Nil rate of Tariff duty, the Central Government could not have had a premonition that the goods would be charged to duty at a later date and hence the comment ‘ did the legislature anticipate duty imposition ” appears specious.

So, the first question would be – are these goods, no doubt packaged commodities, subjected to the SWAM Act or the rules framed thereunder. Assuming that they are so, once they have been made chargeable to Excise duty (at a concessional rate of 10%), it is the duty of the Central government to notify the same in the Official gazette u/s 4A(1) of the CEA, 1944. Apparently, there is no such notification issued by the Central Government on 27.02.2010 and hence one cannot presume that the goods were already covered as opined by the author .

The author's interpretation of the notification 49/2008-CE, therefore, needs to be examined in this background.

N OTIFICATION NO 49/2008-CX.,(N.T.), Dated: December 24, 2008 as amended by 18/2009-CX(N.T) dated 7.7.09

TABLE

S.No	Chapter, heading, sub-heading or tariff item		Description of goods			Abatement as a percentage of retail sale price
(1)	(2)		(3)			(4)
55.		4818		Cleansing or facial tissues, handkerchiefs and towels, of paper pulp, paper, cellulose wadding or webs of cellulose fibres, other than goods falling under 4818 50 00	35

It is worthwhile to note that the caption reads “Description of goods” and lists the following –

The author has opined that the term “other than goods falling under 4818 50 00” is supposedly covers the goods in question viz. “baby and clinical diapers and sanitary napkins”

It must be understood that while interpreting the term “other than goods falling under 4818 50 00”, the Latin rule of statutory construction of “ ejusdem generis ” is to be followed in the sense that the said term introduced with the punctuation mark “comma” qualifies the preceding terms “ Cleansing or facial tissues, handkerchiefs and towels” inasmuch as the items/goods covered for assessment under s.4A are those made of paper pulp, paper, cellulose wadding or webs of cellulose fibres and do not cover that which may fall under heading 4818 50 00.

More specifically, since heading 4818 50 00 covers ‘Articles of apparel and clothing accessories', a doubt may rise as to whether ‘cleansing or facial tissues, handkerchiefs and towels' covered under this heading are also liable for RSP based assessment. The entry Sr. no. 55 by usage of the words “Other than goods falling under 4818 50 00” makes it amply clear that it is NOT.

To conclude, there appears no ambiguity, at least at present, with the entries as they exist and hence coming out with a contention that the manufacturers may opt to exploit section 2(f)(iii) of the CEA, 1944 by importing these goods and subjecting them to repacking etc. and suggesting tweaking the Third Schedule lest the department cries over split milk is unwarranted.

The goods “Baby and clinical diapers and sanitary napkins”, therefore, are to be assessed under section 4 of the CEA, 1944 and not under section 4A of the CEA, 1944. Probably, the Central government may notify it for RSP assessment but till then the law as it stands only allows section 4 valuation.