1984 (11) TMI 323 - AT - Central Excise

Issues Involved:
1. Whether the tin containers and corrugated boxes used for packing biscuits constitute secondary packing.
2. Whether the cost of such secondary packing should be excluded from the assessable value under Section 4 of the Central Excises and Salt Act, 1944.

Detailed Analysis:

Issue 1: Whether the tin containers and corrugated boxes used for packing biscuits constitute secondary packing.
The respondents, M/s. Ampro Food Products and M/s. Jivan Food Products, argued that the packing in the form of tin containers and corrugated boxes should be considered secondary packing. They contended that under Section 4 of the Central Excises and Salt Act, 1944, only the cost of initial packing should be included in the assessable value. The respondents stated that biscuits are primarily packed in polythene bags, which they considered primary packing, while the tin containers and corrugated boxes constitute secondary packing.

The respondents further elaborated that the term "packing" as defined in the explanation to Section 4(4)(d)(i) refers to initial or primary packing, which is different from secondary or additional packing used for marketing or transporting the excisable goods. They supported their argument with several High Court judgments, including:
1. Malwa Vanaspati and Chemical Co. Ltd., Indore v. Union of India (1979 E.L.T. 243).
2. Geep Flash Light Industries Ltd., Allahabad v. Union of India (1979 E.L.T. 391).
3. Alembic Glass Industries Ltd. v. Union of India and Others (1978 E.L.T. 444).
4. Indo-National Ltd. v. Union of India & Others (1979 E.L.T. 334).

Issue 2: Whether the cost of such secondary packing should be excluded from the assessable value under Section 4 of the Central Excises and Salt Act, 1944.
The appellants, represented by Shri Mahesh Kumar, argued that the question of whether tin containers and corrugated boxes are secondary packing has been addressed by the Tribunal and the Bombay High Court. He cited the Tribunal's Order No. 375/1984 and the Bombay High Court's decision in Sathe Biscuits and Chocolate Company Ltd. and Another v. Union of India and Others [1984 (17) E.L.T. 39 Bombay]. He also referred to the Supreme Court's judgment in Union of India & Ors. etc. v. Bombay Tyre International Ltd., etc. (1983 E.L.T. 1896), which clarified that the cost of packing in which goods are ordinarily sold in wholesale trade should be included in the assessable value.

The Tribunal observed that the Supreme Court's judgment in Bombay Tyre International Ltd. established that the cost of primary packing, which makes the goods marketable to the ordinary consumer, must be included in the assessable value. The Tribunal noted that the respondents' goods were sold at the factory gate, making the Supreme Court's ratio applicable. Consequently, the degree of secondary packing used was necessary for selling the excisable goods in the wholesale market, and its cost should not be excluded from the assessable value.

The Tribunal also considered the Bombay High Court's judgment in Sathe Biscuits, which confirmed that the cost of secondary packing, including tin containers and corrugated boxes, should be included in the assessable value. The High Court emphasized that packing of a durable nature and returnable by the buyer to the assessee must be based on a contractual obligation, which was not claimed by the respondents.

Additionally, the Tribunal referred to its Order No. 375/84-A in M/s. Lucky Biscuits Co., which supported the inclusion of secondary packing costs in the assessable value, reinforcing the Assistant Collector's initial decision.

Conclusion:
For the reasons stated, the Tribunal accepted the appeals filed by the Revenue, set aside the impugned Orders of the Appellate Collector, and restored the orders of the Assistant Collector. The cost of secondary packing, including tin containers and corrugated boxes, should be included in the assessable value of the goods under Section 4 of the Central Excises and Salt Act, 1944. Both appeals were disposed of accordingly.

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