1984 (2) TMI 92 - HC - Central Excise

Summary

Issues Involved:

1. Durability and returnability of corrugated boxes as packing material.
2. Inclusion of the cost of corrugated boxes in the assessable value of the product.
3. Limitation period for issuing a show cause notice under Section 36(2) of the Excise Act.
4. Revisional jurisdiction under Sections 35, 35A, and 36 of the Excise Act.
5. Validity of the Government of India's order dated 10th September, 1981.

Issue-wise Detailed Analysis:

1. Durability and Returnability of Corrugated Boxes as Packing Material:

The primary issue was whether the corrugated boxes used by the company for secondary packing could be considered durable and returnable. The company asserted that these boxes were indeed durable and returnable, as evidenced by the maintenance of an account for returned boxes and their reuse for packing. The Government of India, however, contended that the boxes were not durable as commercially understood, given their semi-perishable nature and the impracticality of returning bulky packing. The court found that the company's practice of crediting the returned boxes and reusing them satisfied the criteria for durability and returnability. The court emphasized that once a packing material is returned and capable of reuse, it meets the durability requirement.

2. Inclusion of the Cost of Corrugated Boxes in the Assessable Value of the Product:

The Assistant Collector of Central Excise initially included the cost of corrugated boxes in the product's value, but the Appellate Collector of Central Excise reversed this decision, stating that the secondary packing of corrugated boxes should not be included under Section 4(4)(d)(i) of the Excise Act. The Government of India later contended that these boxes constituted primary packing and thus their cost should be included in the assessable value. The court upheld the Appellate Collector's decision, stating that the corrugated boxes were secondary packing and their cost should be excluded from the assessable value, especially since they were returnable and reusable.

3. Limitation Period for Issuing a Show Cause Notice under Section 36(2) of the Excise Act:

The company argued that the show cause notice issued by the Government of India was barred by limitation under the third proviso to Section 36(2), which prescribes a six-month period for cases involving short-levy or non-levy of duty. The Department contended that the one-year limitation under the second proviso to Section 36(2) applied. The court concluded that the third proviso, which mandates a six-month limitation for cases of non-levy, short-levy, or erroneous refund, was applicable. Since the notice was issued beyond this period, the proceedings were deemed time-barred and without jurisdiction.

4. Revisional Jurisdiction under Sections 35, 35A, and 36 of the Excise Act:

The court examined the revisional jurisdiction under Sections 35, 35A, and 36. Section 35A vests revisional jurisdiction in the Central Board of Excise and Customs and the Collector, while Section 36 vests it in the Central Government. The court noted that the third proviso to Section 36(2) restricts the revisional jurisdiction of the Central Government in matters of non-levy, short-levy, or erroneous refunds, requiring a notice to show cause within six months. The court emphasized that parallel jurisdictions for revising the same orders were not intended by the legislature, and thus the six-month limitation applied.

5. Validity of the Government of India's Order Dated 10th September, 1981:

The court found that the Government of India's order, which included the cost of corrugated boxes in the assessable value, was invalid both procedurally and substantively. Procedurally, it was issued beyond the six-month limitation period, rendering it without jurisdiction. Substantively, the court agreed with the Appellate Collector that the corrugated boxes were secondary packing and their cost should be excluded from the assessable value, given their returnable and reusable nature.

Conclusion:

The petition was allowed, quashing the Government of India's order dated 10th September, 1981, and the notice of demand dated 14th December, 1981. The company was entitled to a refund of amounts recovered on the basis of the invalid order. The court awarded costs to the petitioners.