1985 (9) TMI 90 - SC - Central Excise

Whether the cost of final packing in corrugated fibre board containers would be liable to be included in the value of the cigarettes for the purpose of assessment to excise duty? Held that - Now it is apparent that under s. 3 of the Act the levy of excise duty is made on manufactured cigarettes, which after all are the excisable goods. And s. 4 provides how the value of manufactured cigarettes shall be determined. The expression value has been extended to include the cost of packing. The packing itself is not the subject of the levy of excise duty. The manufactured cigarettes are the subject of the levy, because excise duty is here charged on the manufactured commodity, that is to say, cigarettes. For the purpose of computing the measure of the levy, however, the statute has given an extended meaning to the expression value in clause (d) of sub-section (4) of section 4 of the Act. Plainly, the extension must be strictly construed, for what is being included-in the value now is something beyond the value of the manufactured commodity itself.

Issues Involved:
1. Inclusion of cost of final packing in the value of cigarettes for excise duty assessment.
2. Applicability of promissory estoppel against the Central Board of Excise and Customs and the Central Government.

Issue-Wise Detailed Analysis:

1. Inclusion of Cost of Final Packing in the Value of Cigarettes for Excise Duty Assessment:
The primary issue in this case was whether the cost of final packing in corrugated fibre board containers should be included in the value of cigarettes for the purpose of excise duty assessment. The respondents argued that such packing was only for protecting the cigarettes during transportation and was not necessary for their sale in the wholesale market at the factory gate. The court referred to its earlier judgment in the Bombay Tyre International case, which discussed the inclusion of packing costs under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944. The court reiterated that the cost of packing necessary to put the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate should be included in the "value" for excise duty purposes. The court concluded that if the packed condition in which the cigarettes are generally sold includes packing in corrugated fibre board containers, the cost of such containers should be included in the value of the cigarettes for excise duty purposes.

However, two judges dissented on this point. They argued that the corrugated fibre board containers were used solely to prevent damage during transit and were not necessary for the sale of cigarettes in the wholesale market at the factory gate. They opined that such packing should not be included in the value of the cigarettes for excise duty purposes.

2. Applicability of Promissory Estoppel:
The respondents also contended that they should not be liable for excise duty on the cost of corrugated fibre board containers based on a letter dated 24th May 1976, from the Central Board of Excise and Customs, which stated that the cost of such containers would not be included in the value of cigarettes for excise duty purposes. The respondents argued that this letter constituted a representation upon which they relied, and thus the doctrine of promissory estoppel should apply.

The court agreed with this contention, stating that the representation made by the Central Board of Excise and Customs, and approved by the Central Government, could validly found the plea of promissory estoppel. The court noted that the respondents had acted upon this representation and did not recover the excise duty attributable to the cost of corrugated fibre board containers from wholesale dealers during the period from 24th May 1976 to 2nd November 1982. The court held that it would be inequitable to allow the excise authorities to assess excise duty on the basis that the value of the cigarettes should include the cost of corrugated fibre board containers for this period.

The court concluded that the respondents were entitled to exclusion of the cost of corrugated fibre board containers from the value of the cigarettes for the period from 24th May 1976 to 2nd November 1982. For any period outside these dates, the cost of the corrugated fibre board containers would be included in the value of the cigarettes for excise duty purposes.

Separate Judgments:
- Chief Justice Bhagwati: Agreed with the inclusion of the cost of final packing in the value of cigarettes for excise duty purposes and supported the application of promissory estoppel for the specified period.
- Justice Pathak: Agreed with the application of promissory estoppel but dissented on the inclusion of the cost of final packing, arguing that it should not be included.
- Justice A.N. Sen: Agreed with the application of promissory estoppel but dissented on the inclusion of the cost of final packing, aligning with Justice Pathak's view.

← Previous Next →