1988 (3) TMI 81 - HC - Central Excise

Summary

Issues Involved:
1. Liability of packing charges for excise duty under the Central Excises and Salt Act, 1944.
2. Proof of return of packing material or arrangement for return.
3. Entitlement to refund of excise duty paid under protest.

Detailed Analysis:

1. Liability of Packing Charges for Excise Duty:

The primary issue in this case was whether the packing charges related to the portland cement manufactured by the petitioner were liable to excise duty under the Central Excises and Salt Act, 1944. Section 4 of the Act, as amended in 1973, generally includes the cost of packing while computing the cost of goods for excise duty. However, an exception exists if the packing material is durable and returnable by the buyer to the assessee.

2. Proof of Return of Packing Material or Arrangement for Return:

The respondents contended that there must be proof of actual return of the packing material or an arrangement between the petitioner and the purchaser for the return of the gunny bags. The Supreme Court in K. Radha Krishnaiah v. Inspector General of Excise clarified that two conditions must be fulfilled: (i) the packing must be durable and returnable, and (ii) there must be an arrangement for the return of the packing material.

In this case, the show-cause notice acknowledged that the gunny bags were durable, satisfying the first condition. The second condition was supported by the price fixation order and release orders, which specified that the purchasers were to return the bags to the petitioner or its agents. This arrangement was deemed sufficient to meet the requirements of Section 4(4)(d)(i) of the Act.

3. Entitlement to Refund of Excise Duty Paid Under Protest:

Given the arrangement for the return of the gunny bags, the petitioner was not liable to pay excise duty on the packing charges for the period from 1.10.1975 to 27.11.1975. Consequently, the petitioner was also entitled to a refund of the excise duty paid under protest from 28.11.1975 to 8.1.1976. The Madhya Pradesh High Court had similarly concluded that an arrangement for return, not the proof of actual return, was necessary for non-levy of excise duty on bags.

Conclusion:

1. Rule Made Absolute: The court ruled in favor of the petitioner.

2. Writ of Mandamus: The court directed Respondent-1 to refund Rs. 8,11,024.21 collected as excise duty on packing material for the period from 1.10.1975 to 27.11.1975 and Rs. 7,74,432.84 for the period from 28.11.1975 to 8.1.1976.

3. No Order as to Costs: The court did not issue any order regarding the costs.

This judgment underscores the importance of statutory provisions and arrangements in determining excise duty liabilities and the entitlement to refunds.