1989 (8) TMI 77 - SC - Central Excise

Whether for determining the assessable value of the excisable goods sold by the assessee in drums or containers provided by its customers the value of such drums/containers would also have to be included on a correct interpretation of charging sections, namely, Sections 3 and 4 of the Act? Held that - on the facts of this case, it is clear that the goods were not sold in drums generally in the course of the wholesale trade. There was evidence that 90% of the goods were delivered at the time of removal without being put in drums. There was no evidence that there was any necessity of packing or putting these in drums prior to their sale. It was not necessary that the articles were to be placed in drums for these to be able to generally to enter the stream of wholesale trade or to be marketable. On the other hand, there was evidence that in the wholesale trade, these goods were delivered directly in tankers and deliverable as such. But as a matter of fact, delivery in drums was only to facilitate their transport in small quantities. The manufacture of the goods was complete before these were placed in drums. The completely manufactured product was stored in tanks. From these tanks the goods were removed directly and placed in vehicles for their movement - for 90% of the sales, the vehicle of removal was tankers and 10% of the sales, the vehicle of removals was drums. In the premises, the value of the drums with regard to the fusel oil/styrene monomer irrespective of whether these were supplied by the assessee or not, are not includible in the assessable value of the Styrene Monomer. Appeals have to be allowed and the orders of the Tribunal set aside. The Tribunal was in error in holding that as at the time of removal, goods were delivered from the factory in packed condition and the containers were not returnable to by the buyer, the value of the drums is to be included. It is reiterated that in order to be deliverable, it is not necessary that the goods should be delivered in packed condition and that the containers were not necessary to make the goods marketable.

Issues Involved:
1. Inclusion of the value of drums supplied by the buyer in the assessable value of fusel oil/Styrene Monomer.
2. Interpretation of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944.
3. Applicability of previous judicial decisions on the current case.

Detailed Analysis:

1. Inclusion of the value of drums supplied by the buyer in the assessable value of fusel oil/Styrene Monomer:

The appellant contended that the value of drums supplied by the buyer should not be included in the assessable value of fusel oil/Styrene Monomer. The Assistant Collector had included the value of the drums in the assessable value, which was initially overturned by the Collector (Appeals) but later restored by the Tribunal. The appellant argued that the fusel oil/Styrene Monomer is sold in bulk and does not necessarily need to be supplied in drums. The appellant also emphasized that they were not the manufacturers of the drums, which were supplied by the customers. Therefore, no excise duty should be collected from the appellant on such drums.

2. Interpretation of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944:

The appellant argued that the cost of packing should only be included in the assessable value when the packing is either manufactured or purchased by the assessee. The Tribunal's interpretation was that since the goods were delivered in packed condition and the containers were not returnable, their value had to be included in the assessable value. The appellant relied on the decision in Collector of Central Excise v. Indian Oxygen Ltd., where it was held that rental charges for gas cylinders supplied by the assessee could not be included in the assessable value.

The Court analyzed the provisions of Section 4(4)(d)(i) and concluded that the cost of packing should be included in the assessable value only when it is incurred by the manufacturer. The Court emphasized that the term "cost" in the section refers to the cost incurred by the assessee and not by the buyer. This interpretation aligns with the principles laid down in Union of India v. Bombay Tyre International Ltd., which clarified that the measure of tax should not be confused with the nature of the tax.

3. Applicability of previous judicial decisions on the current case:

The Court referred to several previous decisions, including Union of India v. Bombay Tyre International Ltd., K. Radha Krishaiah v. Inspector of Central Excise, and Union of India v. Godfrey Philips India Ltd. The Court reiterated that the measure of excise duty is the price and not the value, and the price charged by the manufacturer represents the measure. The Court also noted that the decision in Godfrey Philips India Ltd. clarified that secondary packing necessary for selling goods in the wholesale market should be included in the assessable value.

The Court concluded that the goods in question were marketable without being packed in drums, as evidenced by the fact that 90% of the goods were delivered in tankers. Therefore, the value of the drums, whether supplied by the assessee or the buyer, should not be included in the assessable value.

Judgment:

The appeals were allowed, and the orders of the Tribunal were set aside. The Court held that the value of the drums should be excluded from the assessable value for the purpose of excise duty. The Court emphasized that the goods were marketable without being packed in drums, and the cost of packing incurred by the buyer should not be included in the assessable value. The judgment was delivered by Sabyasachi Mukharji, J., with separate concurring judgments by Ranganathan, J., and Verma, J.

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