1986 (12) TMI 130 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of the cost of gunny bags in the value of cement for Central Excise Duty assessment.
2. Returnability of the gunny bags.
3. Statutory and contractual obligations regarding the return of gunny bags.
4. Impact of the Cement Control Order and related statutory provisions.
5. Relevance of High Court judgments and their binding nature on the Tribunal.
6. Additional point regarding the duty demand on cement packed in customer-supplied bags.

Summary:

Issue 1: Inclusion of the cost of gunny bags in the value of cement for Central Excise Duty assessment
The central issue in these appeals was whether the cost of gunny bags should be included in the value of cement for the purpose of Central Excise Duty assessment. Section 4(4)(d) of the Central Excises and Salt Act, 1944, specifies that the value of excisable goods includes the cost of packing unless the packing is durable and returnable by the buyer to the assessee. The Tribunal noted that there was no dispute regarding the durability of the gunny bags; the contention was whether they were returnable.

Issue 2: Returnability of the gunny bags
The Tribunal examined the statutory and contractual obligations regarding the return of gunny bags. The Cement Control Order, 1967, and subsequent circulars mandated that serviceable second-hand jute bags should be returned to the factory or its collecting agent. The Tribunal referred to several High Court judgments which held that the term "returnable" does not necessitate actual return but merely the capability and obligation to return under the terms of sale.

Issue 3: Statutory and contractual obligations regarding the return of gunny bags
The Tribunal emphasized that the directions in the Cement Control Order and the boxed instructions on the Release Orders were binding on both the sellers and buyers of cement. The Madhya Pradesh High Court, whose judgment was confirmed by the Supreme Court, held that the statutory directions made the packing returnable within the meaning of Section 4(4)(d)(i).

Issue 4: Impact of the Cement Control Order and related statutory provisions
The Tribunal acknowledged the statutory scheme of the Cement Control Order, which aimed to ensure equitable distribution and fair pricing of cement. The Order included provisions for the return of serviceable second-hand jute bags, thereby making them returnable by statute.

Issue 5: Relevance of High Court judgments and their binding nature on the Tribunal
The Tribunal noted that the judgments of the Madhya Pradesh, Andhra Pradesh, and Karnataka High Courts were unanimous and there were no contrary judgments from any other High Court. The Tribunal decided to follow these judgments, which held that the cost of returnable packing should not be included in the assessable value of cement.

Issue 6: Additional point regarding the duty demand on cement packed in customer-supplied bags
In the appeals involving M/s. Shree Digvijay Cement Co. Ltd., the Tribunal also addressed the issue of duty demand on cement packed in bags supplied by the customer. It referred to the judgments of the Bombay and Karnataka High Courts, which settled that the cost of packing supplied by the customer cannot be included in the assessable value of the goods packed therein.

Conclusion:
The Tribunal allowed all eight appeals, holding that the cost of gunny bags was not includible in the assessable value of cement. Additionally, it held that the cost of packing supplied by the customer cannot be included in the assessable value of the goods packed therein. The order was substantially agreed upon by all the members, with an additional note by one member emphasizing certain aspects of the case.