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TMI BlogCivil Appeal No.3819/1999 in the case of Commissioner of Central Excise, Allahabad Vs. M/s. Hindustan Safety Glass Works Ltd. against CEGAT Order No.264/99-A.X X X X Extracts X X X X X X X X Extracts X X X X ..... NT S.N. Variava, J. These Appeals are against Judgments of the Customs, Excise Gold (Control) Appellate Tribunal (CEGAT). As the question of law involved in all these Appeals is the same, they are being disposed off by this common Judgment. The question for consideration is whether the cost of wooden crates/boxes in which the Respondents pack their product, i.e., Glass Sheets, is includible in the assessable value of the glass. For the sake of convenience, facts in Civil Appeal No. 3819 of 1999 will be referred to. In Civil Appeal No. 3819 of 1999 CEGAT has held in favour of the Respondents by following an earlier decision of CEGAT, dated 9th January 1987, in that Respondents' own case. In that case, the Order was based on a finding of fact that barring stray instances glass was delivered to local customers with just a paper packing interleaved with straws. CEGAT had, on those facts, held that the ratio laid down by this Court in the case of Union of India Ors. v. Godfrey Philips India Ltd. [reported in 1985 (22) E.L.T. 306] and in the case of Geep Industrial Syndicate Ltd. v. Union of India [reported in 1992 (61) E.L.T. 328] applied. Before the arguments of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in 1983 (14) E.L.T. 1896]. In this case, it was recognized that the degree of packing would vary from one class of excisable goods to another. It was held that packing may be of different grades. It was held that the packing may be necessary to make an article marketable. It was held that by including the cost of packing the Legislature has sought to extend levy beyond the manufactured article itself. It was held that thus a strict construction must be put upon the said provision. It was held that only the cost of packing which was required to make the goods marketable would be includible in the value of goods. It was held that if any additional or special packing is provided, which packing is not generally required or provided as a normal feature, then the cost of such packing need not be included in the value of the goods. The test which was laid down was that it is only the cost of packing ordinarily required for selling the goods in the course of wholesale trade to a wholesale buyer which would be includible and not the cost of any additional or special packing. Thereafter in the case of Union of India v. Godfrey Philips India Ltd. the same principles were reiterated. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise damaged in course of transit. Naturally in such cases, delivery of the cigarettes in those cartons is effected to the buyers at the factory gate after further packing these cartons in corrugated fiber board containers. The further packing of cartons in which the packets of cigarettes have been packed in the corrugated fiber board containers is not, indeed, in the course of delivery to the buyer in the wholesale trade at the factory gate but is only for the purpose of facilitating the smooth transport of the cartons containing the packets of cigarettes to the buyer in the wholesale trade." The qualification laid down by the learned Judges that the costs of such packing was not includible as this packing was merely to prevent damage and injury has been misunderstood by many. As is indicated hereinafter, the ratio is not that in all cases, where the packing is for preventing damage or injury to the goods, the costs of such packing is to be excluded from the value of the goods. In the case of Geep Industrial Syndicate Ltd. v. Union of India (supra), the Appellant-assessee was the manufacturer of batteries and torches. The torches and batteries manufactured by it were first p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondary, which are required to make the articles marketable would be includible in the value. How much packing is necessary to make the goods marketable is a question of fact to be determined by application of the correct approach. Packing, which is primarily done or mainly done for protecting the goods, and not for making the goods marketable should not be included.... The question is not whether these goods could be so sold, but the question is whether these goods are so sold usually and as such used to become marketable in such manner." (emphasis supplied) In the case of Hindustan Polymers v. Collector of C. Ex. [reported in 1989 (43) E.L.T. 165] the Appellant-assessee was engaged in the manufacture and sale of fusel oil. The fusel oil manufactured by it was mainly sold in bulk. A small portion was being supplied to the customers in drums supplied by such customers. It was found that in the wholesale trade these goods were delivered directly into tankers and that delivery in drums was only to facility their transport in small quantities. It was held that the cost of drums was not included in the value of the oil as the material on record established that the goods were not sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary' for delivery at the gate. In Ponds, however, both the learned Judges constituting the Bench laid down tests consistent with the one in Bombay Tyre International. Indeed, Ranganathan, J. understood the majority decision in Godfrey Philips and the decision in Geep Industrial Syndicate in the same manner as we have done - a fact emphasised by us hereinabove, while discussing the ratio of Ponds. As pointed out by us hereinabove, it would not be reasonable to infer any conflict or deduce any inconsistency between the ratio of Bombay Tyre International and the ratio of Godfrey Philips for the reason that not only both Benches were of coordinate jurisdiction (Bombay Tyre International was thus binding upon the latter Bench) but also because both the decision were rendered by the very same Bench. The adage in such matter is : look for harmony, not divergence. It is equally relevant to point out that Bombay Tyre International was equally binding upon the Bench (of three learned Judges) which decided Geep Industrial Syndicate and that it would be equally unreasonable to suggest that the Bench (deciding Geep Industrial Syndicate) would lay down an inconsistent proposition from the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be the normal price at which such goods are ordinarily sold in the course of wholesale trade for delivery at time and place of removal. Thus, at this stage, it would be convenient to refer to the case of A.K. Roy Anr. v. Voltas Limited [reported in 1977 (1) E.L.T. (J 177)] wherein the concept of wholesale market has been explained in the following terms :- "8.We do not think that for a wholesale market to exist, it is necessary that there should be a market in the physical sense of the term where articles of a like kind or quality are or could be sold or that the articles should be sold to so-called independent buyers. 9.Even if it is assumed that the latter part of s. 4(a) proceeds on the assumption that the former part will apply only if there is a wholesale market at the place of manufacture for articles of a like kind and quality, the question is what exactly is the concept of wholesale market in the context. A wholesale market does not always mean that there should be an actual place where articles are sold and bought on a wholesale basis. These words can also mean that potentiality of the articles being sold on a wholesale basis. So, even if there was no market in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... glass sheets is sufficient to show that they cannot be marketed without special packing or arrangement. He submitted that Respondents had led no evidence to show that the glass sheets were marketable without special packing. On the other hand, Mr. Bagaria submitted that the Respondents in Civil Appeal No. 3819 of 1999 had relied upon an earlier Order passed by the Tribunal in their own case. He submitted that that Order clearly established that the Respondents' products, namely, glass sheets, were marketable without their being packed in wooden cases. He submitted that the Respondents therefore did not need to lead any further proof to show that the glass sheets were marketable without wooden packing. Mr. Bagaria also relied upon other decisions of the Tribunal wherein also it has been held, on facts, that glass sheets were marketable without wooden packing. In support of this submission, he relied upon the authority in the case of Window Glass Ltd. v. Collector of Central Excise, Calcutta [reported in 1989 (39) E.L.T. 641]. In this case, the Appellant Company was manufacturing "figured" and "wired" glass in the form of glass sheets. The question was whether the cost of wooden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansport or it is essential for wholesale deliveries effected even at the factory gate. We have to remember in the present case that the factory of the appellants was situated in a village and their nearest wholesale market at Calcutta was also 45 Kms. away. The local demand being limited, there could not be very large number of local deliveries at the factory gate. Their nearest big wholesale market was at Calcutta which itself was 45 Kms. away from their factory. The appellants explained to us that some of their Calcutta customers who wanted to sell their goods locally at Calcutta preferred to purchase the goods in ordinary packing while some others who proposed to re-sell the goods to outstation buyers in original packing preferred to purchase the goods in special packing. The department admits that the appellants did clear some consignments for delivery at Calcutta in ordinary packing. The number of such consignments may be small but yet they do establish the principle that the goods could be delivered in wholesale at the factory gate in ordinary packing. The ordinary packing consisted of frame packing with straw cushioning and paper interleaving between the glass-sheets. Such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was based on a finding of fact that barring stray instances, glass was delivered to the local customers. In that case, the Tribunal has failed to inquire or look into the question as to who were the local customers to whom glass was delivered without wooden packing. From the reply to the show cause notice given by the Respondents in this matter, it is clear that in Calcutta the majority of the deliveries were to original equipment manufacturers like car companies. It is clear that these companies would take delivery without wooden cases because they have their own special arrangements to see that the glass sheets are transported without breakages. The Calcutta case, therefore, is an identical case to the case of Gurind India P. Ltd. [reported in 1999 (112) E.L.T. 1020], where the party taking delivery without wooden crates, had made their own special arrangements. At this stage reference must be made to a decision of a three Judge Bench of this Court dated 20th July 1995 in Civil Appeal Nos. 3119-20 of 1980 [Union of India v. Shri Vallabh Glass Work Ltd. Anr.]. Relying on the ratio in Madras Rubber Factory Ltd.'s case (supra) this Court has held that the costs of wooden crates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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