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TMI Blog1982 (2) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... sts submitted by the petitioner included the cost of packing batteries in card board cartons. It was stated in these price lists that in the event of batteries being sent in wooden boxes at the request of the customers, extra packing charges were being recovered by the petitioner. The Assistant Collector, Central Excise, Allahabad, however, added the cost of packing charges in wooden boxes to the assessable value. He passed three orders in respect of the price lists submitted by the petitioner on 27-3-1976, 5-4-1976 and 10-8-1976. The petitioner filed three appeals against these orders under Section 35 of the Act. The Appellate Collector, Central Excise, New Delhi disposed of the appeals by a common order dated 28-10-1976, holding in favour of the petitioner. On 11-4-1977 the Government of India acting in exercise of powers conferred under Section 36(2) of the Act, issued a show cause notice to the petitioner as to why the appellate order should not be set aside, and the value of wooden boxes added to the assessable value. The petitioner sent a reply to the notice on 7-5-1977. The Central Government, however, by its order dated 9-5-1979 reversed the appellate order so far as exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not been defined in the terms in which it now stands. 3. Counsel on behalf of the Union of India contended that packing charges are a part of the manufacturing cost, and are incurred for putting the commodity in a marketable condition, and as such, have to be included in the assessable value of an article. It was also urged that in view of Section 4(4)(d) the value of excisable article has to be arrived at after including the packing cost. A reference was also made to a decision of a Division Bench of this Court. State of U.P. and another v. Union of India others (1980 U.P.T.C. 659) where it was held that the cost of packing has to be included in the assessable value of an excisable article. 4. We might begin by considering the nature of an excise duty. In the case of M/s. Chhotabhai Jethabhai Patel v. Union of India (A.I.R. 1962 S.C. 1006), it was held that excise duty is tax on home produced goods, the duty being calculated according to the quantity or value of the goods, and is chargeable on the production of goods, and unrelated to any transaction in them. A similar view was expressed in Special Reference In re; Sea Customs Act (A.I.R. 1963 S.C. 760), and in Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be a large number of wholesale sales. The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sales may be few or scanty does not alter the true position." This case is an authority for the proposition that for purposes of calculating the assessable value the manufacturing cost plus the manufacturing profit have alone to be taken into account, and all post-manufacturing costs and profit have to be excluded. A similar view was taken in Atic Industries Ltd. v. H.H. Dave (A.I.R. 1975 S.C. 960) where it was clearly laid down that for purpose of determining the wholesale cash price for calculating the assessable value, the first wholesale price fixed between the manufacturer and the wholesaler has to be taken into account, and the second or subsequent prices have to be ignored, as the subsequent prices would be loaded with a post-manufacturing element, namely, selling cost and selling profit. Such a method of calculation would also violate the concept of factory gate sale, which is the basis for determination of the value of the goods for purposes of excise. 5. Counsel for the petitioner has contended that the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act was amended it was held that packing expenses cannot be included in the assessable value as they are post-manufacturing costs. In Malwa Vanaspati and Chemical Co. v. Union of India [1979 (4) E.L.T. (J 243)] a case which arose under the unamended section 4, it was held that the price of containers used for packing Vanaspati could not be included in the manufacturing cost. The Madhya Pradesh High Court, which decided the case disagreed with the decision of the Madras High Court in the case of Auro Food Private Ltd. v. Government of India and others [1978 (2) E.L.T. (J 673)] where it was held that the cost of packing biscuits has to be included in the assessable value. One of the consideration that weighed with the court was that while defining the word `Manufacturers' under section 2(f) of the Act, the Legislature included in section 2(f) (iii) cost of containers in respect of certain commodities mentioned therein but did not specifically mention Vanaspati. In Hindustan Pilkington Glass Works Ltd. v. Superintendent, Central Excise [1978 (2) E.L.T. (J 229)] a case which arose under the unamended section 4, it was held that cost of packing of glassware could not be included in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to consider as to whether the cost of display boxes in which dry cell batteries were packed and the cost of jute bags in which cement was packed could be included in the assessable value. It held that so far as the cost of display boxes were concerned, as it constituted secondary packing, they could not be included. So far as jute bags were concerned, similar views was taken. On page 372 in paragraph 16 of this report, the judges sounded a word of caution to the effect that the cost of every packing is not liable to be excluded from the assessable value, where without the initial packing of the excisable goods, cannot be consumed or utilised. It was held that in such cases the cost of initial packing would form part of manufacturing cost of goods. 10. In Alembic Glass Co. Ltd. v. Union of India others [1979 (4) E.L.T. (J 444)] a case decided by the Gujarat High Court, the question arose as to whether the cost of packing and packing material which either the buyers supply or manufacturer purchase from the market could be included in the assessable value. Their Lordship of the Gujarat High Court pointed out that the packing material may originate from three sources (i) the buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner on the ground that the jute bags, which constituted the packing material, were returnable. The Karnataka High Court in T.T. Private Ltd. v. Appellate Collector, Central Excise (1980 (6) E.L.T. 667) followed the view of Gujarat High Court in the case of Alembic Glass Co. Ltd. v. Union of India others [1979 (4) E.L.T.(J 444)] as regards the interpretation to be put on section 4(4)(d) and held that the tin wood packing of pressure cookers could not be included in the assessable value, and further that the process of packing was neither incidental nor ancilliary to the manufacture of pressure cookers. 13. The Bombay High Court in the case of Duphar Interfrom Ltd. v. Union of India others (1980 (6) E.L.T. 80) relying on the earlier decisions of the Court to which we have already referred, held that the cost of additional packing could not be included in the assessable value. A similar view was adopted in another decision of the Bombay High Court in the case of Maharashtra Vegetable Products P. Ltd. and another v. Union of India and others (1981 (8) E.L.T. 468). 14. In the Collector of Central Excise, West Bengal v. Dunlop India Ltd. (1981 (8) E.L.T. 398), the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lse. 16. We think that it would be profitable for us to examine the relevant provision of the Statute, and also the decisions of the Supreme Court in order to enable us to choose between the divergent views, which we have already noticed. The weight of authority seems to be in favour of the views that packing costs are post-manufacturing costs and cannot be included in the assessable value, notwithstanding the enactment of section 4(4)(d)(1) of the Act. 17. At the outset, we may point out with respect that it is not possible to read down section 4(4)(d) so as to exclude packing charges. We have seen that some High Courts read down section 4(4)(d)(1) so as to exclude packing charges, which were supplied by the purchaser or purchased by the manufacturer from the market. By the same interpretative exercise, packing material manufactured by the manufacturer were also excluded. The result of adopting such a procedure would not be reading down section 4(4)(d)(1), but reading out section 4(4)(d)(1) outside the statute. We feel that in view of the clear phraseology of section 4(4)(d)(1), we have either to hold that section 4(4)(d)(1) is ultra vires, the powers of the Parliament in as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther place, the transport costs is to be excluded. Section 4(4)(d)(1) requires the inclusion of the packing cost and exclusion of certain other taxes while calculating the assessable value. In as much as Section 4 provides for the method by which the assessable value has to be,calculated and as Section 3 is silent as to how this value has to be calculated for purposes of imposition of excise duty, we are of the view that Sections 3 and 4 are composite in character, and Section 3 left by itself does not fulfil completely the requirement of it being a charging provision. We are of the view that as Sections 3 and 4 are supplementary to each other, Section 4 cannot be read down so as to give an overriding effect to Sec. 3. It must be remembered that the decision of the Supreme Court in the Voltas case and Atic Industries case. When they laid down the test that only manufacturing costs and manufacturing profit could be taken into account for purpose of excise duty, and post-manufacturing cost had to be excluded, and that the duty was chargeable on the wholesale price payable at the factory gate at the time of delivery, did nothing more than to interpret Sections 3 and 4 of the Excise Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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