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TMI Blog1983 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has a factory at Mithapur in Jamnagar district and it manufactures Soda Ash. This commodity falls under Tariff Item No. 14-A in the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act'). The case of the plaintiff was that excise duty was charged on the packing material. It was the contention that Section 4 of the Act was substituted by Section 2 of Act No. XXII of 1973 and it came into force from 1-10-1975. It provided that where under the said Act duty of excise is chargeable on any excisable goods with reference to value such value shall be subject to the provisions of that section. We shall be considering this section in extenso when we shall be discussing the merits. The case of the plaintiff-company was that the excise duty on the packing material recovered by Government was not justified, and therefore, demand of refund of excise duty was made. The suit was decreed. The main ground for decreeing the suit was the consideration of the decisions of a Division Bench of this Court in Golden Tobacco Co. Ltd. v. Union of India, 22 Gujarat Law Reporter 440 = 1980 E.L.T. 311 and in Alembic Glass Industries Ltd. v. Union of India, 1979 Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto. **** (d) 'Valid' in relation to any excisable goods. * * * * (i) Where the goods are delivered at the time of removal in a packed condition includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. , Explanation.- In determining the price of any article under this Section,, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid"., Explanation.-'In this sub-clause 'packing' means the wrapper,, container,, bobbins,, pirn,, spool reel or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid two decisions of this Court and held that the Excise authorities were not empowered to levy the excise duty on the cost of packing materials, that is, gunny bags. 8. It is submitted on behalf of the appellants that during the trial, questions were put to the plaintiff's witness Harjivandas Odhavji Ex. 43, who is Duties and Taxes Officer of the plaintiff-company, and in paragraph 17 he has specifically stated that process of packing, branding, stitching, etc. is carried out in the factory itself and the goods are being sent out in packed condition. It is also despatched after it is ready and packed. We are referring to the deposition of this witness at this juncture because an argument was advanced before us that sometimes this Soda Ash could be sold in loose condition. On facts, so far as the evidence of this witness is concerned, though he stated that this commodity can be sold in loose condition, he specifically stated that they sell the material only in packed condition, and since year 1975 to 1980 (the period relevant for the purpose of this appeal) no goods were sold in loose condition. Then so far as provisions of Sections 4(4)(d)(i) of the Act are concerned, a spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench concerned in the aforesaid two cases we are unable to agree that Section 4(4)(d)(i) can be read down so as to obliterate the provision which expressly makes the cost of packing material includible. When the Parliament has in so many words enacted the provision and made it includible, we cannot erase it by giving the exercise the lable of "reading down". The doctrine of reading down cannot be invoked in order to paste a blank paper over the provision or scoring it of with ink and pen in the course of interpreting it. When we interpret it the body of the provision must remain intact though its looks may be altered. But we cannot obliterate the body of the provision. It amounts to virtual repeal of a legislation by the Court. Now the Court can hold the provision to be unconstitutional. The Court cannot 'repeal' it for the obvious reason that the power of 'enacting' and 'repealing' a legislation is within the exclusive domain of the Legislature not that of the Court. We are, therefore, regretfully unable to agree with the view taken in Alembic Glass Co. Ltd. and Second Golden Tobacco in the aforesaid two cases." Once the law laid down in the earlier two decisions is hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanical handling of the material. From the silos or storages the product is screened and packed for shipment in paper or burlap bags and barrels. The further sentence on which reliance is placed shows that much of it is shipped in bulk. In the instant case we are concerned with the fact, and the fact found from the evidence is that this Soda Ash, though can be sold in loose condition, is actually sold in packed condition by the respondent-company who claims refund of excise duty. 13. Our attention is also drawn to the observations made by Te-Pang Hou in his book Manufacture of Soda with Special Reference to the Ammonia Process, 2nd Edition. Therein, at page 209 in para 2, there is mention about packing of Soda Ash. It has been mentioned therein that Rotary cooling conveyors with inside spirals deliver coaled ash to screens and packing bins, from which the ash is either packed in bags by means of screw packers, or loaded by means of pneumatic conveyor into enclosed railway cars and shipped in bulk, or conveyed into great concrete silos from which it can be retrieved by conveyors, as the case may be. This aspect also would not be helpful to the respondent-company in view of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that for determination of the assessable value of excisable goods, nothing but the manufacturing cost and manufacturing profit can be taken into consideration. The argument is rooted in confusion between the incidence of taxation and the machinery provided for the collection thereof. What is excise duty? Excise duty is a tax on manufactured goods (See : Ramkrishna Ramnath v. Kampaee Municipal, AIR 1960 Supreme Court II, at page 14, para 11). Again in case of R.C. Jain Parsi v. Union of India, AIR 1962 Supreme Court 1281, in para 7 thereof the Supreme Court, after considering the decision of the Federal Court and the Privy Council has observed as follows : "......... It is an indirect duty which the manufacturer or producer passed on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter of sales tax, the Full Bench considered that so far as excise duty is concerned, levy is on 'manufacture' and not on 'sale', and then observed that even if packed goods are not sold excise levy is attracted. Then it is further observed that packing goes with the article because it is not marketable otherwise. Till the excisable article is packed its manufacture as a marketable product is not complete. It is an integrated inseparable part of the process of manufacture of the exciable article. Because the Full Bench observed that packing is an integrated, inseparable part of the process of manufacture of the excisable article, the argument was advanced before us that if the respondent-company could show that manufacturing process was complete before packing, then the packing would not be integrated inseparable part of the process of manufacture of the excisable article and, therefore, excise duty should not be charged. Then as we have already said, is a hair splitting argument and also a curious way of reading the judgment. In order to show that packing is an integrated inseparable part of the process of manufacture of the excisable article, the Full Bench considered various asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh and not gunny bags. What is manufactured is Soda Ash and, therefore, Soda Ash alone can be the subject-matter, i.e. gunny bags in the instant case. This argument overlooks the facts that at the factory gate when goods are cleared, excise duty becomes leviable. At the factory gate what is cleared is 'Soda Ash' packed in gunny bags and not gunny bags. If empty gunny bags are cleared from the factory gate no excise duty can be levied thereon. When the cost of packing material (i.e. gunny bags in this case) is added in the assessable value of the excisable article (i.e. Soda Ash), what is being valued is Soda Ash with the added cost of packing for the purpose of determination of the basis of the levy or excise duty. Thereby incidence of the duty is enhanced; but the nature of the tax, i.e. tax on manufactured goods, is not changed. It may be noted that it is permissible for the Lgislature to levy excise duty on the basis of quantity of commodity. If the duty is assessed on the basis of quantity, say for one bag of 50 kgs. of Soda Ash, particular amount of duty, say Rs. 25/- (or which may be enhanced further), is leviable, how can it be said that is not an excise duty and it is duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the consumer and why is he made to suffer the burden of such a heavy duty? We confess, we are unaware of any judicial system which tolerates a situation wherein a consumer is allowed to be robbed of and the intermediary who collected the tax is allowed to be benefited by a windfall, an unjust enrichment. One who suffers injury is not awarded compensation but compensation is awarded to one who became an instrument in inflicting injury upon the consumer, 'X' (i.e. the company, which has collected the excise duty from the consumer) has not suffered the wrong but claims compensation for the wrong done to 'Y' (i.e. the consumer, on whom the burden of excise duty is passed on). The position in the foremost leading capitalist countries of the world, that is, England, America and Australia is quite different. There a tax payer has no right to ask for the refund of the amount of tax paid under a mistake of law. This is understandable since the amount of tax collected for the immediate expenditure for the common good. Therefore, it would be unjust and unfair to require the State to make its repayment after a number of years. 20. In S P. Gupta v. Union of India, AIR 1982 Supreme Court 149 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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