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TMI Blog1985 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... is being included-in the value now is something beyond the value of the manufactured commodity itself. - 1136 of 1977, 1244 of 1977 and 55-61 of 1979 - - - Dated:- 30-9-1985 - P.N. Bhagwati, C.J.I.; R.S. Pathak and A.N. Sen, JJ. [Judgment per : Bhagwati, C.J.I.]. - These appeals by special leave raise a number of questions relating to excise duty, leviable on cigarettes manufactured by the respondents. Barring one, all the other questions are now settled as a result of the decision of this Court in Union of India v. Bombay Tyre International Ltd., (1984) 1 S.C.C. 467 = 1984 E.L.T. 1896 (S.C.) and all that is required is to direct the assessing authorities to assess the excise duty leviable on the respondents on the basis of the law laid down in Bombay Tyre International case (supra). The only question which remains to be considered is in regard to cost of packing includible in the value of the cigarettes for the purpose of assessment to excise duty. 2. The respondents in these appeals are manufacturers of cigarettes. They manufacture cigarettes in their factories and the cigarettes so manufactured are packed initially in paper/card board packets of 10 and 20 and thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t make any distinction between primary packing and secondary packing, the cost of only such secondary packing was liable to be included in the value of the cigarettes as was necessary for sale of the cigarettes in the wholesale trade and not the cost of secondary packing which was necessitated in order to protect the packed cigarettes and to prevent them from being damaged during the course of transportation from the factory gate to the godown or warehouse of the whole-sale dealer. The packing in corrugated fibre board containers, contended the respondents, was not necessary or essential for the purpose of sale of the cigarettes to the wholesale dealer at the factory gate but it was done only with a view to facilitating transportation of the cigarettes from the factory gate to the godown or warehouse of the wholesale dealer and protecting the cigarettes against damage during such transportation and therefore the cost of such packing was not liable to be included in the value of the cigarettes. These were the rival contentions urged on behalf of the parties and we shall now proceed to examine them. 3. We have broadly dealt with the question of cost of packing in the Judgment deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured article itself. It seems to us that the degree of secondary packing which is necessary for putting the excisable article is the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the value of the article for the purpose of the excise levy. To that extent, the cost of secondary packing cannot be deducted from the wholesale cash price of the excisable article at the factory gate. It will be noticed that so far as primary packing is concerned, it was conceded on behalf of the respondents in that case, that the cost of primary packing must be regarded as falling within the terms of Section 4(4)(d)(i) read with the Explanation and it was only the cost of secondary packing which gave rise to dispute between the parties. But we did not proceed to decide whether the cost of every degree of secondary packing would be liable to be included in the value of the goods or whether a distinction could be drawn between one degree of secondary packing and another. We posed the question: Is all the packing, no matter to what degree, in which the wholesale dealer takes delivery of the goods to be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be asked is : what is the packed condition in which the goods are when delivered at the time of removal? Whatever is the packing of the goods at the time when they are delivered at the time of removal, the cost of such packing would be liable to be included in the 'value' of the goods. The Explanation to Section 4(4)(d)(i) provides an exclusive definition of the term packing and it includes not only outer packing but also what may be called inner packing. Ordinarily bobbin, pirl, spool, reel and warp beam on which yarn is wound would not be regarded as packing of such yarn, but they are brought within the definition of packing by the Explanation. The Explanation thus extends the meaning of the word packing to cover items which would not ordinarily be regarded as forming part of packing. The Explanation then proceeds to say that packing means wrapper, container or any other thing in which the excisable goods are wrapped or contained. It is apparent from the wide language of the Explanation that every kind of container in which it can be said that the excisable goods are contained would be packing within the meaning of the Explanation and this would necessari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find it difficult to appreciate this distinction so far as assessment to excise duty is concerned. Obviously every wholesale dealer would like to take delivery of the goods from the manufacturer in such packing that he can safely transport the goods to his godown or warehouse and sell the same to the retailer or consumer in marketable condition. The wholesale dealer would therefore insist that the goods purchased by him in wholesale should be properly packed so that they do not get damaged during transportation or even storage. The manufacturer would accordingly have to deliver the goods at the factory gate in such packed condition as demanded by the wholesale dealer. It is apparent that unless the goods are in such packed condition, the wholesale dealer would not ordinarily take delivery of the goods and necessarily therefore such would be the packed condition in which the goods are generally sold in the wholesale market at the factory gate. It makes do difference to the applicability of the definition in Section (4)(d)(i) read with Explanation that the packing of the goods ordinarily sold by the manufacturer in the wholesale trade is packing for the purpose of protecting the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis that the cost of corrugated fibre board, containers was not liable to be included in the value of cigarettes for the purpose of assessment to excise duty and did not recover from the wholesale dealers to whom they sold the cigarettes, any amount by way of excise duty attributable to the cost of such corrugated fibre board containers. This representation contained in the letter dated 24th May, 1976 continued to hold the field until 2nd November, 1982 when the Central Board of Excise and Customs addressed a Circular letter to all the Collectors of Central Excise stating that the matter had been re-examined in consultation with the Ministry of Law and in view of the provisions of Section 4, the cost of packing whether initial or secondary in which the excisable goods are packed at the time of the removal may form part of the assessable value of such goods and the earlier advice inconsistent with this position should be treated as cancelled. The question which was raised on behalf of the respondents on this set of facts was as to whether during the period between 24th May, 1976 and 2nd November, 1982 the respondents were liable to pay excise duty on the basis that the cost of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable goods. The letter dated 24th May, 1976 could not possibly be regarded as a special order by the Central Board of Excise and Customs in the case of each of the manufacturers of cigarettes exempting cigarettes from payment of duty to the extent of the cost of packing by way of corrugated fibre board containers. We do not think the letter dated 24th May, 1976 could be brought within the terms of sub-rule (2) of Rule 8 and the argument of the respondents based on that sub-rule must be rejected. 8. The respondents are however on former ground in their plea of promissory estoppel against the Central Board of Excise and Customs and the Central Government. The representation contained in the letter dated 24th May, 1976 was undoubtedly made by the Central Board of Excise and Customs but we may safely assume, and for this assumption there is clear warrant in the proceedings in Special Civil Application No. 787 of 1976 in the Gujarat High Court, that this representation was made with the approval of the Central Government and it was accepted by the Central Government as correctly representing the stand of the Revenue. It is significant to note that when the petitioners in Special Civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. It has often been said in England that the doctrine of promissory estoppel cannot itself be the basis of action : it can only be a shield and not a sword : but the law in India has gone far ahead of the narrow position adopted in England and as a result of the decision of this Court in Motilal Sugar Mills v. State of Uttar Pradesh, (1979) 2 S.C.R. 641, it is now well-settled that the doctrine of promissory estoppel is not limited in its application only to defence but it can also found a cause of action. The decision of this Court in Motilal Sugar Mills case (supra) contains an exhaustive discussion of the doctrine of promissory estoppel and we find ourselves wholly in agreement with the various parameters of this doctrine outlined in that decision. 10. More importantly, it is necessary to point out that the decision in Motilal Sugar Mills case (supra) marks a significant development in the law relating to the doctrine of promissory estoppel. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the Judge of its own obligation to the citizen on an expert appraisement of the circumstances in which the obligation has arisen. The defence of executive necessity was thus clearly negatived by this Court and it was pointed out that it did not release the Government from its obligation to honour the promise made by it, if the citizen, acting in reliance on the promise, had altered his position. The doctrine of promissory estoppel was in such a case applicable against the Government and it could not be defeated by invoking the defence of executive necessity. This Court in Motilal Sugar Mills case (supra) also negatived the argument that if the Government were held bound by every representation made by it regarding its intention, the result would be that the Government would be bound by a contractual obligation even though no formal contract in the manner required by Article 299 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established. It was laid down by this court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. The doctrine of promissory estoppel as explained above was also held to be applicable against public authorities as pointed out in Motilal Sugar Mills case. This court in Motilal Sugar Mills case quoted with approval the. observations of Shah, J. in Century Spinning and Manufacturing Company Limited v. Ulhasugar Municipal Council, (1970) 3 S.C.R. 854 where the learned Judge said ; Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice. If our nascent democracy is to thrive different standards or conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is also laid down in Motilal Sugar Mills case (supra), that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 8 sub-rule (2) to make a special order in the case of each of the respondents granting the same exemption, because it could legitimately be said that, having regard to the representation made by the Cigarette Manufacturers' Association, there were circumstances of an exceptional nature which required the exercise of the power under sub-rule (2) of Rule 8. The Central Government and the Central Board of Excise and Customs were therefore clearly bound by promissory estoppel to exclude the cost of corrugated fibre board containers from the value of the goods for the purpose of assessment of excise duty for the period 24tb May, 1976 to 2nd November, 1982. 15. The respondents would therefore be entitled to exclusion of the cost of corrugated fibre board containers from the value of the cigarettes only during the period 24th May, 1976 to 2nd November, 1982. Save and except in respect of this period, the cost of the corrugated fibre board containers would be liable to be included in the value of the cigarettes for the purpose of assessment of excise duty. I would therefore pass an order in these appeals in terms of the format order, which has been evolved by consent of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning to the expression value in clause (d) of sub-section (4) of section 4 of the Act. Plainly, the extension must be strictly construed, for what is being included-in the value now is something beyond the value of the manufactured commodity itself. In Union of India v. Bombay Tyre International Ltd. (supra), we observed :- It seems to us that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the value of the article for the purpose of the excise levy. Is the packing in corrugated fibre board containers necessary for putting the cigarettes in the condition in which they are generally sold in the wholesale market at the factory gate ? In my opinion, it is not. The corrugated fibre board containers are employed only for the purpose of avoiding damage or injury during transit. It is perfectly conceivable that the wholesale dealer who takes delivery may have his depot a very short distance only from the factory gate or may have such transport arrangements available that damage or injury to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery, the cost of the further packing incurred for putting cartons/outers in the corrugated fibre board containers must also be included in the value for the purpose of assessment of excise duty. 24. When tobacco is rolled up in paper following the appropriate process of manufacturing cigarettes, cigarettes come into existence. The paper in which cigarettes are rolled is indeed a part of the manufactured product itself. The paper in which a cigarette is rolled forms no part of the packing and is indeed a part of the cigarette itself. When the cigarettes, after their manufacture, are put in packets, each packet usually containing 10 or 20 cigarettes, the packets in which the cigarettes are packed indeed constitute the primary packing for the purpose of delivery and there can be no question that the cost of this packing must necessarily be included in the value for the purpose of assessment of excise duty. A number of packets, containing cigarettes either 10 or 20 in number in each packet are then put in larger cartons according to the requirements of the buyer in the wholesale trade. Packing a number of packets of cigarettes in a larger carton for delivery to the buyer in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty which is levied on the goods is ultimately passed on to the consumers of the goods and they have ultimately to bear the burden. So far as the consumers are concerned they buy cigarettes, loose or in packets or even in cartons. Cartons packed in corrugated fibre board containers are not purchased by the consumers. So far as the retail sellers are concerned who may buy from wholesale, they usually buy loose packets of cigarettes or packets of cigarettes packed in- cartons. So far as the buyers in the wholesales trade are concerned, they buy the cartons of cigarettes in which the packets of cigarettes are packed in the course of their wholesale trade for selling the same to retailers or to their customers. It is only for the sake of convenience in the matter of smooth delivery of cartons in which the packets of cigarettes are packed that the cartons may be further packed in corrugated fibre board containers for facility of transport and Smooth transit of the cartons before delivery of the same to the whole-sale buyer. 25. The letter dated 4th May, 1976 addressed by the Under Secretary, Central Board of Excise and Customs to the Cigarette Manufacturer's Association w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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