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TMI Blog1987 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... core paper to arrive at the total value of the core paper for the purpose of levy of duty thereon as per Section (4)(d)(i) of the Central Excises and Salt Act, 1944, hereinafter referred to as the Act, the petitioner has been visited with a show cause notice - demanding payment of difference in duty. The respondents have made it clear that the duty paid on the wrapper paper separately has been excluded and not taken into account while arriving at the short payment or differential duty. This demand has prompted the petitioner to come to this Court, on principle challenging the very validity of the show cause notice. 2. Mr. A.L. Somayaji, learned Counsel for the petitioner, would submit that the wrapper paper manufactured by the petitioner admittedly did suffer the duty thereon and in that context when it is being used for packing the core paper for putting the latter into the market, its value cannot be tacked on to the value of the core paper to arrive at the total value of the core paper and that would amount to double taxation. 3. Mr. T. Somasundaram, learned Additional Central Government Standing Counsel, appearing for the respondents, would advance an argument that irrespect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(i) reads : 4. For the purposes of this section - (d) 'value' 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 this sub-clause, 'packing' means the wrapper, container, bobbin, prin, spool, reel or wrap beam or any other thing in which or on which the excisable goods are wrapped, contained or wound." It is relevant to note that the packing of which the cost is included, is the packing in which the goods are wrapped, contained or wound when the goods are delivered at the time of removal. In other words, it is the packing in which it is ordinarily sold in the course of wholesale trade to the wholesale buyer. The degree of packing in which the excisable article is contained will vary from one class of articles to another. From the particulars detailed before us by the assessees, it is apparent that the cost of primary packing, that is to say, the packing in which the article is contained and in which it is made marketable for the ordinary consumer, for exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of packing under the Act, both before its amendment and after." It is an indisputable proposition that the duty of excise is imposed in respect of the manufacture or production of an article, but the point at which it is collected is not determined by the point of time when its manufacture is completed, but will rest on considerations of administrative convenience. Once it is admitted that the wrapper paper manufactured by the petitioner has suffered the excise duty paid by the manufacturer namely, the petitioner, should it be made to suffer duty once again by adding its value to the core paper, which is packed in the wrapper paper, invoking Section 4(4)(d)(i) of the Act. 5. The question as to when the manufacture of an article could be said to have been completed has vexed and even today is vexing Courts and in the case of packing, views were expressed by High Courts with reference to Section 4(4)(d)(i) that the cost of packing referred to in that provision is includible in the assessable value of the main excisable article, which is packed in the packing material, only if the packing is a process incidental or ancillary to the completion of its manufacture. Hence, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade practice in the paper industry and as per the Indian Standards Specifications, the ream-reel of weight of paper and paperboard old is inclusive of the weight of the wrapper paper, or in other words, he weight of ream-reel is the combined weight of the packed paper as well as the wrapper paper, and this convention has been accepted by the Directorate General of Supplies and Disposals, Government of India, for supplies under the Rate Contract also and the chargeable weight of the paper is always inclusive of the weight of the wrapper paper. There is no dispute over this and in fact, this has been accepted as existing factual features by Mohan J. in Seshasayee Paper and Boards Ltd., Erode v. Appellate Collector of Customs and Central Excise, Madras and Another, 1984 E.L.T. 3 (Madras). If these are the admitted factual features and they are so, we can take it that the wrapping assumes the character of primary packing, that is to say, it is the packing in which the core paper is contained and in which it is marketed, as per the trade practice, to the customer. Then as laid down by the Supreme Court, the cost of such packing has to be tacked on to the value of the main excisable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export or manufacture or any other commodity in or outside such place, until the excise duty leviable thereon has been paid. The power to levy double taxation is not evident from the provisions either of the Act or of the Rules. On the other hand, the intendment is clear that an excisable goods on its manufacture must suffer the excise duty leviable thereon. Section 4(4)(d)(i) contemplates the tacking on of the cost of packing to the value of the packed main excisable article to arrive at the excisable value of the latter. In substance, what all Section 4(4)(d)(i) lays down is that the packing material also should suffer the excise duty by having its value tacked on to the value of the packed main excisable material. But, where the manufacturer of both the packed main excisable material and the packing material is one and the same, and if such manufacturer has paid excise duty on the packing material, if the value of such packing material is to be added on to the value of the packed main excisable material, it would m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It is for the Revenue to notify and declare as to when the wrapper paper manufactured for captive or home consumption by the same person, who also manufactures the packed or wrapped paper, should suffer the excise duty. But the wrapper paper manufactured for captive or home consumption could bear the excise duty only once, to be paid by the manufacturer; since there is no authority of law available to make it suffer excise duty twice; to be paid by the manufacturer. For the wrapper paper, manufactured for captive or home consumption, the point of time at which levy should be made on it, can be relegated to the stage of clearance of the wrapped paper, so that as per Section 4(4)(d)(i) the value of the wrapper paper can be added on to the value of the wrapped paper, and on that consolidated basis there could be levy of excise duty. It is not claimed by the respondents before me, that the petitioner was directed to adopt this procedure for the period in question. Without any protest from the third respondent, the excise duty has been paid by the petitioner separately, on the wrapper paper. Mr. T. Somasundaram learned Additional Central Government Standing Counsel, would submit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive convenience. If the very same manufacturer manufactures other varieties of paper or core paper, and they are to be packed in the wrapper paper, also manufactured by him, the value of the wrapper paper has to be added on to the value of the core paper, as per Section 4(4)(d)(i) to make up a consolidated value for levy, provided the wrapper paper has not suffered excise duty of its own separately, in the hands of the manufacturer. If it has so suffered, it will not be in order to tack on its value to the value of the core paper, since that would amount to double taxation not authorised in law. The manufacturer is cast with the liability to pay the requisite excise duty on the wrapper paper manufactured by him. But that liability cannot be cast on him twice in the absence of an authority of law, which is lacking here. But the point at which levy should be made need not be static and can be fixed up according to administrative exigencies. Taking note of the intendment behind and the implications of Section 4(4)(d)(i), the value of the wrapper paper, if it has separately suffered excise duty in the hands of the manufacturer of the wrapper paper, who is also the manufacturer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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