9911796707
TMI Blog1989 (9) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the Petitioner Company to clear its goods after payment of the excise duty on the basis of the assessable values as declared in the price lists submitted by the Petitioner Company. The Petitioners also prayed for refund of the sum of Rs. 68,29,214.81 p. which, according to the Petitioner company, had been illegally collected by the Respondents from 1st October 1975 to 31st March 1980 by including in the value of the Petitioners' products post-manufacturing costs, expenses and profits. A learned Single Judge of this Court was pleased to issue Rule in terms of prayers (a) to (c) and on the Petitioners through their Advocates undertaking to this Court that in the event of this Petition being dismissed they will pay to the Respondents the differential excise duty in respect of goods cleared by them thereafter on the basis adopted by the Respondents and the amount actually paid within four weeks from the dismissal of the Petition with interest on the differential amount of 17 per cent per annum from the due date and on the Petitioners executing a bond without security in favour of the Respondents to the aforesaid effect, granted interim order in terms of prayer (d) of the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new Section 4 in supersession of the previous Section no material departure was intended from the basic scheme of determining the value of an excisable article. In paragraph 48 of their judgment in the case of Union of India v. Bombay Tyre International Ltd. (supra) the true position under the Central Excises and Salt Act, 1944, as amended by Act 22 of 1973 was set forth. The proposition (i) was that the price at which the excisable goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal as defined in sub-section (4)(b) of Section 4 is the basis for determination of the excisable value, provided a buyer is not related person and the price is the sole consideration for the sale. The proposition (iii) was where wholesale price of any excisable goods for delivery at a place of removal is not known and the value thereof is determined with reference to the wholesale price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery should be excluded from such sale. In Bombay Tyre International Ltd. 's case (supra) the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In paragraph 53 of its judgment in Bombay Tyre International Ltd. 's case (supra) the Supreme Court had interpreted Section 4(4)(d)(i) by holding that the packing of which the cost is included in the value of excisable goods was that packing in which goods are ordinarily sold in the course of wholesale trade to the wholesale buyer, i.e. The packing in which the article is made marketable without being ordinarily consumed. With reference to secondary packing in Bombay Tyre International Ltd. 's case (supra) the Supreme Court had observed that when secondary packing is necessary for putting excisable article in the condition in which it is generally sold in the wholesale market at the factory gate, cost of the same is to be included in the value for the purposes of excise duty. "If any special secondary packing is provided by the assessee at the instance of a wholesale buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such packing shall be deducted from the wholesale cash price." Vide paragraph 54 of the judgement in the case of Union of India v. Bombay Tyre International Ltd. (A.I.R. report). 5. On December 5,1983, the present Writ Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 25,74,740.23 p. for the period 1st April 1971 to 6th August, 1980. According to the Petitioners, for the period covered by the Writ Petition, i.e. from 1st October 1975 to 6th August 1980, the Petitioner Company was entitled to refund amounting to Rs. 16,20,485.82 p. under the following headings :- (1) Carriage and freight. (2) Transit insurance. (3) Interest on distributors' advances. (4) Surcharge on sales tax. (5) Packing and card-board boxes. 8. Thereafter various correspondence ensued between the Petitioner Company and Respondent No. 6. According to the Petitioners, Respondent No. 6 had also deputed his representative to examine and verify the books and documents of the Petitioner Company. After giving a personal hearing to the Petitioner Company on 13th March 1984, on 19th March 1984 Respondent No. 6 passed an order which was, however, withdrawn pursuant to the order of this Court dated 18th June 1984. 9. On 9th July 1984 personal hearing was again granted to the Petitioner Company. During the said personal hearing, the Petitioner Company claimed to have submitted copies of price lists. The Petitioner Company also submitted two invoices, two trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 6th August 1980. Although initially the learned Counsel for the Petitioners had urged that the Petitioners were entitled to obtain refund of the alleged excise duty paid from 1st April 1971, after the Respondents pointed out that the Petitioners' claim for refund from 1st April 1971 to 30th September 1975 was subject-matter of another Writ Petition, Mr. Hidayatullah, the learned Counsel for the Petitioners, submitted that the Petitioners would confine, in the present Writ Petition, their claim for refund from 1st October 1975 and not from earlier. Thirdly, whether assessments of excise duty made by Respondent No. 6 were lawful. 14. We may first take up the Petitioners' claim for deduction from the assessable value of the Petitioner Company's products of amounts allegedly paid by the Petitioner Company as interest on deposits from its various distributors. The Petitioner Company through its Solicitors by letter dated March 14, 1984, had claimed that the Petitioner Company received advance deposits from the wholesale dealers which were in the nature of security acting as debenture on buyers so that they did not default in making payments in respect of supplies made by the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of goods. The said advances did not differ from the moneys borrowed by the Petitioner Company from banks or other financial institutions. In his order dated 30th March 1985 Respondent No. 6 recorded the submission made on behalf of the Petitioner Company that the said advances from the distributors were by way of security and not borrowings in the nature of loans. The respondent No. 6 also found that although the terms for receiving advances from its distributors were not identical with the terms of other borrowings made by the Petitioner, these distributor's advances were indistinguishable from other borrowings so far as utilisation of the same was concerned. It was not accepted that the cash moneys in the form of these deposits available to the assessee Company were allowed to lie idle and borrowings were made from other sources at higher market rate. The assessees did not adduce evidence to show that the said amounts were not at all utilised as capital. Liability to pay interest on these deposits was to be discharged out of the miscellaneous income arising, if any, by way of deposits and not out of the sale price of goods. 17. In our view, the Assistant Collector of Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the different regions was due to the delivery charges payable on account of carriage of the goods for delivery over longer distances. The further finding of the Assistant Collector was that in the case before him freight paid was not averaged in order to make the wholesale cash prices of the biscuits same everywhere. 19. In his second order dated 30th March 1986 the Assistant Collector recorded as follows the submission made on behalf of the Petitioner Company in respect of carriage and freight. According to the learned senior Advocate appearing on behalf of the petitioner company, costs of carriage and freight were being borne by it as a practice for fifty years. There was transit insurance with regard to transportation which had been already allowed and the same showed that the transport costs were being incurred by the Petitioner Company. Reliance was placed on behalf of the Petitioner Company upon clause 2, according to which it had not only to sell but to supply biscuits. Therefore, the Company had to transport biscuits to wholesaler's destination. The Company also relied upon Clause 5 and contended that the same indicated the costs which arose only after the goods delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively less. In case of areas beyond Bombay city and the suburbs delivery from the Petitioner Company's depot involved transport over longer distances and necessarily payments of higher transport charges. Therefore, for the western region another set of prices which included averaged transport costs were charged to wholesale buyers of the Petitioner Company's products. Mr. Sethna, the learned Counsel appearing on behalf of the Respondents, has submitted that in view of the provisions of sub-section (2) of Section 4 of the Central Excises and Salt Act he does not dispute the legal proposition that where the value of an excisable product is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded for arriving at the price at which the said goods are ordinarily sold to a wholesale buyer at the time and place of removal, i.e. at the factory gate or a warehouse where excisable goods had been permitted to be deposited without payment of duty. Mr. Sethna has correctly pointed out that ordinarily when goods are sold at the place of removal and the normal pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assailed by the Petitioner Company in this Writ Petition. Whether transport charges had entered into the prices payable by the wholesalers was a question of fact. We, however, cannot subscribe to the extreme view canvassed on behalf of the Respondents that the price charged by the manufacturer at the factory gate can never include transport charges. In case excise duty levied under Section 3 of the Central Exicses and Salt Act is to be collected with reference to the value of excisable articles, such value is to be determined in terms of Section 4 of the Act. Such value under Section 4(1)(a) is deemed to be the normal price, i.e. the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade. It is possible to visualize cases in which the price payable by a wholesaler at the factory gate includes charges and payments which do not enrich or add the value of the product at the time and place of removal. In view of the observations of the Supreme Court in paragraph 49 of its judgment in the case of Union of India v. Bombay Tyre International Ltd. (supra), the price of an article is related to its value and into that value is added the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Petitioner Company had failed to satisfy him that the Company had incurred transport charges and the same had been added to the wholesale cash prices, on the basis of which excise duties were levied. Mr. Sethna also pointed out that since removal from the Petitioner Company's factory took place under Rule 52 of the Central Excise Rules, although the price charged at the factory gate was known, at the time of removal the Petitioner Company had not claimed deduction on account of freight and transport cost. 25. The Petitioner Company, even after the Writ Petition was amended, did not claim that besides the goods consignment notes, Chartered Accountants' certificates and profit and loss account, it had other materials to substantiate its claim for refund on account of transport charges. After Pendse, J. had made the formal order on 5th December 1983, the Petitioner Company had further opportunity to produce all its evidence in support of its claim for deduction under different heads including freight and transport costs. On 23rd January 1984 the Assistant Collector had called upon the Petitioner Company to produce documents and papers. The Petitioner Company had availed of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was entitled to deduction on account of transport charges but had come to the conclusion that the Petitioner Company had failed to prove the same by producing necessary material. Therefore, the matter cannot be again remitted back and the Petitioners' contention for deduction on account of freight and carriage costs ought to stand rejected. 27. The third head of deduction was the costs of special secondary packing from the assessable value of the biscuits. Under Section 4(4)(d), the value in relation to excisable articles includes the cost of packing except the cost of packing which is of a durable nature and is returnable by the buyer to the assessee. In the present case, the Petitioner Company had initially claimed that some of its manufactured goods were packed materials which were durable in nature and returnable by the buyer. The Petitioner Company failed to prove the same. In fact, at the time of the final hearing, Mr. Hidayatullah, the learned Counsel for the Petitioners, fairly submitted before us that he was not in a position to pray for deduction on account of the cost of packing which was of a durable nature and was returnable by the buyer to the Petitioner Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew and the minority view in Godfrey Philips case (supra) differently interpreted the above quoted passage from the judgment in the case of Union of India v Bombay Tyre International Ltd. (supra). The majority view was that the packing in corrugated fibre board containers was not necessary for putting the cigarettes in the condition in which they were generally sold in the wholesale market at the factory gate. The corrugated fibre board containers were employed only for the purpose of avoiding damage or injury during transit. 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 cigarettes can be avoided. The corrugated fibre board containers are not necessary for selling the cigarettes in the wholesale market at the factory gate. A.N. Sen, J. who countered with Pathak, J.'s judgment in the case of Union of India v. Godfrey Philips India Ltd. observed at page 323 of the report that 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packing which is to be at the request of the wholesaler or because of express or implied arrangements. Such special packing is for the purpose of protection of the goods during the transit or delivery beyond the place of removal. The number of layers or wrappers in which the manufactured goods are packed is not relevant. In order to be special packing, it must be such packing which is in addition to the normal packing and is done at the request of or by reason of arrangement with the wholesale dealer, the object of such packing being for facilitating transport and delivery at a place other than the factory gate. 31. In his order dated 10th August 1984 the Assistant Collector mentioned that the Petitioner Company had submitted that card-board boxes and cases were special packing and were done as per requirements of customers and hence should be allowed to be deducted from the price. Reliance was placed upon the Supreme Court decision in the case of Union of India v. Bombay Tyre International Ltd. (supra). In support of the claim the Petitioner Company had submitted two letters dated 3rd September 1980 and 4th January 1981 received from its wholesalers requesting for packing in car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner Company dated 9th January 1984. The Assistant Collector came to the categorical finding that in the case before him the packing was in the nature of essential packing for the biscuits prepared in loose form or in small packets which, without the help of the secondary packing like tin container or card-board box, could not be obviously marketed or despatched. The Assistant Collector further observed that these tin containers were used by the party for movement of biscuits and were obviously primary packing of the goods. According to the Assistant Collector, it had been admitted by the assessees themselves that these packings were substitutes of craft paper packings. In respect of outstation sales the goods were cleared by the assessees to their godown and subsequently thereafter the same moved to wholesalers. The situation of storage, transport, loading and unloading required packing which could protect the biscuits against humidity conditions, damage/breakage that might be caused due to handling, loading, unloading and transport and to preserve the quality of the biscuits. The Assistant Collector refused to accept the Petitioner Company's claim that the packings were done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despatched upcountry is a matter entirely one of fact. The Petitioner did not place any material before us in order to substantiate its contention. The Collector's finding that the packing in question was normal packing and not additional or special packing is one of fact. As already stated, before filing the Writ Petition, such a claim for deduction on account of special packing charges was not made. Even during the hearing of the matter before him, according to the Assistant Collector, the evidence adduced was not sufficient to prove the Petitioners' claim. The Petitioner Company's profit and loss account or the certificate granted by its auditors did not indicate separately the costs of normal packing and the costs of special packing made either at the request of the party or for facilitating delivery in Mofussil. It is not at all clear whether the Petitioner Company had claimed deduction of entire packing costs or only the costs of packing in corrugated card-board boxes. It has been pointed out before us that the sale invoices of the Petitioner did not also mention such packing. 36. In this connection, Mr. Sethna has strongly relied upon the decision of this Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot open to Mr. Sethna, the learned Counsel for the Respondents, to urge any point which cannot be found in the orders of the Assistant Collector dated 10th August 1984 and 30th March 1985. According to Mr. Hidayatullah, the learned Counsel for the Petitioners, the points now urged by Mr. Sethna were also not taken in the affidavit filed on behalf of the Respondents. In this connection, the learned Counsel for the Petitioners had relied upon a number of reported decisions including Commr. of Police v. Gordhandas, A.I.R. 1952 S.C. 16; Mohinder Singh Gill v. Chief Election Commissioner, A.I.R. 1978 S.C. 851; Bush (India) Ltd. v. Union of India and Others, 1980 (6) Excise Law Times 258 at p. 260 and Leukoplast (India) Ltd. v. State of Goa, 1988 (36) Excise Law Times 369. We find no substance in the preliminary objection by which, in effect, the learned Counsel attempted to shut out submissions made on behalf of the Respondents. The orders in question of the Assistant Collector were quasi judicial in nature. The Assistant Collector had given several reasons in his two orders dated 10th August 1984 and 30th March 1985. Even if it is assumed that some of his reasons are erroneous, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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