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TMI Blog1989 (9) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ods for purposes of levy of excise duty. 4. This Court upheld the validity of Section 4(4)(d)(i) of the Act following the decision of the Supreme Court in Union of India Ors. v. Bombay Tyre International Ltd. Ors. (AIR 1984 S.C. 420). So far as the show cause notice was concerned, it was quashed and a direction was issued to examine and decide the claim for refund of excise duty paid on the cost of packing material supplied by the buyers, in accordance with law. 5. Dealing with the validity of the show cause notice, this Court rejected the contentions of the Department and the reliance placed by the Department on a Circular issued by the Collector of Central Excise, Bangalore. Allowing the writ petition this Court held that the cost of packing material supplied by the buyer himself should not be Included in the value of the excisable goods for purpose of excise duty. 6. After the decision of this Court in W.P. No. 5995/75, dated 23-1-1985 rendered by a Division Bench (of which I was a Member), the petitioner made a claim for refund of the excise duty paid under protest up to 14-5-1985. The said application was Filed on 6-9-1985 claiming refund of Rs. 42,78,947-07 ps. bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the benefit to the customers, is contrary to the Judgment and order of this Court in Mangalore Chemicals v. Assistant Collector (1986) (23) E.L.T. 48 and the decision of the Supreme Court in Bombay Tyre International Case (1984 S.C. 420). 12. The Writ petition is resisted by the Central Government and a statement of objection is filed in support of their case. The case of the Department is that the second respondent was justified in rejecting the claim for refund of Rs. 14,80,663-98 ps. relying on Explanation to Section 4(4)(d)(ii) and the order passed is, therefore, in accordance with law. The argument of the learned Counsel is that the directions issued by this Court while disposing of the writ petition 5995/75 was to scrutinise the claim and make an order in accordance with law, and the view taken by the the second respondent, even if it is wrong, should be challenged only by way of an appeal and not in a writ petition. It is also stated that the Department has not accepted this Judgment and has filed an S.L.P., before the Supreme Court, which is pending admission. 13. The order is also sought to be supported on the additional ground that the petitioner had not passed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt considered, in detail, the broader question as to mode of determination of the value in relation to the cost of packing under Section 4(4)(d)(i) of the Act. In so doing, the Supreme Court examined the provisions of the Central Excise Act with particular reference to inclusion of the cost of packing in the value of excisable goods. The discussion on this aspect is summed up by me as follows :- 19. For purposes of Section 4, "value" in relation to any excisable goods 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 in nature and is returnable by the buyer to the assessee. 20. The Supreme Court drew a clear distinction between primary packing and secondary packing while considering the price of an article in relation to its value and the several components which go to enrich its value up to the date of sale, which includes the cost of packing also invariably. 21. As regards the cost of primary packing, it was observed that such packing should be understood as the packing in which goods are wrapped, contained or wound when the goods are delivered at the time of removal. The cost of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the provision providing for excluding the cost of packing material of durable nature and returnable by the buyer to the assessee must also be read as providing for the converse situation also, as any other construction would do violence to the language of Section 4(4)(d)(i) of the Act and create an artificial definition of that term". 27. For coming to this conclusion this Court relied upon the decision of the Supreme Court in Bombay Tyre International case and the decision of the Gujarat High Court in the case of the sister-concern of the petitioner - Alembic Glass Industries, Baroda v. Union of India (1989)(2) TLR 2251) and the Full Bench decision of the Government of India in Gujarat Fertilisers [1982 (10) E.L.T. 472]. This Court, while allowing the writ petition in part, quashed the impugned show cause notice and directed the department to examine the claim for refund 'in accordance with law'. 28. In Mangalore Chemicals case, this Court categorically held that the cost of packing material supplied by the buyer is not includible in the value of the excisable goods for purposes of charge to excise duty. It was held in para 29, as follows :- "29. In determining the 'value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a requirement of the explanation, is wholly misconceived and is not sound. (See : Para 31). 30. It was argued by Sri Dave that the 2nd respondent has deliberately omitted to refer to the decision of this Court in Mangalore Chemicals case and chose to give his own interpretation on the direction given by this Court in W.P. No. 5995/75. His argument is that the second respondent has adopted an ingenious argument to circumvent the direction issued by this Court and has invented a new ground to reject part of the claim for refund. 31. It is demonstrated by the learned Counsel that the reasoning adopted by the second-respondent for rejecting refund of Rs. 14,80,663-98 ps. out of the total claim of Rs. 42,78,947-07 ps. does not stand to reason and is self-contradictory. He argued, that the entire claim to refund Rs. 42,78,947-07 ps. was on the basis that it represented the duty paid on the packing materials supplied by the buyers and this being the undisputed factual position, no other reason could be put forward in granting refund of Rs. 27,89,502/- only disallowing Rs. 14,80,663-98 ps. The mode of calculation as is seen from the order dated 6-1-1988 produced before me by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this writ-petition has tried to read in between the lines and has given an interpretation of his own for rejecting part of the claim on the ground of 'unjust enrichment' which was not permissible in law to be invoked. It is further argued that the Asst. Collector being a creature of the statute is bound to determine all questions only in accordance with the provisions of the statute and no other ground outside the statute viz., S.1 1B can be invoked by the statutory authority. 36. In support of this argument, he has relied upon the decision of the Supreme Court in the case of Collector of Central Excise v. Doaba Co-operative Sugar Mills (1988) (37) E.L.T. 478 and also other decisions of the CEGAT reported in (i) 1987 (30) E.L.T. 641; (ii) 1985(22) E.L.T. 539 and (iii) 1986 (26) E.L.T. 394. 37. The principle of law that flows from the enunciation laid down by the Supreme Court in Doaba's Co-operative Sugar Mills's case is that the doctrine of 'unjust enrichment' is a principle in equity that can be invoked only by Courts and not by the authorities under the Act. He has also relied upon the decision of the Supreme Court in S.T.O. v. Kamiayalal (1959 S.C. 135) and D. Cawasji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45. The test, according to their Lordships, to be applied in a case where the containers or other packing material is supplied by the buyer, is to find out whether the manufactured goods had become marketable without the containers supplied by the buyer and whether the manufacturer had incurred any cost of such packing and it was incidental or ancillary to the manufacture? 46. It was categorically held that Section 4(4) (d) (i) does not make any provision for including the cost of packing, which is supplied by the buyer and the Legislature had appropriately thought it fit to exempt such packing from the value of excisable goods. Holding that this is the correct way to interpret the provisions, the Supreme Court in cidentally approved the view taken by this Court Alembic Glass Industries v. Union of India (1986 (24) E.L.T. 23), that there is no logic or reason for not excluding the value of the packing material supplied by the buyer himself. 47. The Supreme Court further proceeded to observe that it would be repugnant to the very scheme of Section 4, if the value of packing materials supplied by the buyer is included in the value of goods and it would be an absurd situation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced on behalf of the petitioner, Sri Pad-marajaiah has sought to justify the action of the second respondent in rejecting the part of the claim. It must be stated, at the outset, that he is not able to give any satisfactory answer or explanation as to how the part of the claim - nearly 2/3 of the claim viz. Rs. 27,89,502/- was refunded while rejecting a part of the claim. He, however, relies on the observation made by this Court while disposing of the W.P. No. 5995/75 that the claim of the petitioner for refund may be considered 'in accordance with law'. 54. The argument developed on the basis of this observation is that the second respondent has examined that claim in accordance with law viz., in the light of explanation to Section 4(4)(d)(ii) of the Act. Elaborating his arguments on this aspect, Sri Pad: marajaiah tried to justify the action of the second respondent on the ground of 'unjust enrichment' and, this should be construed as consideration of the assessee's claim for refund 'in accordance with law'. 55. The claim for refund examined in the light of this principle, Sri Pad-marajaiah submitted, that the 'effective duty' of excise payable by the petitioner by addin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of packing materials supplied by the buyers in the assessable value. 62. The Central Government is expected to grant refund which is legitimately due to the assessee if the facts warrant refund, ungrudgingly and with the same promptitude as they do while recovering the revenue due from the assessees. 63. On the very reasoning adopted by the Department to grant refund of a part of the amount in its order dated 6-1-1988, the remaining amount was also eligible for refund, since the entire amount represented the excess duty paid on the value of packing materials supplied by the buyers. The basis on which the refund was denied is, therefore, a self-contradiction in terms, and the argument of the department in support of this method of bifurcating part of the amount as not eligible for refund has, therefore, to be rejected. What is more surprising is that the second respondent, who was bound by the ruling of this Court in Mangalore Chemicals case, in which the trade notice 58/77 dated 21-3-1977 issued by the Collector of Central Excise, Bangalore, was quashed, does not choose to follow that decision. This Court held, in categorical terms (para 29), that only the actual or real dut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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