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TMI Blog1999 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... the period form 19-6-1980 to 1-3-1981 and 2-3-1981 to 30-6-1981. v. Issue writ order or direction in the nature of mandamus directing the Assistant Collector Central Excise to refund the amount of excise duty paid under protest on the cost of packing charges on or after 1st July, 1981 and not to demand any excise duty on the cost of packing charges on future clearance." 2.The petitioner is a company registered under the Companies Act, 1956 and is engaged in the business of manufacture and sale of excisable goods i.e. sheet glass. The question raised is about the inclusion of the cost of secondary packing in computing the assessable value of the goods for the levy of excise which is leviable ad valorem. Section 4 of the Central Excise Act, 1944 provides for determination of the value of excisable goods for the purpose of charging duty of excise and it was amended by Section 2 of the Central Excises and Salt (Amendment) Act, 1973 and was enforced from 1st October, 1975. The relevant portion of Section 4 of the Act is as under :- "(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall subject to the other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey pay for it. Quite often packing is done in advance to avoid delay in delivery and to bring efficiency in sales. 13. That the buyers of the petitioner are at liberty to purchase sheet glass from the petitioner without any packing or to purchase it and to take delivery of it in their own packing materials. They can purchase it and take its delivery in their own trucks or vehicles, which may be layered with materials, such as, hay or grass to protect it from breakage during transits." 4.The petitioner submitted the price list of its product for approval and the Assistant Collector, Central Excise by order dated 20th June, 1981 approved the price list subject to inclusion in the assessable value of packing charges when the goods are cleared in packed condition. This order, copy of which is Annexure 5 to the writ petition was in respect of price list No. 2 of 1980 dated 18-6-1980. Annuxure 6 is another order in respect of price list No. 1 of 1980 in which also the same condition was placed. The price list as contained in Annexure 6 states that the prices mentioned in column 3 include the costs of initial packing i.e. bundle packing. Against the aforesaid order the petitioner file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Act and the Rules framed thereunder and sheet glass in loose form without packing cannot be cleared from the factory. 10. That the contents of paragraph 11 of the writ petition, as stated therein are not admitted. All the processes are ancillary and incidental to the completion of manufactured goods till the goods are finally accounted for in the records showing production and since the sheet glass is accounted for only when it is packed, the process of packing is ancillary and incidental to the completion of manufacture of the sheet glass. 11. That the contents of paragraph 12 of the writ petition are not admitted. Packing of sheet glass is necessary in order to make them portage and fit for storage. Packing is needed even for transferring the sheets from finishing room to the store-room. 12. That the contents of paragraph 13 of the writ petition are not admitted. Only these sheets of glass which have duly been packed and accounted for in the records relating to the production (in departmental terminology, it is known as R.G.1 stage). The sheet glass which have not been packed are not taken out from the factory of the petitioner and the buyers are left with no alternativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the packing whould be frustrated. This durability of the packing much protects the sheet glass inside during transit. The durability of the packing also makes the packing returnable if the buyer so desires. Fifthly, the packing is neither necessary nor is normally undertaken in the course of wholesale at factory gate. In the case of wholesale of sheet glass the Government of India has accepted the fact that sheet glass is completly manufactured and can be sold without any packing vide its Circular F. No. 6/24/74-CK 1 dated August 18, 1975. A true copy of this circular is Annexure R.A. 52 to this affidavit. In this regard it may be stated that the buyers of the petitioner, who purchase sheet glass in packed condition use the same packing again for further delivery to their buyers. Lastly the normal whole sale at the factory gate is either in loose form or in bundle packing as stated above. The delivery is made at the factory gate in the above two forms in the normal course of whole sale business. The three other types of packing, namely, frame packing, crate packing and case packing, are not necessary for whole sale at the factory gate. These facts relating to wholesale of sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4 came in for consideration before the Hon'ble Supreme Court. It was observed as under :- "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 example a tube of toothpaste or a bottle of tablets in a cardboard carton, or biscuits in a paper wrapper or in a tin container, must be regarded as falling within S. 4(4)(d)(i). That is indeed conceded by learned counsel for the assessee. It is the cost of secondary packing which has raised serious dispute. Secondary packing is of different grades. There is the secondary packing which consists of larger cartons in which a standard number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntainers are not necessary for selling the cigarettes in the wholesale market at the factory gate." 11.In Geep Industrial Syndicate Ltd. v. Union of India —1992 (61) Excise Law Times 328 (S.C.) the situation was similar to the one in Godfrey Philips India Ltd. The only difference was that the goods in question were torches and batteries. There was a third stage of packing in wooden boxes and following Godfrey Philips the Hon'ble Supreme Court held that the cost of wooden boxes was not includible in assessable value. 12.The controversy that seems to arise again and again re-emerged before the Hon'ble Supreme Court in Government of India v. Madras Rubber Factory Ltd. - 1995 (77) Excise Law Times 433 and the whole gamut of case law had to be re-analysed. The apex Court concluded : - "The test laid down in Bombay Tyre International has never been departed from in any of the later decisions and must be treated as good and sound. We may as well stress the obvious: in a matter like this, certainty in law is essential. It may be that in applying the principle having regard to the facts of a given case, there may be some divergence in conclusion but so far as the principle—the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y gate; (ii) Whether such packing is durable and returnable. 15.In our view if the answer to the first point is in the affirmative then the cost of such packing would be included in the assessable value. But if the answer to point No. 2 is also in the affirmative then the cost of such packing cannot be included. 16.The provisions of Section 4 show that different prices can be charged from different types of buyer, meaning thereby that there may be buyers who are willing to buy the goods without packing that was otherwise necessary for putting the goods in the condition in which they are generally sold in the wholesale market at the factory gate and this has been recognised by the respondent while approving the price lists in which it was provided that where the goods are cleared in packed condition the packing charges would be included in the assessable value. As stated above, the petitioner's contention has been that the primary packing which consists of hay and paper wrapping is done in respect of all the sheets manufactured by it and that value of such packing is included in the value of the goods as shown in the price lists and that the secondary packing is done at the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and returnable" used by Hon'ble Supreme Court do not carry their literal meaning only. What seems to be necessary is that the packing cases should be so durable that the manufacturer intends to use them again and again and places a condition that the buyer must return the packing. 'Returnable' does not merely refer to a theoretical possibility of the crates being returned. What in our view is necessary that the packing should be of a special use to the manufacturer so that it is a condition of the contract that the packing material will be returned to the seller. There are several trades in which it is necessary that the packing material should be returned to the seller. For example, yarn sold wrapped on bobbin, spool, reel etc., is sold with the condition that after the removal of the yarn the bobbin etc., would be returned to the seller who will use it again for the same purpose. In the same way gas cylinders are required to be returned to the manufacturer of gas after the purchaser has used the gas. So is the case with glass bottles of cold drinks. They need frequent re-circulation and are usually of a special patented and design and the manufacturer insists on their return so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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