ORDER
U.L. Bhat, President
1. Certain common questions arise for consideration in the appeals relating to the same assessee. We, therefore, heard the appeals together and are disposing of the same by this common order.
2. The assessee is manufacturer of batteries, torches etc. These goods are individually packed in small boxes. Dozens of these small boxes are packed in medium size cartons and varying number of such cartons are packed in larger corrugated cartons i.e. 7 ply corrugated cartons. This is the condition in which the manufactured products are stored in the bonded warehouse of the assessee situated within the premises of the factory. The factory is at Allahabad, The assessee has two customers in Allahabad who invariably buy these products in the medium size cartons. The other sales by the assessee are to wholesale dealers at various places in the country. The goods are sent to private customers in larger corrugated cartons by charging extra cost for such packing. The dispute relates to three different periods between 1987 to 1989. During the relevant periods, the assessee submitted price lists which were approved by the department. The price lists indicate the unit of sale as carton containing 25 or 50 pieces and the price shown includes the cost of packing in carton. In the remark column it was written : “When goods are sold in secondary packing, packing charges shall be charged @ Rs. 24.00 each case of 505 type if containing 16 cartons at Rs. 18.00 each case.” Demand was made from the assessee to pay excise duty on the value including the cost of the corrugated cartons, namely, outer packing. The attempt was resisted by the assessee on the ground that formerly the smaller cartons were packed in wooden crates for the purpose of safety of the goods while in transit and that is the manner in which the wholesale trade in the goods was conducted, that in relation to 1975 in the decision reported in 1992 (61) E.L.T. 328 (SC) in the case of Geep Industrial Syndicate Ltd. v. Union of India Supreme Court held that the cost of wooden crates was not liable to be included in the value for the purposes of assessing excise duty. Subsequently wooden crates are being used in regard to supplies to Government departments, but supply to others outside Allahabad is being made not in wooden crates but in corrugated cartons which are also used for the same purpose for which wooden crates were being used and, therefore, the cost of corrugated cartons cannot be included in the value. This contention was over-ruled by the Collector who assessed excise duty by assessing the value as inclusive of the cost of outer packing. These decisions relating to successive periods are being challenged in these appeals.
3. One of the questions which arises for consideration is whether the cost of outer packing is liable to be included in the assessable value. The assessee relies on the decision in his own case reported in 1992 (61) E.L.T. 328, which, it is submitted, has been approved in the recent decision in MRF Ltd. case reported in 1995 (77) E.L.T. 433 (SC). Learned counsel for the assessee as well as the Departmental Representative, Shri A.K. Singhal referred to a number of decisions. We think it unnecessary to refer to the earlier decisions since all the leading decisions have been adverted to and considered in MRF Ltd. case. In the words of Pathak, J. (as his Lordship then was) in Bombay Tyre International: “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.” MRF Ltd. case also referred to the subsequent decisions including the decision in the assessee’s own case reported in 1992 (61) E.L.T. 328 (SC) and indicated that there is no difference in the basic proposition though emphasis might be different depending on the facts of each case. With reference to the case of Geep Industrial Syndicate Ltd. v. Union of India reported in 1992 (61) E.L.T. 328, the Supreme Court observed as follows :-
” It is thus implicitly clear that the factual position in this case was perceived to be the same as in Godfrey Philips (majority opinion) to wit, wooden boxes were not necessary for putting the torches and batteries in the condition in which they are generally sold in the wholesale market at the gate and on that basis it was held that the cost of such wooden boxes cannot be included”.
The Court also referred to certain observations made by Ranganathan J. in the case of Collector of Central Excise v. Pond’s India Ltd. reported in 1989 (44) E.L.T. 185 (SC). The Court also referred to the following observations :-
“In Godfrey Philips and Geep, this Court was concerned with a special type of packing which seemed intended more to protect the packed goods against injury or damage rather than to enable it being placed on the market. Indeed, in Godfrey Philips, this was a factual position mat had been accepted by the departmental authorities earlier for a period of little over six years which they later wanted to go back upon”.
The test as laid down in MRF case is as follows :-
“Whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further, even if the packing is “necessary” in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case”.
4. The matter in issue has to be examined in the light of the test indicated above, which is the test indicated in earlier decisions also. The decision of the Supreme Court in the assessee’s own case reported in 1992 (61) E.L.T. 328 (SC) was given on a consideration of the purpose of packing cartons in wooden crates. It was held that the purpose was to protect the goods from damage and other adverse effects during transportation. This is only one aspect as indicated by the Supreme Court in the earlier and later decisions also. The true test is whether packing is one in which the goods are ordinarily sold in the course of wholesale trade to the wholesale buyer at the factory gate. It appears to us that the decision reported in 1992 (61) E.L.T. 328 cannot apply in the present cases where almost the bulk of medium size cartons containing the manufactured products are packed in corrugated cartons and not in wooden crates. Presuming that wooden crates were being used to preserve and protect the goods from damage during transportation, the same need not be and cannot be the position with regard to use of corrugated cartons. The question is one entirely of fact. It is for the assessee to place the necessary materials before the statutory authority.
5. The price list is the only material placed before the statutory authorities concerned. Less than 3% of the manufactured products are sold to dealers of Allahabad who take delivery of the goods at the factory gate in small cartons i.e. in numbers less than the total number of medium size cartons packed in corrugated cartons. Necessarily supply to them cannot be made in such larger corrugated cartons. But in regard to other non-governmental customers, goods are packed in corrugated cartons and are sold as such. That would ordinarily be the manner in which wholesale trade is conducted in these goods. In the absence of any other material placed before the statutory authorities by the assessee, our conclusion is that the outer packing is such whose cost should be included in the assessable value of the goods since it is “necessary” in the sense in which the expression has been understood in the MRF case and we hold so.
6. The next common question arising for consideration relates to the method of computation of the value. Assessment has been made and we have upheld the same, on the basis that the value of the material used for outer packing is liable to be included in the assessable value. The grievance of the assessee is that while doing so, the Collector ignored the requirement of sub-clause (2) of clause (d) of Sub-section (4) of Section 4 of Central Excises and Salt Act, 1944. Sub-clause (2) makes it clear that value in relation to excisable goods” does not include the amount of duty of excise etc., if any, payable on such goods. It is contended for the assessee that while including the cost of the outer packing material in the value of the excisable goods, the Collector should have deducted the excise duty payable thereon, but he failed to do so. In our opinion, this contention has substance, The question is not whether the assessee has actually collected the excise duty or not from the customers. The question is whether excise duty is payable on the goods. If found payable, deduction has to be given from the value. The Collector has failed to do so. He should have done so.
7. The last contention arises only in appeal No. 2796/93. Section 11A of the Act deals with recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. Two periods of limitation are prescribed to cover two different situations. Sub-section (1) requires notice to be served on the assessee within six months from the relevant date. The proviso states that in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, the period shall be five years and not six months. It is common case that the order can stand only if the proviso can be successfully invoked and not otherwise.
8. The Collector has held that the assessee has deliberately omitted to declare the exact nature and type of packing in the price lists and central excise gate passes as well as their private records, namely, invoices etc. This finding cannot stand. There does not appear to be any defect in the gate passes or the invoices. The alleged defect in the price lists remains for consideration. Column 3 of the price list is about the price at which such goods are ordinarily sold in the course of wholesale trade. Column 4 relates to unit of sale. Prices are shown against units of cartons containing 25 or 50 pieces. Remarks column states that when goods are sold in secondary packing, packing charges are chargeable at the particular rate indicated therein. It is not disputed that a part of the manufactured goods of the assessee are sold in corrugated cartons and a part are sold in smaller cartons without being packed in corrugated cartons. The remarks column refers to part of the goods which are packed in secondary packing and sold. Thus the entire relevant data was provided in the price list. The departmental representative contended that bulk of the sales are of goods packed in secondary packing, there has been an attempt to mislead the statutory authority by the manner in which the price lists were prepared, and there was wilful suppression of facts. Assuming that the assessee was trying to be somewhat clever in arranging the mention of prices in the manner in which it has been done, that cannot, in our opinion, be regarded as wilful suppression of material facts. This is particularly so when this was not pointed out when the price lists were submitted and the department was fully aware of the past excise history of the assessee. In these circumstances, we hold that the Collector was in error in invoking the proviso to Section 11A(1) of the Act.
9. The appeals are disposed of as indicated hereunder :
(a) The order impugned in appeal No. 2796/93-A is set aside and the appeal is allowed.
(b) The order in appeal Nos. 2361/92-A and 2362 /92-A is modified by directing that the excise duty leviable on the cost of the outer packing shall be deducted in arriving at the assessable value.
(c) The other aspects of the orders in these two appeals are con- firmed.