ORDER
Lajja Ram, Member (T)
1. These are two appeals; one filed by M/s. CEAT Tyres of India Ltd. and the other filed by the Revenue against the common order-in-appeal dated 5-3-1986 of the Collector of Central Excise (Appeals), Bombay. In the appeal filed by the Revenue, M/s. CEAT Tyres of India Ltd. have filed cross-objections also. As both these appeals (with the cross-objections) arise out of common order-in-appeal, they were heard together disposed of by this common order.
2. We have heard Ms. Amrita Mitra, Advocate, for M/s CEAT Tyre of India Ltd. and Shri G.D. Sharma, JDR, for the Revenue.
3. We have gone through the facts and circumstances of the case. It is seen that the matter relates to the packing of tubes and other products. The type of packing had been referred to by the Collector of Central Excise (Appeals) in his order as under :
(i) Thread/Rubber gum .... Corrugated boxes (ii) Cushion gum .... Fibre containers, wooden boxes (iii) Thread repair gum .... Fibre containers, wooden boxes (iv) Tube repair gum .... Fibre containers - wooden boxes (v) U.T. Strips .... Corrugated boxes, wooden boxes (vi) Vulcanising cement .... Tins, returnable drums (vii) Tubes .... Cloth bags.
4. While the assessee has come in appeal on the question of inclusion of the cost of cloth bags in the assessable value of tubes, the Revenue had come in appeal with regard to corrugated boxes, fibre containers and wooden boxes. Ms. Amrita Mitra, Advocate, explained that tubes are generally supplied with the tyres and are placed inside the tyre. Only for long distances, tubes are packed in cloth bags. As regards other packing, she submitted that the order passed by the Collector of Central Excise (Appeals) was correct and he has rightly allowed deduction in respect of corrugated boxes, fibre containers and wooden boxes. Shri G.D. Sharma, learned JDR, replied that the issue is not relating to tubes which are supplied with the tyres where no cloth hag packing is used. The issue is that, when tubes are cleared duly packed in cloth bag, then such cloth bag packing is the primary packing and its cost is includible in the assessable value of the tubes. As regards corrugated boxes and fibre containers, he referred to the Supreme Court decision in the case of Geep Industrial Syndicate, – 1992 (61) E.L.T. 328 (SC). With regard to the returnable drums, he mentioned that there was no agreement with the customers and in the absence of actual return or an agreement for return, their cost was includible in the assessable value of vulcanising cement.
5. We have carefully considered the matter. As regards the wooden boxes, we find that the Supreme Court decision in the case of Geep Industrial Syndicate – 1992 (61) E.L.T. 328 (SC) will be applicable and their cost is not includible in the assessable value of Cushion, Thread Repair Gum, Tube Repair Gum and Unvulcanised Thread Strips.
6. In so far as the corrugated boxes and fibre containers are concerned, the Supreme Court decision in the case of Geep Industrial Syndicate, referred to above, clearly holds that their cost is includible in the assessable value of the excisable goods, if the goods are generally cleared from the factory with such packing. In the proceedings before us, corrugated boxes and fibre containers were secondary packing in Thread/Rubber Gum, Cushion Gum, Thread Rubber Gum and Tubes Repair Gum and U.T. Strips. As explained by the learned Advocate, the primary packing was polythene cover. As held by the Supreme Court in the case of Bombay Tyre International – 1983 (14) E.L.T. 1896 (SC), the cost of the secondary packing in the circumstances of this case is also includible in the cost of the goods concerned.
7. As regards returnable drums, it was explained that when small quantity of Vulcanised Cement is cleared, it is cleared in tins, but when a customer wants much bigger quantity, then it is packed in returnable drums and these are large sized drums. It was explained by the advocate that their established customers bring their drums and they are used again and again. The learned JDR had contended that this is not borne out by the facts on records. We find, however, that tins and drums are independent packing and it is not as if the tins are packed in drums. When large quantity is required, then tins may not be the proper packing for the Vulcanising Cement. It has been held by the Supreme Court in the case of Hindustan Polymers v. Collector of Central Excise -1989 (43) E.L.T. 165 (SC), that when packing material is supplied by the customer/buyer, the cost thereof was not includible in the assessable value. The vulcanising cement when packed in tins of 5 lts, 250 lts. and 200 lts, it is already included in the assessable value and only when the customers bring their own drums for packing of quantities above 200 lts, the assessee had claimed deduction. In the case of K. Radha Krishnan v. Inspector of Central Excise, 1987 (27) E.L.T. 598 (SC), the Supreme Court had clarified that it is not the physical capability of the packing to be returned which is the determining factor and what is required for the purpose of attracting the applicability of the exclusion clause in Section 4(4)(d)(ii) for returnable packing is that the packing must be returnable by the buyer to the assessee. In the case of Hindustan Polymers v. Collector of Central Excise – 1989 (43) E.L.T. 165 (SC), the Supreme Court had further clarified that when the durable container is brought by the customer, its cost was not includible. They have observed as under :
“Hence there was no logic or reason for not excluding the value of packing material supplied by the buyer himself which is of durable nature and is returnable by the assessee to the buyer.” (Para 12 of the decision)
8. In so far as the cloth bags for packing the tubes are concerned, the tubes particularly for the up market have to be packed in the cloth bags before they are removed to the wholesale market. We are not concerned with the situation when tubes are placed inside the tyre and tyres are removed individually. We are only concerned when tubes as such are cleared duly packed in cloth bags. In such a situation, the cloth bag is the primary packing for such tubes and the cost of cloth bag is includible in the assessable value of the tubes.
9. Taking all the relevant considerations into account, we consider that the cost of wooden boxes and that of drums for packing vulcanising cement in bags above 200 lts. is not includible in the assessable value of the goods mentioned above. As regards the corrugated boxes, fibre container, tins and cloth bags are concerned, in the circumstances of the case, they are primary/secondary packing and their cost is includible in the assessable value of the respective goods which are packed with them. The order of the Collector of Central Excise (Appeals), Bombay, is modified accordingly. Both the appeals are disposed of in the above terms. Cross-objections also stand disposed of accordingly.