ORDER
U.L. Bhat, J. (President)
1. The common appellant in these appeals is engaged in the manufacture of paper wound on paper cores or wooden reels. The dispute relates to the period 1-3-1983 to 31-5-1984. The dispute is whether the value of paper cores or wooden reel would be added to the assessable value of paper which is the excisable product. During the period in question, the price lists or gate passes did not show the price of the cores or reels. Under the invoices, over and above the price list price, the appellant was collecting separately the cost of paper core or wooden reel. When the excise officers compared the invoices with the gate passes, they allegedly came to know about the collection of the cost of cores or wooden reels over and above the price list price. Accordingly, 12 show cause notices were issued to the appellant to cover the entire period, requiring the appellant to show cause why differential duty should not be demanded on the value of paper core or reel on which paper cleared had been wound. The appellant resisted the notices contending that a part of the claim was barred by limitation and that the cores or reels were durable in nature and returnable under an arrangement between the seller and the buyer. Appellant also adverted to an order passed by the Collector (Appeals) on 11-1-1982 in respect of similar demand made for a period in 1978-79 in which the appellant’s contention had been accepted. The Assistant Collector overruled the contentions of the appellant on the ground that the appellant had not produced evidence to prove that the cores or reels were returnable and confirmed the demand. The Collector (Appeals) having confirmed these orders, these present appeals have been filed.
2. In Star Paper Mills Ltd. v. Collector of Central Excise -1989 (43) E.L.T. 178 (SC) Supreme Court has held that:
“Use of paper core is necessary for rewinding of paper if it is delivered to the customer in rolls and would come within the purview of the expression “any process incidental or ancillary to the completion of a manufactured product” used in the definition of the term “manufacture” in Section 2(f) of the Act and for the same reason paper core would also be constituent part of paper and would thus fall within the term “component parts” used in the Notification No. 201/79 insofar as manufacture of paper rolls is concerned.”
Hence, there can be no doubt that the value of core or reel would ordinarily be includible in the assessable value of paper. This, of course, is subject to the exceptions engrafted in Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 (for short, the Act).
3. According to Section 4(4)(d)(i) of the Act, where goods are delivered at the time of removal in a packed condition, the value of the goods includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. This clause has received consideration at the hands of the Supreme Court in some decisions. In K. Radha Krishaiah v. Inspector of Central Excise -1987 (27) E.L.T. 598, Supreme Court held that what is required for the purpose of attracting the applicability of the exclusion clause in Section 4(4)(d)(i) is that the packing must be returnable by the buyer of the assessee and the question which has to be asked in each case is whether the packing in the case is returnable by the buyer to the assessee and it cannot be said that the packing is returnable unless there is an arrangement between them that it shall be returned. This decision was followed by the Supreme Court in Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise – 1988 (36) E.L.T. 727 (SC) where the Court elaborated the same idea in the following language :-
“Actual return or extent of return has no relevance. What is necessary is that if the buyer chooses to return the packing, the seller should be obliged to accept it and refund the stipulated amount.”
The matter in dispute in these cases has to be examined in the light of the above principles.
4. The Assistant Collector found against the appellant only on the ground that the appellant did not produce evidence to prove that the packing materials were returnable ignoring the reference in the replies to the show cause notices to several invoices issued by the appellant, where it was alleged, a condition was stipulated that paper core and wooden plugs were of durable nature and returnable and the cost of packing materials would be refunded to the customers who choose to return them without causing any damage. The Assistant Collector did not advert to these invoices. The Collector (Appeals) referred to the invoices and the condition therein, but brushed aside the same on the ground that appellant did not produce evidence to establish the returnable nature of the packing and evidence indicating that those materials were actually returned to them by the customer. He also indicated that mere endorsement on the invoices or other documents would not establish durability and returnability. He also held that the endorsement indicated that it was optional for the buyers to return the packing materials and that would not be sufficient. This reasoning is contrary to what the Supreme Court held in Mahalakshmi Glass Works (P) Ltd. case.
5. There was an identical dispute between the Department and the appellant for an earlier period. The Assistant Collector held against the appellant who took up the matter before the Collector (Appeals) who set aside the order of the Assistant Collector on 18-1-1992 referring to the materials provided by the invoices and holding on that basis that the cores and reels were durable in nature and returnable under the arrangement between the parties. The show cause notices and the impugned orders do not indicate that the Department had at any stage a contention that cores and reels were not durable in nature. There was doubt about the returnability in the absence of documents to show actual return. Supreme Court has indicated that actual return is not a relevant circumstance. The examination of invoices had preceded the show cause notices. The show cause notices did not propound a case that the invoices or the rubber stamp endorsement, on the invoices were the result of a subsequent manipulation, nor do the impugned orders contain any such suggestion. We, therefore, take it that the invoices with the endorsements are genuine documents. If that be so, they reflect an agreement between the parties regarding the returnability of the containers. Hence, the packing material in these cases would attract the exclusion clause of Section 4(4)(d)(i) of the Act.
6. We will consider the question of limitation for the sake of completeness. The particulars of the show cause notices are as follows :-
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Sl. No. Date of the show cause notice Period ----------------------------------------------------------------------------- 1. 11-12-1984 1-6-1984 to 30-6-1984 2. 18-1-1985 1-7-1984 to 31-7-1984 3. 23-2-1985 1-9-1984 to 30-9-1984 4. 23-2-1985 1-8-1984 to 31-8-1984 5. 26-3-1985 1-10-1984 to 31-10-1984 6. 19-4-1985 1-11-1984 to 30-11-1984 7. 8-5-1985 1-12-1984 to 31-12-1984 8. 8-5-1985 1-1-1985 to 31-1-1985 9. 17-5-1985 1-2-1985 to 28-2-1985 10. 9-7-1985 1-3-1985 to 31-3-1985 11. 15-11-1984 1-3-1983 to 31-12-1983 12. 15-11-1984 1-1-1984 to 31-5-1984 -----------------------------------------------------------------------------
We find that the entire period covered by Serial No. 11 and parts of the periods covered by Serial Nos. 1,2 and 12 notices would be beyond the period of six months stipulated in Section 11 of the Act. The show cause notices invoked the proviso to Section 11 of the Act. We have gone through the show cause notices. The annexure to the show cause notices shows that the review of invoices with gate passes for the period in question revealed that the cost of packing materials was collected as per invoices, though not shown in the gate passes. Admittedly, the fact that the cost of packing materials would be separately collected was not shown in the price list. The show cause notices do not contain specific averment of misdeclaration or deliberate suppression. It was not as if the Department was not aware of the practice of the appellant of clearing paper wound on paper cores or wooden reels. In fact, the dispute between the two was finally settled by the Collector (Appeals) on 11-1-1982. By that order the appellant’s contention that the packing materials were durable in nature and returnable by the buyer and, therefore, the cost of the packing materials cannot be added to the assessable value of the paper was held to be correct. Therefore, the failure of the appellant to mention in the price lists or the gate passes the cost of packing materials collected separately cannot be regarded intentional misdeclaration or deliberate suppression of facts with the intention of evading duty. Therefore, the claim for differential duty for the period falling prior to six months prior to the show cause notices would be barred, by time.
7. For the reasons indicated above, we set aside the impugned orders. Appeals are allowed.