ORDER
S.V. Maruthi, Member (T)
1. This reference to the Larger Bench arises out of an Order expressing the view that Order No, 111 to 119/90-A, dated 14-2-1990 requires re-consideration.
2. Briefly, the facts are as follows :-
The appellants filed price lists No. 34, 35 and 36 for the period 19-6-1981 to 30-6-1982 at Rs. 900/- per MT and 1-7-1982 to 30-9-1982 at Rs. 900/- MT and Rs. 424.05 per MT of Konark Brand Dalmia grey special cement. While filing the price lists, the appellants have excluded packing charges of gunny bags in which the goods were packed. The Assistant Collector approved the price lists by including the cost of gunny bags in the assessable value. On appeal, the Collector confirmed the Order of Assistant Collector. The Collector held that :-
“The appellants do not sell the cement without packing. So, packing is essential before the cement can be sold to the various customers. Therefore, the cost of packing is a part and parcel of the manufacturing cost in respect of the cement. It might be true that the appellants are collecting old gunny bags on payment of some price. This does not mean that the gunny bags which were used for packing of the cement at the time of removal from the appellants’ factory are returned to the appellants’ factory. It has been contended that the consumer of cement has to pay, at the time of buying the cement, the price inclusive of the cost of the gunny bags. Later on, if the consumer wants to come and sell the empty gunny bags to their collecting agent, he will get some payment for the empty gunny bags. This mode of arrangement is entirely different from what Section 4 of the Central Excises & Salt Act, 1944 envisages. The consumer just sells empty gunny bags to so-called collecting agents. This in no way means that the gunny bags used in packing of the cement by the appellants are returned to them. The various court decisions cited by the appellants had not coasidered the provisions of Rule 9A of the Central Excises Rules, 1944 and therefore, these decisions are of no material help to the appellants in their instant appeal.”
While holding as above, he found that the cost of gunny bags used in packing the cement should be included in the assessable value against which the present appeal was filed.
3. When the appeal came up for disposal before the Bench consisting of the President, Shri Harish Chander and Technical Member, Shri P.K. Kapoor, the only argument advanced was that the issue whether the cost of gunny bags was includible or not was already decided by this Tribunal by an Order No. 111-119/90-A, dated 14-2-1990 wherein it was held that the cost of packing of special cement or ‘high strength ordinary portland cement’ manufactured by the appellants was not includible in the assessable value since such cement could be sold without packing. It was also pointed out that the appeal filed in the Supreme Court against the said Order was dismissed by the Supreme Court and, therefore, it is now finally settled that the cost of gunny bags is not includible in the assessable value of the cement.
4. However, the Bench on a consideration of the argument advanced by the appellants and also the Departmental Representative, was of the view that this Tribunal in the earlier Order (supra) mainly placed reliance on the judgment of the Supreme Court in the case of
India Cement v. C.C.E. 1989 (41) E.L.T. 358 (SC)
in which the Court had observed that the authorities ought to have extended the benefit of the view taken by Central Government in the case of Birla Cement Works to all similar cases. It was also observed that in Birla Cement Works, the Government expressed the view that the special cement was capable of being sold without packing. Whereas in the instant case, during the relevant period, the special cement was not being sold by the appellants in loose condition. In other words, according to the Bench, the earlier Order (supra) was mainly based on their decision on the ground that special cement is capable of being sold without packing whereas the Supreme Court has now laid down the principle in Ponds India as to the circumstances under which the value of packing should be included in the assessable value of the goods. Therefore, according to the Bench, the earlier Order requires re-consideration. Hence the Reference before us.
5. Shri S. Ganesh, learned advocate appearing for the appellants raised 3 main contentions :- (1) He submitted that though the earlier Order has mainly considered whether it is necessary to pack the cement in gunny bags to make them marketable in view of the alternative question considered and decided against the appellant namely the gunny bags are not returnable and therefore, the packing of cement is includible by the Collector, it may not be necessary to go into the question whether packing is necessary to make the cement marketable; (2) In the alternative, he submitted that the earlier Order of this Tribunal covers the issue and in view of the judgment of the Supreme Court in
Radhaswami Satsang v. Commissioner of I.T. 1992 (193) ITR Page 321
, it would not be appropriate to allow the position changed in respect of the same commodity for determining the assessable value; (3) The other contention raised by Shri Ganesh is that under the Cement Control Order ex-factory price is fixed. Therefore, in view of the judgment of the Supreme Court in Indian Oxygen it is ex-factory price of cement i.e. relevant for determining the assessable value.
6. Elaborating the argument about the finding of the Collector that the gunny bags are not returnable and, therefore, the cost of packing is includible in the assessable value, he brought to our notice that under the Cement Control Order and Releasing Orders, there is an arrangement for returning the gunny bags and tests laid down by the Supreme Court in
K. Radha Krishaiah v. Inspector of Central Excise, Gooty, 1987 (27) E.L.T. 598 (SC)
are satisfied. Therefore, the bags are returnable packing within the meaning of Section 4(4)(d)(i) of the Central Excises & Salt Act. He also relied upon an Order of this Tribunal in
Associated Cement Company Ltd. v. Collector of Central Excise 1987 (27) E.L.T. Page 746
and the judgment of Madhya Pradesh High Court in the case of
Birla Jute Manufacturing Company Ltd. v. Union of India 1980 (6) E.L.T. Page 593
;
Kesho Ram Cement v. U.O.I. 1982 (10) E.L.T. Page 214 (A.P.)
;
Baghalkot Udyog Ltd. v. U.O.I. judgment of Karnataka High Court, dated 29-6-1984 in Writ Petition No. 13625/77, 16564/79
. He also pointed out that Special Leave Petition filed against the judgment of the Madhya Pradesh High Court was dismissed. He brought to our notice a judgment of the Delhi High Court in
Jay Kay Cement Comp. v. U.O.I. and Ors. (Civil Petition No. 492/87)
wherein by a judgment dated 4-9-1991 under similar circumstances, it was held that the cost of gunny bags is not includible in the assessable value of cement. He also pointed out that the Special Leave Petition filed against the said judgment was dismissed by the Supreme Court. The said judgment of Delhi High Court was followed in
Associated Cement Company v. U.O.I. (CW 8/76) and SLP No. 576/92
was dismissed on 20-2-1992. In view of the above, he submitted the finding of the Collector that the cost of packing viz. gunny bags is not returnable is based on no evidence and contrary to the facts on record.
7. Shri Prabhat Kumar, learned Departmental Representative appearing for the Department contended that the issue of durability and returnability of the gunny bags was not raised before the Assistant Collector, Collector or before the Tribunal. However, the Collector dealt with the returnability of the gunny bags. He reiterated the Order of the Collector on the question of durability and returnability of the bags. He further submitted that the observations made by the Supreme Court in Bombay Tyres International relating to secondary packing are not applicable as gunny bags are in the nature of primary packing. He also submitted that there is no sale at the factory gate and that there is not a single sale without gunny bag. Therefore, the ratio of the judgment of the Supreme Court in Ponds India is applicable. He further pointed out that the judgment of the Supreme Court in Ponds India being latter in time it should be followed. The fact that the same material is sold by different manufacturers without packing is not relevant in determining whether the cost of packing is includible in the assessable value as the appellant is in fact selling the same in gunny bags. Packing, according to him, in industry is not relevant in deciding the assessable value. Each case is to be determined on the facts of the case. The necessity of packing cannot be decided on the basis of commodity though it may be relevant to some extent. He submitted that the judgment of Indian Oxygen is not relevant as it is given in a different context. The general pattern of sale for one year and 3 months is in gunny bags at the factory gate. Therefore, the cost of gunny bags is liable to be included.
8. The first argument of Shri Ganesh is that the gunny bags are durable and returnable and, therefore, the value of gunny bags is not includible in the assessable value. He pointed out that the fact that the gunny bags are durable is accepted by the Collector as he says that here is no arrangement for return of the gunny bags and, therefore, they are not returnable.
9. Before considering the issue raised by Shri Ganesh, we will refer to the relevant provisions of the Central Excises and Salt Act, 1944. Section 4(4)(d)(i) defines value in the following manner :-
” “value”, in relation to any excisable goods, – (i) where the goods are 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 nature and is returnable by the buyer to the assessee.
Explanation. – In this sub-clause, “packing” means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound;”
10. In other words, the value for the purposes of Section 4 does not include the cost of the packing which is of durable nature and is returnable by the buyer to the assessee. The Supreme Court while interpreting the above expression in
K. Radha Krishaiah v. Inspector of C. Ex.
(supra) has held as follows :-
“While interpreting this word, we must bear in mind that what Section 4(4)(d)(i) excludes from computation is cost of packing which is of a durable nature and is “returnable by the buyer to the assessee”. The packing must be one which is returnable by the buyer to the assessee and obviously that must be under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in the event, the words “by the buyer to the assessee” need not have found a place in the section they would be superfluous. 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 to the assessee. The question which has to be asked in each case is : Is the packing in this case returnable by the buyer to the assessee and obviously it cannot be said that the packing is returnable by the buyer to the assessee unless there is an arrangement between them that it shall be returned.”
10A. In other words, there should be an arrangement between the assessee and the customer for the return of the durable container.
10B. We may also refer to the Order of this Tribunal in
Associated Cement Company v. Collector
(supra), where this Tribunal had an occasion to consider the returnability of gunny bags under the Cement Control Order of the 1967. We may examine the case in detail as it is under the Cement Control Order and the Tribunal considered the judgment of the Madhya Pradesh High Court in Birla Jute Mfg. Company, and Kesho Ram Cement and Baghalkot Udyog Ltd.
10C. Under the Cement Control Order, the price of the cement was fixed under Clause 4 and 8. In pursuance of the said Order releasing orders were issued releasing the cement to the suppliers. Relevant clauses are extracted below :-
“4. Power to direct sale or transport:
The Central Government may, by order, require any producer to sell cement to such person or class of persons or to transport cement to such destinations by such modes of transport, and on such terms and conditions, as may be specified in the order.”
“8. Price at which producer may sell:
No producer shall, himself or by any person on his behalf, sell :-
(a) water-proof (hydrophobic) cement at a price exceeding Rs. 246.65 per metric tonne;
(b) rapid hardening cement, low heat cement, and grey cement of specific surface not less than 3500 cm2/g at a price exceeding Rs. 237.65 per metric tonne; and
(c) any other variety of cement at a price exceeding Rs. 214.65 per metric tonne,
free on rail destination railway station plus the excise duty paid thereon :
Provided that in case of packed cement, there shall be added to the price referred to in this clause such charges as may be fixed by the Central Government in respect of packing in jute bags or in any other containers, and different charges may be fixed for the use of new and serviceable second-hand jute bags and for the use of different containers in such packing :
Provided further that in the case of packing of cement in jute bags the producer shall not use serviceable second-hand jute bags in excess of the limit specified by the Central Government from time to time.”
On 1-10-1975, the Cement Controller in the Ministry of Industries and Civil Supplies, Government of India, issued a circular as under :-
No. CC/CO/8(l)/75/18126 Dated : 1st October, 1975. ALL PRODUCERS/SELLING AGENTS Sub : F.O.R. destination price of cement and packing charges applicable during the period 1-10-1975 to 31-12-1975. Dear Sirs,
The Ministry of Industry & Civil Supplies (Department of Industrial Development) have intimated that the charges for packing one metric tonnes of cement in 20 new as well as old bags in the ratio of 50 and 50 per cent respectively for the period 1-10-1975 to 31-12-1975 will be Rs. 40.98 (Rupees forty and paise ninety eight) only. Accordingly, the price of cement packed F.O.R. destination railway station per metric tonne during the aforementioned period will be as under :
XXX XXX XXX XXX XXX XXX XXX XXX
The serviceable second-hand jute bags may be collected by the Bag Collecting Agents of the respective cement factories (to be collected by them at the consumers’ work site on ‘Cash and Carry’ basis) and the resale price for the period 9-11-1975 to 31-12-1975 is Rs. 92.54 (Rupees Ninety two and paise fifty four only) per 100 bags. Sales Tax where leviable, extra.
Yours faithfully,
Sd/-
(S.S. MIGLANI)
Deputy Chief Cement Officer.”
5. In terms of the Cement Control Order, Release Orders were issued by Regional Cement Officer to various cement factories for supply of the stated quantity of cement to bulk consumers. The specimen copies of the Release Orders produced before us (which we admitted as additional evidence) show that they were all in a uniform format. On the reverse of the Release Orders, 9 serially numbered conditions were printed. Below condition No. 9, there was a boxed instruction in the following terms :-
Please preserve empty cement bags in serviceable condition and return them to the factory of origin or its Collecting Agent on payment.
On consideration of Clauses 4 and 8 of the Cement Control Order of the 1967 and the circular issued by the Ministry of Industry and the release orders, it was held :-
“The word ‘returnable’ used in Section 4(4)(d)(i) is distinguishable from ‘returned’, mere capability of being returned is not enough. Returnability should be a term of sale either by contract between the buyer and the seller or by statute. It cannot be said that the packing is returnable by the buyer to the assessee unless there is an arrangement between them that it shall be returned. Secondly, that actual return is not relevant. 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. Thirdly, that extent of return is also not relevant. Fourthly, that the mode of return is a matter of mutual convenience. Whether the packing is returned direct to the seller or through his collecting agent makes no difference. Therefore, the cases of cement gunny bags during the material period satisfy the above norms of returnability to hold that their cost was not includible in the assessable value of cement.”
10D. We may also point out that the judgment of the Madhya Pradesh High Court in Birla Jute Manufacturing Company and the judgment of the Andhra Pradesh High Court in the case of
Kesho Ram Cements v. Union of India
and judgment of Karnataka High Court in the case of
Baghalkot Udyog Limited v. Union of India and Ors.
dealt with similar issues and this Tribunal while holding that the cost of packing of cement is not includible in the assessable value of cement followed the above three judgments. We may also point out the Special Leave Petition filed against the Madhya Pradesh High Court was dismissed.
11. Next we may refer to the judgment of the Delhi High Court in J.K. Cement Works. Under exactly similar circumstances, Delhi High Court while construing the Cement Control Order and the releasing Orders held :-
“In the present case, since the arrangement exists between the assessee and the buyer for the return of the gunny bags, by virtue of the orders of the Controlling Authorities which are controlling sale and price of controlling commodity i.e. cement, it should be packed in gunny bags, gunny bags are durable and returnable and the provisions of Section 4(4)(d)(i) of the Act are fully complied with, with the result that the assessee is not liable to pay excise duty on the cost of gunny bags.”
12. The above decision was followed by the Delhi High Court in
Associated Cement Company Ltd. v. Union of India
. Special Leave Petition filed against both the judgments viz. Civil Appeal No. 576/92 and 360/92 were dismissed on 27-1-1992 and 20-2-1992 respectively.
13. From the above, it follows that it is the considered view of the High Courts as well as Tribunal approved by the Supreme Court that under the Cement Control Order and the Releasing Order under the said Order, there is an arrangement for return of the gunny bags and that the said arrangement is covered by statutory orders. Since there is an arrangement for return of the packing the principle laid down by the Supreme Court in K. Radha Krishaiah (supra) and the conditions laid down in Section 4(4)(d)(i) are satisfied. Therefore, the cost of gunny bags is not includible in the assessable value of the cement.
14. Let us examine the facts of this case. It is not disputed that the cement is controlled commodity and the sale of which is governed by Cement Control Order. Under Clause 3 of the Cement Control Order, 1967 prohibits the removal of the cement and the relevant clause reads as follows :-
“Power to prohibit removal
No producer shall remove or permit the removal of any cement, whether sold or unsold, from the precincts or premises of his factory or from any part of such precincts or premises to any place;
(i) Within the precincts or premises of such factory for use as such or for the manufacture of any article; or
(ii) Outside the precincts or premises of such factory, except with the previous permission in writing of the Central Government.
“Provided that nothing in this clause shall apply to cement produced in a mini cement plant.”
Clause 8 of the Cement Control Order deals with free sale of cement. It reads as follows :-
“Every producer shall himself or by any person on his behalf, sell:
(a) Water proof (hydrophobic) cement at Rs. 564.00 per metric tonne.
(b) Rapid hardening cement and low heat cement at Rs. 555.00 per metric tonne.
(c) High strength ordinary portland cement conforming to IS specification No. IS-8112 -1976 at Rs. 555.00 per metric tonne.
(d) Ordinary portland cement and portland slag cement at Rs. 532.00 per metric tonne.
(e) Portland pozzolana cement and masonry cement at Rs. 517.00 per metric tonne.
free on rail destination railway station plus the excise duty paid thereon :
Provided that in the case of packed cement there shall be added to the price referred to in this Clause such charges as may be fixed by the Central Government in respect of packing in jute bags or in any other containers, and different charges may be fixed for the use of new and serviceable second-hand jute bags and for the use of such other containers.”
Clause 9 deals with levy cement and it reads as follows :-
“Every producer shall, in respect of each transaction by way of sale of cement effected by him or in respect of every removal of cement made by him under Clause 3, pay within one month of the close of the month in which such sales or removals take place, to the Controller an amount equivalent to the amount, if any by which the free on rail destination price of such cement exceeds the aggregate of the following amounts, namely :-
(i) The ex-factory price of such cement calculated in accordance with the rates specified in the schedule;
(ii) Selling and distribution expenses calculated at the rate of Rs. 4.00 per tonne;
(iii) The excise duty paid thereon; and
(iv) In the case of packed cement, the charges fixed by the Central Government in respect of packing under the first provision to Clause 8 and where a producer uses second-hand jute bags in excess of the limit, if any, specified under the second provision to that clause such charges as proportionately reduced.”
In pursuance of the Cement Control Order, Releasing Orders were issued from time to time releasing cement to the manufacturers for the purpose of supply to the customers. There is an endorsement on the back of the Releasing Order which reads as follows :-
“Please reserve empty cement bags in serviceable condition and return them to the factory or its collecting agent on payment.”
The Ministry also issued instructions fixing the charges for packing on Metric Tonne of cement in 20 new as well as serviceable second-hand heavy cess cement bags in the ratio of 90% and 10% for period commencing 1st July, 1982 to 30th Sep., 1982 from Rs. 66.96 only for 8 x 9 construction weight 515 GMS and Rs. 71.10 only for 8 x 10 construction weight 538 GMS only KML the re-sale price of serviceable second-hand jute bags for the above period is Rs. 134.18 only per 100 bags. The appellant brought to our notice the number of collecting agents appointed for the purpose of collecting the serviceable cement bags. We found from the documents that Joshi Agencies are bag collecting agencies of M/s. Orissa Cement Ltd., Rajgangpur. The receipt dated 27-7-1982 states that they have deposited towards the cost of serviceable empty cement gunny bags out of M/s. Orissa Cement Ltd. advance with them. The receipt also indicates the following endorsement :-
“We arranged 30,000 old gunny bags on 21-24-27 July, 1982. Reimbursement may please be made accordingly.”
The appellants have also filed receipt dated 3-7-1982 and 11-7-1982 which reads as follows :-
“Received the sum of Rs. 17,815/- (Rupees Seventeen Thousand Eight Hundred Fifteen Only) from Orissa Cement Ltd., Rajgangpur towards the cost of serviceable empty gunny bags 15000 numbers @ Rs. 119/- per 100 bags delivered to your authorised bag collecting agent, M/s. Joshi Agencies, Rajgangpur.”
Similar is the receipt issued by Deli Lal Madan Lal Sharma in favour of the appellants. The earlier receipt was issued by Bindeshwari Prasad Krishan Prasad Sahu.
15. The proviso to Clause 8 of the Cement Control Order permits the use of new and serviceable second-hand jute bags. The very fact that Cement Control Order which is statutory Order permits the use of serviceable secondhand jute bags implies an arrangement between manufacturer and the customer for the return of the packing namely gunny bags. We have also extracted the Releasing Order which categorically says that the customer should preserve empty cement bags in serviceable condition and return them to factory of origin or its collecting agent on payment. The Releasing Order is made in pursuance of the Cement Control Order while releasing levy cement to the manufacturer namely the appellants. The fact that Clause 8 of the Cement Control Order permits the re-use of second-hand serviceable cement bags indicates that there is an implied arrangement for the return of serviceable gunny bags. The Releasing Order which was issued in pursuance of the Cement Control Order categorically provides for an arrangement for the return of serviceable gunny bags. In the light of the above, we are of the view that in this case packing is returnable as under the Releasing Order buyer has to preserve empty cement bags in serviceable condition and return to the Collecting Agent, or the factory. The principle laid down by the Supreme Court in Radhakrishaiah (supra) is satisfied and the value of the gunny bags is not includible in the assessable value of cement. We are not referring to the other orders issued by D.G.S.D. fixing the ratio for using the old and new bags for the purpose of packing as it is not necessary to refer to those orders.
16. The next argument of Shri Ganesh is ex-factory price of levy cement as well as non-levy cement is determined under the Cement Control Order. Therefore, in view of the judgment of the Supreme Court in
Collector of Central Excise v. Indian Oxygen 1988 (36) E.L.T. 723 (SC)
, it should be ex-factory price which is determined for assessable value. Secondly, the value of gunny bag is not includible.
17. It is true that under Clause 9 of the Cement Control Order, ex-factory price of levy cement was fixed and it does not include the cost of packing. In view of the Clause 9(IV) which says that in the case of packed cement, the charges fixed by the Central Government in respect of packing under the first provision to Clause 8 and where a producer uses second-hand jute bags in excess of the limit, if any, specified under the second provision to that clause such charges as proportionately reduced. Under Clause 8, the price of free cement is fixed. The price fixed both under Clauses 8 and 9 does not include the cost of gunny bags. Therefore, in terms of judgment of the Supreme Court in Indian Oxygen it is the ex-factory price which should be the assessable value.
18. We may, in this context, refer to the proviso (ii) to Section 4 which reads as follows :-
“Section 4. Valuation of excisable goods for purposes of charging of duty of excise. – (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 provisions of this section, be deemed to be –
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale :
Provided that –
(i)…
(ii) where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the ease may be, so fixed, shall in relation to the goods so sold, be deemed to be the normal price thereof:”
19. According to proviso (ii) if the removal of goods is at a price fixed under any law, the price so fixed shall be the normal price. We have already extracted the price fixed in respect of cement under Clauses 8 and 9 and it fixed the price of cement alone and the cost of packing is separately mentioned. Therefore, the price fixed under Clauses 8 and 9 alone be the normal price and value of gunny bags is not includible in the assessable value of cement.
20. The next argument of Shri Ganesh is that packing is not necessary for making the cement marketable as it is sold in bulk.
21. The appellants manufacture grey special cement. The levy of duty is on grey special cement i.e. the excisable article is special cement. It has been pointed out time and again that the excise levy under Section 3 of the Central Excises and Salt Act, 1944 is on the production and manufacture of goods and Section 4 provides the measure of levy. It was also pointed out that enacting a measure to serve as a standard for assessing the levy the legislature need not contour it along lines which spell out the character of the levy itself. It was also pointed out that a broader based standard of reference may be adopted for the purpose of determining the measure of the levy. Any standard which maintains the nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy (Bombay Tyres International). The measure of levy under Section 4 is the “value”. The expression ‘value’ has been defined and extended to include the cost of packing. The packing itself is not the subject of levy of excise duty. The manufacture of cement is the subject of levy. For the purpose of computing the measure of levy, Parliament has given an extended meaning to the expression “value” by including the cost of packing. Therefore, the extension must be construed strictly.
22. Since “cost of packing” is included in the measure of levy and since the levy of duty is on cement and since the levy is sought to be extended beyond the manufactured article the statutory provision requires to be construed strictly, the Supreme Court restricted the inclusion of cost of packing only to that 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, (Bombay Tyre’s International).
23. The decision in Bombay Tyres International was followed in
Union of India v. Godfrey Philips Ltd.-1985 (22) E.L.T. 306 (S.C.)
, the commodity involved in this case is cigarettes. Cigarettes are packed in paper/card board packets of 10 or 20 cigarettes and these packets are then packed together in paper/card board carton/outers. These cartons/outers are then placed in corrugated fibre board containers and it is these corrugated fibre board containers filled with cartons/outers containing packets of cigarettes of 10 and 20 which are delivered by the respondents to wholesale dealers at the factory gate.
24. The dispute is in regard to inclusion of cost of corrugated fibre board containers in the value of cigarettes.
25. P.N. Bhagwati, CJ is of the view that the test is whether particular kind of packing is done in order to put the goods in the condition in which they are generally sold in the wholesale market at the factory gate in a certain packed condition whatever may be the reason for such packing, the cost of such packing would be includible in the value of goods for assessment to excise duty. While Shri Pathak, J. keeping in view the principle that the expression ‘value’ has been extended to include the cost of packing and since the cost of packing is not the subject of levy is of the view that the cost of corrugated fibre board containers are not necessary for putting the cigarettes in the condition in which they are generally sold in the wholesale market at the factory gate and, therefore, the cost is not includible.
26. We may now consider the decision in
Hindustan Polymers v. Collector of Central Excise – 1989 (43) E.L.T. 165 (S.C.)
. The issue before the Court was whether the cost of drums supplied by the customers is includible in the assessable value of fusel oil/styrene monomer. According to the manufacturer, the said goods are completely manufactured and after it is manufactured, it is stored in storage tanks duly approved after entering it in the RG-1 register. The said fusel oil/styrene monomer is stored in bulk and delivered at the factory gate of the customers. Therefore, it is not necessary for the said fusel oil/styrene monomer to be supplied to the customers in drums. It was urged that the cost of packing cannot be included in the cost of goods when the packing was supplied by customer to the manufacturer.
27. It was found by the Court that 90% of the goods were delivered at the time of removal without being put in drums and delivery in drums was only to facilitate their transport in small quantities. Shri Sabyasachi Mukharjee, J. held that the manufacture of goods was complete before the goods were placed in drums. He also held that the goods were not sold in drums generally, in the course of wholesale trade and, therefore, cost of drums is not includible in the assessable value.
28. Shri S. Ranganathan, J. while agreeing with the conclusion arrived at by Shri Mukarjee, J. rested his conclusion on the language of Section 4(4)(d)(i). According to him, it would be anomalous if the cost of packing charges from the customer is to be excluded from the assessable value where the packing though durable is returnable to the manufacturer but the cost of an item of durable packing supplied by the customer and taken back by him is liable to be included in the assessable value.
29. The next decision to be considered is judgment in
Collector of Central Excise v. Ponds India Ltd. – 1989 (44) E.L.T. 185 (S.C.)
. It is not necessary to refer the facts in extenso. The Court while reiterating the test laid down by the Supreme Court in Bombay Tyres International, observed :-
“In my opinion, the correct position seems to be that the cost of that much of packing, be they primary or secondary, which are required to make the articles marketable would be includible in the value. How much packing is necessary to make the goods marketable is a question of fact to be determined by application of the correct approach. Packing which is primarily done or mainly done for protecting the goods, and not for making the goods marketable should not be included….The question is not whether these goods could be so sold, but the question is whether these goods are so sold usually and as such used to become marketable in such manner.”
This Tribunal in
Hindustan Lever v. C.C.E. 1991 (54) E.L.T. 420 (Tri.)
following the judgment of the Supreme Court referred to above directed the Asstt. Collector to make an enquiry to find out whether the secondary 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 and if so, include the same.
30. In the appellants’ own case viz.
Collector of Central Excise, Bhubaneswar v. Orissa Cement Ltd.
, on consideration of the earlier decision, this Tribunal observed as follows :-
“It follows from the above that the special cement can be sold in bulk and is actually sold in bulk. The only difference between ordinary port land cement and the special cement is in fineness and its compressive strength. The fact that the special cement is sold in bulk shows that packing is not essential to make the goods marketable. It can be sold without packing and in fact is actually sold without packing. Therefore, the cost of packing is not includible in the assessable value.”
31. The fact that the special cement is actually sold in bulk is categorically found in the said Order and the appeal filed in the Supreme Court against the said Order was dismissed.
32. Supreme Court in Bombay Tyres International has held that 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 degree of packing whose cost can be included in the value of the article for the purpose of excise levy. To that extent, the cost of secondary packing cannot be deducted from wholesale cash price of the excisable article at the factory gate. The said principle was followed in Godfrey Philips and also in Hindustan Polymers (supra) and Ponds India (supra).
33. This Tribunal followed the said principle in Hindustan Lever.
34. In Hindustan Polymers the Court found that 90% of the fusil was sold in bulk. Since 90% of the fosil oil was sold in bulk, it was held by the Supreme Court that in respect of 10% of the fusil oil, which is sold in containers brought by the customers, the packing is not necessary. In other words, packing is not necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. They have taken into account the general condition in which the commodity is sold.
34A. Now let us examine in the light of the above whether the Order No. 111 to 119/90-A, dated 14-2-1990 requires re-consideration.
34B. In the Order referred to above on examination of the material before it, this Tribunal gave a finding that the special cement is sold actually in bulk. Therefore, the cost of packing is not necessary. In other words, on facts, it was found that the special cement is generally sold in the wholesale market in bulk at the factory gate without packing.
34C. According to the Supreme Court in Bombay Tyres International (supra), it was followed in Godfrey Philips, Hindustan Polymers, Ponds India, it is that 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 is includible in the assessable value of article. They pointed out that as far as the inclusion of primary packing, there was no dispute. We may also specifically refer to the decision in Hindustan Polymers where there was a finding that 90% of the goods were sold in bulk and 10% was sold in containers to facilitate delivery in small quantities, and in view of the said finding that it is sold in bulk it was held packing is not necessary in respect of the goods which were actually sold in containers to facilitate the delivery in small quantities. In the Order under consideration, the finding is that special cement is sold in bulk. When the special cement is sold generally without packing, the question of including the cost of packing does not arise. Therefore, this Tribunal in their Order No. 111 to 119/90-A has correctly decided that the cost of packing is not includible in the assessable value of cement. The said Order in our view is in accordance with the principles laid down by Supreme Court in Bombay Tyres International, Godfrey Philips, Hindustan Polymers and Ponds India. Therefore, in our view the said Order does not require any re-consideration as it is in accordance with law laid down by Supreme Court.
35. It is true on the facts of this case the entire production is sold in gunny bags but the fact remains that it is special cement and the other manufacturers and the appellants are in fact actually selling the cement in bulk without packing. In other words, it is generally sold without packing and it is not necessary. In this connection, we rely upon the finding in the appellants’ own case in Order No. 111 to 119/90-A, dated 14-2-1990 which was confirmed by the Supreme Court. In other words, the special cement is in fact sold in bulk and, therefore, packing is not necessary. The fact that a particular manufacturer is selling the cement in gunny bags does not in any way affect the nature of product and its marketability without packing. As pointed out in earlier paragraphs in appellants’ own case, there is a finding that the special cement is sold in bulk and the cost of packing was excluded. In this context, we refer to the observations made by the Supreme Court in
Radhaswami Satsang v. Commissioner of Income Tax
. (supra) wherein it was observed :-
“We are aware of the fact that strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.”
36. As we pointed out, there was finding of fact that special cement is being sold without packing and the said finding was confirmed by the Supreme Court. Therefore, it would not be appropriate to allow the position to change in respect of the very same manufacturer who sold the entire production in gunny bags. In our views, the general principle of law that where packing is not necessary for putting the article generally in the market at the factory gate, the same principle should be applied to the commodity though it is sold in packing. We are of the view that there should be finality for litigation and parties should not be permitted to begin fresh litigation because of new views.
37. In view of the above discussions, we are of the view that the Order No. 111 to 119/90-A does not require re-consideration as it has not expressed any view different from the judgments of the Supreme Court referred to above. Therefore, the appeals are allowed and the Revenue Authorities are directed to give consequential relief.