ORDER
U.L. Bhat, J. (President)
1. Appellant, engaged in the manufacture of torches was including the cost of secondary packing in the assessable value of torches and paying duty, allegedly under protest. The dispute in these appeals relates to the period from 1.1.93 to 30.11.93. It was found that during this period, appellant had collected from buyers as cost of packing an amount less than the actual cost of packing and added to the assessable value only the lesser amount collected from the buyers and not the higher amount incurred as cost of packing. Three show cause notices dated 6.4.93, 17.6.93 and 9.12.93 were issued in respect of different periods alleging the above facts and stating that the entire cost of packing should have been included in the assessable value and proposing demand of differential duty on the difference between the actual cost of packing and the amount of charges collected from the buyers. The notice also proposed imposition of penalty. Though appellant resisted the notices, the Assistant Collector confirmed the demands and imposed penalty of Rs. 10,000/- each in two cases and Rs. 50.000/- in one case. The Collector (Appeals) having confirmed his decision, the present appeals have been filed.
2. In respect of a prior period, appellant was collecting as charges for secondary packing some amount in excess of the actual cost of packing and the Department demanded differential duty on the basis that the actual charges for secondary packing collected from the buyers should have been included in the assessable value. That dispute, it is said, is pending in the Tribunal for decision. For the period under consideration in these appeals, the Department took the converse stand namely, that the actual cost of packing and not the amount of packing charges collected from the buyers should be included in the assessable value. The question is whether this stand is justifiable. Both sides have relied on the decision in Hindustan Polymers v. Collector of Central Excise .
3. In Hindustan Polymer’s case, the Supreme Court held that the cost of durable and returnable packing supplied free of cost by the buyer cannot be included in the assessable value of the excisable goods packed in such containers. In order to arrive at this conclusion, the Court considered the definition of “value” in Section 4(4)(d)(i) of the Central Excise Act, 1944 in relation to excisable goods delivered at the time of removal in packed condition as inclusive of cost of such packing except where the packing is durable in nature and is returnable by the buyer to the assessee. The Court drew a distinction between “cost” on one hand and “value” on the other and since the packing did not cost any money to the manufacturer, held that the cost of such packing cannot be included in the assessable value.
4. Shri S.K. Srivastava, SDR relied on the following observations contained in the leading judgment at para 12:–
The word “cost” has a definite connotation, and is used generally in contradistinction of the expression “value”. Thus, the clear implication of the use of the word “cost” is that only packing, cost of which is incurred by the assessee, i.e., the seller, is to be included. The use of the expression “cost” could not obviously be by way of reference to packing for which the cost is incurred by the buyer.
5. Learned Counsel for the appellant placed reliance on the following observations in the judgment rendered by Mr. Justice Ranganathan seen at paragraphs 20 & 21 respectively:–
There is ample internal indication in the statute to the cost of packing referred to in the above clause is the cost of packing incurred by the manufacturer and recovered by him from the purchaser whether as part of the sale price or separately.”
Where the manufacturer supplies his own container or drum but does not charge the customer there for, then the price of the goods will also include the cost of the container. There will be no question of separate addition to the sale price nor can the assessee claim a deduction of the cost of packing from the sale price except where the container is a durable one and is returnable to the manufacturer. If the manufacturer supplies the drums and charges the customers separately there for, then, under Section 4(4)(c)(i). the cost of the drums to the buyer has to be added to the price except where the packing is of durable nature and is to be returned to the manufacturer.
6. In the judgment by Mr. Justice Verma, it was stated as follows:–
I agree that the cost of packing envisaged in Section 4(4)(d)(i) of the Act for determining the “value” in relation to any excisable goods is only the “cost of such packing” incurred by the manufacturer and recovered from the buyer except where the packing is of a durable nature and is returnable by the buyer to the manufacturer.
The requirement of Section 4(4)(d)(i) that value of excisable goods would include the cost of such packing has been understood in the above judgments as meaning that the value would include the cost of packing incurred by the manufacturer and recovered from the buyer. The matter has been further clarified in the above quoted observations in para 21 to the effect that what is to be added to the price is the cost of packing to the buyer. It must thus follow that irrespective of the manufacturer incurring a particular cost for the packing materials, it is the cost of packing to the buyer, i.e., the cost as charged to the buyer, meaning the packing charges collected from the buyer, which is to be included in the assessable value, even if it is less than the actual cost of packing. On this conclusion, it follows that the confirmation of demand was not sustainable in law.
7. We record the submission made by the learned Counsel that though the appellant is entitled to raise the larger contention that the cost of secondary packing in the facts and circumstances of the case would not be includible at all in the assessable value, the contention is not being raised in these appeals and is being raised in another appeal pending before the Tribunal.
8. In view of our finding that the confirmation of demand is not sustainable, the imposition of penalty also cannot stand.
9. For the reasons indicated above, we set aside the impugned orders and allow the appeals.
Pronounced and dictated in the open Court.