Full Judgment Text
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PETITIONER:
GEEP INDUSTRIAL SYNDICATE LTD. ETC.
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE,ALLAHABAD ETC.
DATE OF JUDGMENT: 04/02/1997
BENCH:
B.P. JEEVAN REDDY, K.S. PARIPOORNAN
ACT:
HEADNOTE:
JUDGMENT:
THE 4TH DAY OF FEBRUARY, 1997
Present:
Hon’ble Mr. Justice B.P. Jeevan Reddy
Hon’ble Mr. Justice K.S. Paripoornan
Soli J. Sorabjee, Sr. Adv., V.Lakshmikumaran, V.
Balachandran and Ms. Nisha Bagchi, Advs. with him for the
appellants in C.A.Nos. 4608-12 and 4960/96 and Respondent in
C.A. No. 14407/96.
M. Gaurishankar Murthi, G. Prakash and V.K. Verma, Advs. for
the Respondents in C.A.No. 4608-12/96, 4960/96 and
Appellants in C.A. No. 14407/96
J U D G M E N T
The following Judgment of the Court was delivered:
J U D G M E N T
B.P. JEEVAN REDDY, J.
These appeals are preferred against the orders of
Central Excise and Gold [Control] Appellate Tribunal. Civil
Appeals Nos. 4608-4612 of 1996 and 4960 of 1996 are
preferred by the assessee, Geep Industrial Syndicate
Limited, while Civil Appeal No.14407 of 1996 is preferred by
the Revenue. Though preferred against different orders, the
issue is one and the same. The assessee is engaged in the
manufacture of batteries and torches. These goods are
initially packed in small boxes. These small boxes are
packed in medium size cartons. The medium size carton are in
turn packed in larger corrugated cartons, called "7-ply
corrugated cartons". The assessee does not dispute that the
value of small boxes and medium size cartons is liable to be
included in the value of the goods packed. The dispute is
only with respect to the inclusion of the value of 7-ply
corrugated cartons. Differing views have been expressed by
different Benches of the Tribunal on this question in the
case of this very assessee, as would be evident from the
fact that while against some orders, the assessee has filed
appeals, certain other orders have been appealed against by
the Revenue.
Sri Soli J. Sorabjee, learned counsel appearing for the
assessee, submitted that the factual and legal situation in
the present appeals is the same as was considered by this
Court in Geep Industrial Syndicate Limited v. Union of India
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[(1992) 61 E.L.T. 328]. Learned counsel submitted that the
said decision rendered by a three-Judge Bench between the
same parties is binding and conclusive on the question at
issue. Sri Sorabjee submitted further that even according to
the principles enunciated in Union of India v. Bombay Tyre
International [1984 (1) S.C.C.467] and Government of India
v. Madras Rubber Factory Limited [1995 (4) S.C.C.349], the
assessee is entitled to succeed. Sri Gauri Shankar Murthy,
learned counsel appearing for the Revenue, however,
submitted that according to the principles affirmed by this
Court in Madras Rubber Factory after a full consideration of
all the earlier decisions, the value of 7-ply corrugated
cartons is also liable to be included in the value of the
goods packed.
Inasmuch as differing interpretations are placed upon
the principles affirmed in Madras Rubber Factory, it is
necessary to ascertain, in the first instance, the precise
principle enunciated in the said decision. After referring
to the definition of "value" in Section 4(4)(d)(i), this
court observed in Para-24:
"The provision in the sub-clause is
a plain one and does not admit of
any ambiguity. What it says is that
where the goods are delivered in a
packed condition, at the time of
removal, the cost of such packing
shall be included and that only
where such packing is of a durable
nature and is returnable by the
buyer to the assessee, should the
cost of such packing be not
included in the value of the goods.
The concept of primary and
secondary packing has, however,
been urged by the assessees and
recognised to some extent in the
decisions of this Court including
Bombay Tyre International. While it
may not be possible for us to wish
away the said distinction, we
cannot but remind ourselves that
this is a refinement not borne out
by the express language of the
enactment and must, therefore, be
resorted to with care and
circumspection."
In Para 25, the Court referred to the holding in Bombay
Tyre International on this aspect to the effect: "(I)t seems
to us 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 the degree of packing whose cost can be
included in the ‘value’ of the article for the purpose of
the excise levy." Reference was then made to the decision of
this Court in Union of India v. Godfrey Phillips India
Limited [1985 (4) S.C.C. 369]. It was pointed out that the
said decision was rendered by the very same Bench which
decided Bombay Tyre International. It was also pointed out
that the test evolved by the majority [R.S.Pathak and
A.N.Sen,JJ.] and minority [P.N.Bhagwati, CJ.] was identical
and that the different conclusions arrived at by them was
mainly attributable to the difference in perception of the
factual situation [see Para 30]. The Court then referred to
the decision in Geep Industrial Syndicate Limited and
pointed out again that the factual position in this case too
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was perceived to be the same as in Godfrey Phillips, viz.,
that the wooden boxes were not necessary for putting the
torches and batteries in the conditions in which they are
generally sold in the wholesale market at the factory gate.
It was stressed that so far as the test applicable is
concerned, there was no departure from the one enunciated in
Bombay Tyre International.
The decision in Madras Rubber Factory next referred to
the opinions of Sabyasachi Mukharji, J. and S. Ranganathan,
J. in C.C.E. v. Ponds (India) Limited [1989 94) S.C.C.759]
and expressed its entire and respectful agreement with the
test evolved by Mukharji, J. which reads:
"The question is not for what
purpose a particular kind of
packing is done but the test is
whether a particular 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 and if
they are generally sold in the
wholesale market at the factory
gate in certain packed condition,
whatever may be the reason for such
packing, the cost of such packing
would be includible in the value of
the goods for assessment to excise
duty........The correct position
seems to be that the cost of that
much of packings, 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."
The Bench also expressed its respectful concurrence
with the opinion of Ranganathan, J. where the learned Judge
pointed out that the words "which is necessary" in the test
evolved in Bombay Tyre International has led to certain
further refinement in Godfrey Phillips and Geep industrial
Syndicate and then observed:
".......in judging the condition of
packing whose cost is to be
included in the assessable value,
one should go by the conduct of the
parties and the nature of the
packing in which the goods
generally are - not, can be -
placed in the wholesale
market.......what is to be really
seen in this: What is the condition
of packing considered by the
manufacturers, having regard to the
nature of the business, the type of
goods concerned, the unit of sale
in the wholesale market and other
relevant considerations, to be
generally necessary for placing the
goods for sale in the wholesale
market at the factory gate. In
Godfrey Phillips and Geep, this
Court was concerned with a special
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type of packing which seemed
intended more to protect the packed
goods against injury or damage
rather than to enable it being
placed in the market. Indeed, in
Godfrey Phillips, this was a
factual position that had been
accepted by the departmental
authorities earlier for a period of
a little over six years which they
later wanted to go back upon."
After considering some other cases, the decision in
Madras Rubber Factory stated the test in the following
words:
"The test is: 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."
Sri Sorabjee placed a good about of emphasis upon the
word "necessary" occurring in the above test. It appeared as
if the learned counsel was emphasising the said expression
to the exclusion of all others in the said test. The test,
as stated by this Court in Madras Rubber Factory, is
"whether packing, the cost of where of 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". The
same was reiterated employing the words in Bombay Tyre
International, to wit: "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". We think it appropriate to
point out that the test evolved by this Court in Madras
Rubber Factory should be read and understood in the context
of the preceding discussion including the express and
repeated affirmance of the test evolved by Mukharji and
Ranganathan, JJ. in Ponds India Limited which is, in truth,
nearer to the definition of the word "value" in Section
4(4)(d)(i) of the Act. The word "necessary" in the test
evolved by Bombay Tyre International and as reiterated in
Madras Rubber Factory need not be over-emphasised. According
to madras Rubber Factory, the true test is in terms of the
one evolved by Mukharji and Ranganathan, JJ. in Ponds India
Limited, viz., "whether packing, the cost whereof is sought
to be included is the packing in which it is ordinarily sold
in the course of wholesale trade to the wholesale buyer".
While judging the necessity of the packing, what one must
see is whether it is necessary for putting the excisable
article in the condition in which they are generally sold in
the wholesale market at the factory gate and this must be
judged from the conduct of the manufacturer himself.
Ordinarily speaking, no manufacturer would provide a packing
which is not necessary for putting the excisable articles in
the condition in which they are sold in the wholesale market
at the factory gate. [Where a special kind of packing is
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provided by the manufacturer at the specific request of a
buyer, the situation would be different but that is not the
situation herein.] Therefore, one can proceed on the footing
that whatever packing is provided at the time of delivery of
the goods at the gate is the packing necessary for the
purpose of putting the excisable articles in the condition
in which they are generally sold in the wholesale market at
the factory gate. Unless the manufacturer establishes that a
particular packing, provided at the time of such delivery,
was not really necessary for that purpose, the value of the
packing cannot be excluded. In our respectful opinion, the
above is the correct understanding of the principle and the
ratio of Madras Rubber Factory.
Now coming to the facts of the case before us, we find
that the factual situation considered by this Court in 1986
in Geep Industrial Syndicates [this very assessee] and the
factual situation now obtaining is no different. It was held
by this Court in the said decision that packing in wooden
boxes was not necessary for putting the articles in the
condition in which they are generally sold in the wholesale
market at the factory gate and that it was done only for the
purpose of protecting them from damage during the course of
transport, i.e., transport after delivery. The 7-ply
corrugated cartons have now taken the place of wooden boxes.
But for this, there is no change in the factual situation
since 1986. In such a factual situation, it would not be
permissible for us to arrive at a different conclusion than
the one arrived at in 1986*. On this
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* The decision in Geep Industrial Syndicate was actually
rendered on April 2, 1986 though reported in Excise Law
Times in the year 1992.
ground alone, we hold in favour of the assessee.
For the reasons recorded hereinabove, Civil appeals
Nos. 4608-4612 of 1996 and 4960 of 1996 [preferred by the
assessee] are allowed and Civil Appeal No. 14407 of 1996
[preferred by the Revenue] is dismissed. There shall be no
order as to costs.