TMI Blog1982 (6) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Central duties of excise and to salt came into force on February 28, 1944. Section 3 of the Act which makes provision for levy of duties of excise lays down that such duties shall be levied and collected on all excisable goods other than salt produced or manufactured in India in such manner as may be prescribed and at the rate set forth in the First Schedule. ``Vegetable product" is one of excisable goods specified as such in Item 13 of the First Schedule. `'Vegetable Product" as defined therein means any vegetable oil or fat which has, by hydrogenation or by any other process, been hardened for human consumption. "Vegetable product" is chargeable with duty at the rate of ten per cent ad valorem. Section 4 of the Act which deals with valuation of excisable goods for purposes of charging duty of excise was amended with effect from October 1, 1975. The amended section lays down, inter alia, that where duty of excise is chargeable with reference to value, such value shall, subject to other provisions of the section, be deemed to be 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision for the cost of packing to be included in the value of excisable goods is challenged on the ground that it contravenes the charging section i.e. Section 3. Another ground of challenge to this section is that if allowed to stand it would be tantamount to allowing Parliament to levy tax on the sale or purchase of tin containers, for, it is further alleged, the petitioner does not manufacture the tin containers and instead purchases them from the market for filling them with vegetable product and marketing such product in that manner. It is contended that since the petitioner does not manufacture the tin containers, the duty levied on the cost of such containers cannot legitimately be described as duty of excise within the ambit of entry 84 list I Seventh Schedule of the Constitution. It is further contended that the real character of such duty is no different from a tax on sale or purchase of such containers which is a subject exclusively reserved by entry 54, List II, Seventh Schedule of the Constitution for Legislation by a State Legislature. 4. It is on these averments that the petitioner prays in this writ petition (No. 460 of 1981) for a declaration to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Courts in the country cost of packing is not includible in the value of excisable goods for determining the duty payable on such goods and that therefore the petitioner would stop including such cost in the value of the vegetable products to be declared in the gate-pass with effect from October 9, 1979. The excise authorities did not accept the contention of the petitioner and advised it to continue including the cost of containers in the value of its vegetable products as it had been doing in the past. The petitioner stuck to its earlier position, but continued to pay, under protest, the requisite duty on its vegetable products inclusive of the cost of containers as before. The matter came to a head on January 5, 1982, when the petitioner began to exclude the cost of containers from the declared price in the gate-pass, and thus refused to pay duty on the cost-of-packing component of its vegetable products. The Assistant Collector Central Excise, Jaipur, visited the petitioner's factory on January 27, 1982, and made a direction in writing requiring the petitioner to pay duty on its vegetable products including the cost of containers. The petitioner again paid such duty under pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides. We would however like to observe that ordinarily tin containers and polythene containers of small capacities like 1 kg., 2 kg., 4 kg. and 16.5 kg. are not by their very nature durable and are seldom returnable by the buyer to the manufacturer. Such small-sized containers are prima facie intended to serve diverse functions like facilitating ready measurements, labelling of brand names printing or inscribing sale-promotion material on the labels or the containers themselves, prevention of physical deterioration, theft, adulteration or substitution in transit till the vegetable product reaches the consumers. If the vegetable product were to be sent out from the factories contained in big galvanised-steel drums, one should normally be willing to accept that such drums are of a durable nature and if they are returnable by the wholesale buyers to the manufacturer their cost cannot be included in the value of the vegetable product for purpose of charging duty of excise. There is however, all the difference between big galvanised-steel drums on one side and small polythene containers and tin containers on the other. Having said all this, we would once again utter the caveat that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing profit and must not be loaded with post-manufacturing operations". (See Atic Industries Ltd. v. Asstt. Collector, Central Excise, AIR 1975 SC. 960 = 1978 (2) E.L.T. (J 444). 11. Now, the point to see is as to whether the manufacture of "vegetable product" within the purview of Item 13 of the First Schedule is complete with the manufacture and hydrogenation of vegetable oil or fat, or, whether such manufacture requires any further processing to produce the goods known to the consumer as vegetable product or vanaspati. A bare perusal of the definition of "vegetable product" as given in Item 13 of the First Schedule would at once show that since the legislature was dealing therein with human food, it could not have been oblivious of the essential requirement of processing of the vegetable product to make it fit for human consumption. "Vegetable product'' which is made subject to duty of excise in Item 13 of the First Schedule is not merely vegetable oil or fat in its naked, raw and brute form in which it emerges immediately on hydrogenation. The Legislature requires something more and has therefore defined "vegetable product" to mean "any vegetable oil or fat which, whether by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are merely illustrative and not exhaustive. That being so, it would be permissible in a given case, not directly covered by any of the eight clauses, to ascertain whether packing, which includes containers, is a process incidental or ancillary to the completion of a manufactured product, and if so, it would be perfectly legal to include the cost of packing in the value of the excisable goods produced or manufactured by the assessee. 14. In Union of India v. Delhi Cloth General Mills, AIR 1963 S.C. 791 = 1977 (1) E.L.T. (J 199) the Supreme Court took note of the fact that while the Act defines "excisable goods" to mean ``goods specified in the First Schedule as being subject to duty of excise", it does not give any definition of "goods". It is therefore necessary to discover as to what the term "goods" really means. Their Lordships explained with reference to Words and Phrases (permanent Edition) and Webster that to become "goods", an article must be something which can ordinarily come into the market to be bought and sold. We have already discussed that vegetable product (vanaspati) in these cases can only be marketed and indeed is being marketed in containers of different capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished "goods" bought and sold in the market in their respective brand names. 15. Turning now to the other limb of the petitioners' argument that the definition of "value" in so far as it makes the cost of packing includible in the value of the excisable goods for purposes of excise is ultra vires the Constitution, it is contended by the petitioners' learned counsel that since the petitioners do not manufacture the containers levy of duty on the cost of containers cannot legitimately be described as excise duty within the purview of entry 84, List I, Seventh Schedule of the Constitution. It is further contended that since the petitioners purchase the containers from the open market levy of duty on the cost of the containers would be tantamount to a tax on their purchase by them which is a subject lying within the legislative field of entry 54, List II, Seventh Schedule of the Constitution on which a State Legislature alone can legislate. Now, these arguments stand adequately answered in the discussion above relating to the alleged contravention of Section 3 by Section 4(4)(d)(i) of the Act and the so called illegality of the latter by reason of such contravention. We have held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court held that packing of biscuits in containers cannot be characterised as post-manufacturing operation on as to exclude their cost from the value of biscuits. The reason given for this opinion was that since biscuits require packing for their marketing, and since biscuits, in that case, were being delivered in containers at the factory gate, tbe value of containers will necessarily have to be included in the value of biscuits for levy of excise on biscuits. 18. Following its earlier judgment in Aurofood (supra), the Madras High Court once again held in Mettur Chemical Industrial Corporation v. Assistant Collector of Customs, 1981 Excise Law Times 884 (Mad.) that "manufacture" of eight products, involved in that case, including vanaspati, will, as the court put it, "take in also the process of putting them into metal containers for purpose of being pushed into the market as marketable commodities at the factory gate". It is significant to note that the assessee in the cited case also manufactured metal containers and had paid duty on containers under Item 46 of the First Schedule. An argument was raised on behalf of the assessee that since he had already paid duty on conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessable value of the vegetable products. In Union of India v. Mansingka Industries Pvt. Ltd., 1979 (4) E.L.T. (J 158), which was decided on September 6, 1974, i.e., long before the definition of "value" as we find it now in Section 4(4)(d)(i) of the Act was inserted by Parliament, the Bombay High Court rejected the argument that manufacture of vegetable product is not complete until it is packed in a tin container. We have carefully studied this judgment from the law report cited before us and find ourselves unable to endorse the reasoning which persuaded the Division Bench to reject the above argument. In any case, we are dealing here, in the instant cases not with vegetable products simpliciter in their naked form, but with vegetable products which are marketed under particular brand names. We cannot therefore apply the ratio of Mansingka to the facts of this case. We may also mention that relying on Mansingka, the Bombay High Court has reaffirmed in Oudh Sugar Mills Ltd. v. Union of India, 1979 (4) E.L.T. (J 493) and in Maharashtra Vegetable Products Pvt. Ltd. v. Union of India, 1981 Excise Law Times 468, its earlier view that the cost of containers is not includible in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
