TMI Blog1989 (8) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery in drums was only to facilitate their transport in small quantities. The manufacture of the goods was complete before these were placed in drums. The completely manufactured product was stored in tanks. From these tanks the goods were removed directly and placed in vehicles for their movement - for 90% of the sales, the vehicle of removal was tankers and 10% of the sales, the vehicle of removals was drums. In the premises, the value of the drums with regard to the fusel oil/styrene monomer irrespective of whether these were supplied by the assessee or not, are not includible in the assessable value of the Styrene Monomer. Appeals have to be allowed and the orders of the Tribunal set aside. The Tribunal was in error in holding that as at the time of removal, goods were delivered from the factory in packed condition and the containers were not returnable to by the buyer, the value of the drums is to be included. It is reiterated that in order to be deliverable, it is not necessary that the goods should be delivered in packed condition and that the containers were not necessary to make the goods marketable. - 4339-41/86 - - - Dated:- 23-8-1989 - Sabyasachi Mukharji, S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof could not be included in the assessable value. On the 11th August, 1983, two orders were passed by the Assistant Collector - one in relation to each of the aforesaid show cause notices. The Assistant Collector included the value of the drums in the assessable value of the said fusel oil/Styrene Monomer. Appeals were filed by the assessee. The same were allowed by the Collector (Appeals). He held that the appellant had not collected any amount in excess of the amount indicated in the price-lists. Therefore, in addition to this amount, according to the Collector (Appeals), it was not open to the Asstt. Collector to inflate the assessable value without establishing the receipt of the additional consideration by the appellant apart from what had been shown in the invoice. There was a further appeal to the Tribunal. The Tribunal held that at the time of removal the goods were delivered from the factory in packed condition and the containers were not returnable by the buyer, therefore, the value has to be included in the assessable value. The Tribunal, therefore, accepted the revenue's contention and restored the order of the Asstt. Collector. Aggrieved therefrom, the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said decision, according to learned Attorney General, was concerned with the rentals of certain oxygen gas cylinders supplied by the assessee. Reference was made to the decision of this Court in K. Radha Krishaiah v. Inspector of Central Excise, Gooty and Ors. [1987 (27) E.L.T. 598]. Shri Salve referred to and relied on the decision of the High Court of Bombay in the case of Govind Pay Oxygen Ltd. v. Asstt. Collector of Central Excise, Panaji and Ors. [1986 (23) E.L.T. 394] as also the decision of the Karnataka High Court in Alembic Glass Industries Ltd. v. Union of India and Ors. [1986 (24) E.L.T. 23]. Learned Attorney General urged before us that the question whether for determining the assessable value of the excisable goods sold by the assessee in drums or containers provided by its customers (the assessee itself provided such drums/containers on payment of price in Civil Appeals Nos. 4339-41 of 1986) the value of such drums/containers would also have to be included on a correct interpretation of charging sections, namely, Sections 3 and 4 of the Act. It was submitted that while determining the scope and nature of levy, as contemplated under Section 3 of the Act, of central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale market. Therefore, the learned Attorney General submitted, the mere fact that the assessee in C.A. No. 4339 of 1986 sold only 10% of the excisable goods to its buyer where drums were supplied by the buyers themselves and that 90% of the sales were through tankers belonging to the customers would not in any manner affect the question or determination of the assessable value of the excisable goods inasmuch as the 10% of its sales to wholesale buyers were in drums supplied by the buyers at the time of removal. According to the learned Attorney General, the fact that 90% of the goods were supplied in tankers and not in containers had no relevance at all and the 10% represented the entire quantity of excisable goods delivered in packed condition. Learned Attorney General contended that the decision of India Oxygen Ltd.'s case (supra) cannot be relied on in view of the facts of this case. In that case, the learned Attorney General contended the only question which arose was whether the rental charges received by the assessee for the gas cylinders lent by it to its customers could be included in the assessable value and whether interest earned on deposits made by the customers for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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; (ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale; Explanation. - For the purposes of this sub-clause, the amount of the duty of excise payable on any excisable goods shall be the sum total of - (a) the effective duty of excise payable on such goods under this Act; and (b) the aggregate of the effective duties of excise payable under other Central Acts, if any, providing for the levy of duties of excise on such goods, and the effective duty of excise on such goods under each Act referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the levy of excise is a levy on goods manufactured or produced, the value of an excisable article must be limited to the manufacturing cost plus manufacturing profit. This Court reiterated that Section 4 of the Act provides the measure by reference to which the charge is to be levied. Therefore, the charge is to be determined by the terms of Section 4 of the Act. But it has to be borne in mind that the duty of excise is chargeable with reference to the value of the excisable goods and the value is defined in express terms in that section. Though the learned Attorney General referred to the fact that in taxing statutes, one must look merely at what is clearly stated, yet such a construction must be made in the context of the entire scheme of the Act. Learned Attorney General emphasised that the language of clause (d) of sub-section (4) of Section 4 of the Act made it clear beyond doubt that in cases where the Act provides for excise duty with reference to value of the excisable goods, while determining the value of such goods, the cost of packing where the excisable goods are delivered at the time of removal in packed condition, would have to be included in the assessable va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market, a certain amount of packing or user of containers or wrappers or putting them either in drums or containers, are required, then the value or the cost of such wrapper or container or drum must be included in the assessable value and if the price at which the goods are sold does not include that value then it must be so included by the very force of the terms of the Section. The question, therefore, that has to be examined in this case is whether these drums, containers or packing, by whatever name they are called, are necessary to make fusel oil or styrene monomer marketable as such or can these goods be sold without the containers or drums or packing? In my opinion, the facts established that these could be. The fact that 90% of the goods in C.A. No. 4339 of 1986 were delivered in tankers belonging to the assessee and only 10% of the goods were in packed condition at the time of removal clearly establish that the goods were marketable without being packed or contained in drums or containers. These were in the storage tanks of the assessee and were as such marketable. In this connection, it is necessary to refer to the observations of this Court in Collector of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons that the assessee did not spend for such packing. It was for this simple reason that the legislature had not thought it fit to exempt such packing from the value of excisable goods. In my opinion, that is the correct approach to the problem. Similarly, Karnataka High Court in Alembic Glass Industries v. Union of India and Ors. [supra] held that the term "value" defined in Section 4(4)(d)(i) provides for exclusion of cost of packing material which was of durable nature and was returnable by the buyer to the assessee. Hence, there was no logic or reason for not excluding the value of packing material supplied by the buyer himself which is of durable nature and is returnable by the assessee to the buyer. Furthermore, in my opinion, in terms of section, it is not includible. The contention that the value of packing materials including those supplied by the buyer, has to be included in the value of the goods, is repugnant to the very scheme of Section 4. It overlooks the use of the expression "cost" in relation to packing in the clause (i) of Section 4(4)(d) of the Act. The word "cost" has a definite connotation, and is used generally in contradistinction of the expression "val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a notional value comprising of the wholesale cash price plus certain notional charges. This would be a radical departure from old Section 4 and cannot be said to be on the same basis. It has to be borne in mind that the measure of excise duty is price and not value. It has been so held by this Court in Bombay Tyre International's case (supra). See in this connection, the observations of this Court in Bombay Tyres case at pages 368,377,379,382 and 383, where this Court emphasised that in both the old section 4 and the new Section 4, the price charged by the manufacturer on a sale by him represents the measure. Price and sale are related concepts and price has a definite connotation. Therefore, it was held that the "value" of the excisable article has to be computed with reference to the price charged by the manufacturer, the computation being made in accordance with the terms of section 4. This Court rejected the contention on behalf of the assessee in that case, that section 4 also levied excise on the basis of a conceptual value which must exclude post-manufacturing expenses and post-manufacturing profit by observing that the contention proceeded on the assumption that a conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measure of levy on cigarettes, the statute has given an extended meaning to the expression "value" in Section 4(4)(d) of the Act. Plainly, the extension must be strictly construed, for what is being included in the value now is something beyond the value of the manufactured commodity itself. The corrugated fibreboard containers could be regarded as secondary packing. These were not necessary, it was emphasised by the majority of the Judges, for selling the cigarettes in the wholesale market at the factory gate. These were only employed, it was emphasised by the majority of the Judges, for the purpose of avoiding damage or injury during transit. It was perfectly conceivable that the wholesale dealer who took delivery might have his depot at a very short distance only from the factory gate or might have such transport arrangement available that damage or injury to the cigarettes could be avoided. A.N. Sen, J, who agreed with Pathak, J, observed that on a proper construction of Section 4(4)(d)(i), it was clear that any secondary packing done for the purpose of facilitating transport and smooth transit of the goods to be delivered to the buyer in the wholesale trade could not be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the degree of secondary packing which is necessary for putting the excisable article in which it is sold in the wholesale market at the factory was the degree of packing where the cost would be included in the value of the goods for the purpose of excise duty. Pathak J., as the Hon'ble Chief Justice was then, observed whether it is necessary for putting the cigarettes in the conditions in which they were sold in the wholesale market or at the factory gate. He answered that it is not. It was found that these corrugated fibreboard containers are employed for the purpose of avoiding damage or injury during the transit. It was conceivable that the wholesale dealer who takes delivery might have its depot at a very short distance only from the factory gate or may have such transport arrangements available that damage or injury to the cigarettes could be avoided. In those cases, the corrugated fibreboard containers, according to Pathak J., were not necessary for selling the cigarettes in the wholesale market. 14. I am of the opinion that the views expressed by the majority of the learned Judges were correct and it appears, with respect, that the observations of Chief Justice Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containers were not necessary to make the goods marketable. 16.In the aforesaid view of the matter, the appeals are allowed and the orders of the Tribunal are set aside. The value of the aforesaid drums should, therefore, be excluded from the assessable value for the purpose of excise duty. In the facts and the circumstances, however, there will be no orders as to costs. 17. [Judgment per : Ranganathan, J.]. - I have perused the judgment proposed to be delivered by my learned brother Sabyasachi Mukharji, J. I agree with the conclusion arrived at by him but I would like to rest it entirely on the language of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, without going into the larger questions raised by counsel and dealt with by my learned brother. 18.The assessee company is manufacturing and selling fusel oil. It also manufactures and sells another liquid known as styrene monomer. The fusel oil and monomer are supplied generally in tankers brought by the customers. Sometimes it is supplied in drums provided by the customers who are not charged anything for those drums. In the case of styrene monomer, the finding is that the supply is in tankers to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If this question is answered in the affirmative, then, in respect of the goods so sold, the cost of packing, whether incurred by the manufacturer or by the supplier, has to be automatically included in the assessable value if necessary, by addition to the sale price, except only where the packing is of durable nature and returnable to the manufacturer. He reminded us of the oft-quoted truism that, in tax matters, one has to look at what is said and that there is no question of any intendment, implication, equity or liberality in construing the taxing provision. I agree with Mukharji, J. that this contention cannot be accepted. The principle referred to by the learned Attorney General is unexceptionable but the words of a statute have to be read in the context and setting in which they occur. The proper interpretation to be placed on the words of Section 4(4)(d)(i) has been explained in the judgment of my learned brother and I am in full agreement with him on this point. There is ample internal indication in the statute to show that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer supplies the drums and charges the customers separately therefor, then, under Section 4(4)(d)(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. If on the other hand, the manufacturer asks the customer to bring his own container and does not charge anything therefor then the cost (or value) of the packing cannot be "notionally" added to, or subtracted from, the price at which the goods have been sold by the manufacturer. 22. [Judgment per : Verma, J.]. - I have the benefit of perusing the judgments prepared separately by my learned Brothers Mukharji, J. and Rangnathan, J. both of whom have arrived at the same conclusion. My conclusion also is the same. However, I append this short note only to emphasize that in my opinion also the view taken by all of us on the construction of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Act") is alone sufficient, in the present matters, to support the conclusion we have reached and it does not appear necessary to consider the wider propositions canvassed by the two sides. 23.I agree that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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