TMI Blog1986 (12) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 4(4)(d) of the Central Excises and Salt Act, 1944 lays down as under : (d) 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." There is no dispute between the appellants and the department that gunny bag was a durable packing since it was capable of being re-used. The dispute is on the point whether it was returnable by the buyer to the appellants. 4. The period to which the controversy before us relates is from 1-10-1975 to 8-1-1976. During this period, cement was a controlled commodity by virtue of the Cement Control Order, 1967 promulgated by the Central Government under Section 18G and Section 25 of the Industries (Development and Regulation) Act, 1951 for the declared purpose of securing the equitable distribution and availability at fair prices of cement, the supply and distribution of, and trade and commerce in, cement. Clauses (4) and (8) of the Cement Control Order are relevant for our purpose. We reproduce them below :- 4. Power to direct sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actories (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. Dealers, stockiest and certain private consumers were issued permits by the respective District Collector or Deputy Commissioner for supply of cement from the specified factory. 6. Our attention was drawn to the following thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid judgment of the Madhya Pradesh High Court, the Union of India filed special Leave Petition before the Supreme Court (S.L.P. Civil No. 11044-45/80). The Special Leave Petition was dismissed by the Supreme Court on 30-7-1982. The Andhra Pradesh High Court and the Karnataka High Court noticed the aforesaid Madhya Pradesh High Court judgment and expressed their full agreement with it. 7. Both sides stated before us that they were not aware of any appeal having been filed against the Andhra Pradesh and Karnataka High Court judgments. They also stated that on the specific issue of exclusion of cost of cement gunny bags from the assessable value there was no contrary High Court judgments. In the circumstances, we put it to the learned representative of the department as to why, in keeping with the practice of this Tribunal, the unanimous verdict of Madhya Pradesh, Andhra Pradesh and Karnataka High Courts should not be followed by this Tribunal. Our attention was drawn to two earlier orders of this Tribunal relating to Panyam Cements and Mineral Industries Limited v. Collector of Central Excise, Hyderabad [1984 (18) E.L.T. 31] and M/s. Udaipur Cement Works, Udaipur v. Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Release Orders on record before us did not cover the entire quantity of cement cleared from the appellants factory during the material period. (5) The statutory scheme of the Cement Control Order left no area for bargaining on return ability of the bags and hence the returnability could not be considered a term of contract of sale [Reliance on AIR 1978 S.C. 449 - M/s. Vishnu Agencies (Pvt) Ltd. v. Commercial Tax Officer]. (6) The conventional practice followed in the trade regarding returnable containers was that the seller took a security deposit from the buyer and paid it back to him on the buyer returning the container to the seller. The practice followed by the appellant cement factories was different. Theirs was an outright sale of the gunny bags along with the cement packed therein, followed by re-purchase of the cement serviceable bags on their return. (7) While the pricing circular dated 1-10-1975 of the Ministry of Industry and Civil Supplies fixed the charges for packing one metric tonne of cement in 20 new as well as old bags in the ratio of 50 and 50 per cent respectively at Rs. 40.98, the re-sale price for the second hand serviceable bags was fixed at Rs. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of second hand serviceable bags which they could manage to collect. But since the controlled price of cement fixed the packing charges on the basis of 50% new and 50% old bags, the Cement Control Order deemed it necessary to put a ceiling on the use of old bags lest cement factories profiteer at the cost of the consumer. Lack of an express provision to use old bags in the Cement Control Order did not mean that Cement factories would not use old bags or would use them to an extent which is less than 50%. Nor did it mean that serviceable second hand bags became non-returnable thereby. No cement factory would think of using new bags wholly or in pre-dominant quantity and thereby lose money. This is so because the controlled price of cement did not compensate the factory for cost of new bags beyond 50%. 11. We are not the right forum before which the department should choose to challenge the vires of the boxed instruction on the reverse of Release Orders. Even otherwise, we find no substance in point No. (2) of the department. One of the declared objects of the Cement Control Order was to make cement available to consumers at fair prices. One method of keeping the cement pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in addition to Release Orders, certain invoices/challans and a circular letter to stockists issued by the cement factory of M/s. Birla Jute Manufacturing Company Limited. But we fail to see how we could come to a different conclusion on return-ability of cement bags just because the additional evidence of invoices etc. is not available to us. The Release Orders shown to us in themselves covered a substantial quantity of cement. All the Release Orders were in the same format and used the same language. There is no reason to think that the remaining Release Orders would not be in the same format and language. Further, for the sheer economics of working, which we have discussed in paragraph 10 above, it is inconceivable that there would be any cement factory which would not have made arrangements to collect and use at least 50% serviceable cement second hand gunny bags. 14. It is not correct to say that the statutory scheme of the Cement Control Order left no area for bargaining on returnability of used bags. The buyer had the choice of time and place for return. He could either return the used bags direct to the cement factory or through a collection agent of the factory. The ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an arrangement between them that it shall be returned. As we see it, it confirms the judgment of Madhya Pradesh, Andhra Pradesh and Karnataka High Courts in regard to cement. In the light of this judgment and the judgments of the Madhya Pradesh, Andhra Pradesh, Gujarat and Bombay High Courts, it would be worthwhile summarising the norms relevant to returnability of durable containers. We list the norms as under :- (1) Though 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. (2) Actual return is not relevant. What is necessary is that if the buyer choses to return the packing, the seller should be obliged to accept it and refund the stipulated amount. (3) Extent of return is also not relevant. (4) The mode of return is a matter of mutual convenience. Whether the packing is returned direct to the seller or through his collection agent m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sell, express or implied, between the buyer and the seller (the assessee) or may be one that is ordained by statute. In the latter case, the agreement between the buyer and seller and the resultant sale are implied rather than express in terms of the compulsive sanction of the statute. [Please see the minority judgment of Hidayatullah J. in AIR 1963 S.C. 1207 - (M/s. New India Sugar Mills v. Commissioner of S.T.) - approved by a majority of six to one in 1978 (2) S.C.R. 433 - (Vishnu Agencies v. C.T.O.)]. Therefore, a transfer of property in goods ordained by statute at a specified price is no less a contract of sale and in terms of the second proviso to S.4, such price also is deemed to be the normal price which in turn is the assessable value. (c) But then, in terms of an agreement to sell between the parties, the agreed price may include the price of packing or it may be charged extra. Likewise, a statute may fix the price for the goods as well as an additional price for the packing. Thus, the legislative scheme in the relevant Cement Control Order envisages an addition to the controlled price of cement of such charges as may be fixed by the Central Government in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been carried out. (f) Be that as it may, in terms of the provision, unless the two aforesaid conditions are satisfied, the cost of packing is not to be excluded in the computation of the value of assessable goods. (g) The delivery envisaged in the provision [S. 4(4)(d)], as already stated, may be pursuant to an agreement to sell between the parties or a statutory sale. Whichever it is, the provision can be understood to mean that, since there is an implied sale of and consequent change in title to and ownership in the packing material as well, the assessable value of the goods includes the cost of such packing material. Looked at in this light, where the packing is not charged extra and is durable and returnable (gas cylinders) or where the packing is provided by the buyer, there may be, in fact, no sale of and no consequent change in ownership of the packing material. If, therefore, it is only the normal price of the goods in a sale that is to furnish their assessable value, the value of unsold packing cannot form a part thereof. So also, where there has been a sale of packed material and a separate price charged for a durable packing and contemporaneously, an agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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