TMI Blog1995 (12) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of M/s. Duphar Interfran Ltd. and used to recover the extra money (prises) under the heading `Packing, Forwarding and Despatch Expenses at the following uniform rate :- (i) Bottle of Lacto Calamine Lotion - 120 ml. @ 0.58 ps per bottle; (ii) bottle of Lacto Calamine Lotion - 60 ml. @ 0.38 ps. per bottle; and (iii) bottle of Lacto Calamine Lotion - 30 ml. @ 0.29 ps. per bottle, over and above the approved prices declared by the appellants in their price list. It was the further case of the Revenue that if the said Packing, Forwarding and Despatch Expenses are taken into consideration by including it in the value then in that case the appellants would not be entitled to avail the benefit of Notification No. 140/83, dated 5-5-1983 in the financial years 1986-87 and 1987-88 as they had crossed the exemption limit of value of clearances worth Rs. 15 lakhs in the preceding financial year. It was also the case of the Revenue that since the appellants were using the brand name of Duphar they were not entitled to avail the benefit of said Notification from 1-10-1987 onwards. On these allegations a Show Cause Notice dated 29-3-1990 was issued to the appellants calling upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debit Note. They also stated that the said M/s. Duphar Interfran Ltd. paid the normal prices of the product manufactured by them on the basis of the normal packing for the bottles which consist of 3-Ply double faced corrugated boxes and that it is this price which they have declared in their price lists which was duly approved from time to time. As regards the exemption under Notification No. 140/83-C.E., dated 5-5-1983 it was pleaded that the benefit was rightly availed by the appellants as the cost of special packing is not to be included in the value. As regards the demand raised for duty on the goods bearing the brand name of Duphar after amendment, the appellants submitted that after the amendment of the Notification with effect from 1-10-1987 they have been paying full duty on the branded goods and not the concessional rate of duty as alleged by the Department. Demand was also challenged on the ground that it was time barred. However, the Collector of Central Excise and Customs, Vadodara confirmed the demand and imposed different penalties and also confiscated land, building, plant and machinery, etc. with option to redeem the same as detailed out in the impugned order. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s special packing was provided by the factory of the appellants itself. Challenging these findings he contended that for the purpose of determining the value under Section 4(4)(d)(i) of the Act it is immaterial whether the special packing is provided in the factory or outside the factory. Since the test is whether a particular kind of 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 as laid down in the case of Union of India Others v. Bombay Tyre International Ltd., 1983 (14) E.L.T. 1896 (SC) = 1983 ECR 1627D (SC) and as explained in Government of India Others v. The Madras Rubber Factory Ltd. Others, 1995 (77) E.L.T. 433 (SC) = 1995 (58) ECR 385 (SC). Since the 7-Ply double faced corrugated boxes, universal folding type are employed only for the purpose of avoiding damage or injury during transit, these 7-Ply double faced corrugated boxes, universal folding type are not necessary for selling the subject goods in the wholesale market at the factory gate, their price is not includible in the value of the cost for the assessment of excise duty. To support his contention he cited the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. Further, ........... We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case. Applying the above test we proceed to decide whether in the facts and circumstances of the present case whether the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was - (i) necessary for putting the subject product in the condition in which it is generally sold; (ii) in the wholesale market at the factory gate; (iii) to the wholesale buyer. 6. In the instant case it is not in dispute that the appellants are manufacturers of LACTO CALAMINE LOTION for M/s. Duphar Interfran Ltd. according to the specifications provided by them. In their factory and the LACTO CALAMINE LOTION so manufactured are packed initially in 30 ml. bottles, 60 ml. bottles and 120 ml. bottles and these bottles are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the question, Is the packing in corrugated fibre board containers necessary for putting the cigarettes in the condition in which they are generallry sold in the wholesale market at the factory gate? and answered in the negative observing that CFCs containers were not necessary for selling the cigarettes in the wholesale market at the factory gate. In the case of Geep Indust- rial Syndicate Ltd. v. Union of India, ibid, the relevant facts were that the assessee therein was the manufacturer of torches and batteries. The torches and batteries were manufactured by it were first packed in Polythene boxes and then these Polythene packets were placed in cardboard boxes. There was no dispute about the inclusion of the value of polythene boxes and cardboard boxes. The dispute was only with respect to the cost of wooden boxes in which the card board cartons were placed at the time of the delivery at the factory gate. There was dispute between the parties whether the cardboard were packed in wooden boxes or not. It was suggested by the assessee that they were placed in wooden boxes at the time of delivery at the gate only where the delivery was taken by the wholesale dealers outside t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-Ply double faced corrugated boxes containing the bottles, namely, Lacto Calamine Lotion employed as a primary packing even if the goods are transported without the special packing that is to say 7-Ply double faced corrugated boxes, universal. folding type. This is indicative of the fact that the goods are not so sold generally in the wholesale market at the factory gate. It is also not the case of the Department that the subject product, namely, Lacto Calamine Lotion are sold in special cartons even in wholesale trade. This is further indicative of the fact that the subject goods are not so sold ordinarily in the wholesale market at the factory gate. Further we find from the agreement entered into by the appellants and M/s. Duphar Interfran Ltd. (Exhibit B ) on the record that the 3-Ply double faced corrugated boxes would be the normal packing for the bottles and the price for the subject product would be inclusive of this normal packing. This was reiterated by the appellants in their defence. The Department has not rebutted the said defence of the appellants by adducing any evidence on the record worth the salt. On the other hand it stands established on the record that the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur various customers all over India according to the advice which we shall be sending to you from time to time. In order to ensure that the bottles do not suffer any damage in transit, we request you to provide special packing in the form of 7-Ply double faced corrugated boxes, universal folding type. For this special packing, we shall be prepared to pay you separately. You may raise Debit Notes for recovery of these charges from time to time. We are interested in maintaining a uniform price for the lotion in different sizes of bottles for all the customers in India. Since we are casting the responsibility of despatching the goods to our customers, we are prepared to bear not only the special packing charges for the boxes as mentioned above but we feel shall also reimburse you for the handling and forwarding charges which you will have to specially incur. These too may be recovered from us separately." 9. From the above, it is clear that the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was provided by the appellants at the instance of the wholesale buyer i.e. M/s. Duphar Interfran Ltd. which is not generally provided as a normal fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel, Shri A.N. Haksar, that by agreement dated 10th July, 1984 (Exhibit A on the record) entered into between the appellants and M/s Duphar Interfran Limited, the appellant was to manufacture Lacto Calamine Lotion, as per the specifications given by M/s. Duphar with the trade mark or trade name Crookes Lacto Calamine and the price for the said product was to be mutually agreed upon from time to time and was to be inclusive of excise duty, but excluding freight, sales tax and other levies. By a letter dated 14th August, 1984 (Exhibit B on the record), the said M/s. Duphar Interfran Limited requested the appellants to manufacture the said product in three different sizes strictly according to their specifications and requested that the said bottles should be packed by the appellants in three ply double faced corrugated boxes which would be the normal packing for the bottles. The price for the said product would be inclusive of this normal packing. He highlighted that by this letter M/s Duphar Interfran Limited further requested the appellants to despatch the said product in different types of bottles to their various customers all over India according to their advice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod from 1984-85 to August, 1989 was time barred being issued after the expiry of the period of six months as provided under Section 11A of the Act as there was no suppression of facts by the appellants with intent to evade payment of duty especially when all the facts were known to the Department since the Office of the Department as well as the audit party have been checking and verifying their documents and records from time to time. Drawing our attention to paragraph 18.2 of the impugned order wherein the Collector of Central Excise while deciding the issue framed by him, as to whether the appellants suppressed the facts of recovering such extra charges from M/s. Duphar Interfran Ltd. turned down the plea of the appellants that there was no intention on the part of the appellants to evade payment of duty on the ground that in the case of M/s. Cosmic Dye Chem v. Collector of Central Excise, Bombay, 1984 (18) E.L.T. 6, it was held that, mere suppression of the fact or mis-statement in the information statutorily required to be supplied to the excise authorities attracts the larger period of limitation, regardless of intent to evade payment of duty. He highlighted that on appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are concerned, they are clearly qualified by the word `wilful preceding the words mis-statement or suppression of facts" which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty . It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful. 7. Now coming to the facts of the case, the appellant s case is that he thought bona fide that he need not include the value of the Rapidogens in his declaration, for the reason that the said product was fully exempt from duty under Notification No. 180/61, dated November 23, 1961. Certain facts are brought to our notice in support of this plea. It is also brought to our notice that on the date of filing of his declaration, two High Courts had taken the view that the goods exempted from duty are not includible within the definition of excisable goods as defined in clause (d) of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and followed in the case of Geep Industrial Syndicate Ltd. v. Union of India, judgment dated 2-4-1986. Even in the judgment rendered by the Apex Court in the case of M/s. Pond s India Ltd. (judgment dated 19-10-1989, reported in 1989 (44) E.L.T. 185 (SC) ), the said two judgments were not over-ruled and the case was remanded to the Tribunal only to find out as to whether the excisable goods involved therein are so sold (that is to say, sold in wooden boxes called master cartons) usually and as such used to become marketable in such manner. Even the Apex Court in its recent judgment dated 8th May, 1995 rendered in the case of M/s. MRF, has reiterated the principle laid down in the case of M/s. Bombay Tyre International, 1983 (14) E.L.T. 1896, without disturbing the findings of facts and the conclusion arrived therein by the Apex Court in the case of M/s. Godfrey Philips India Ltd. supra, and M/s. Geep Industrial Syndicate Ltd. supra. 18. In the instant case, the Collector of Central Excise in his impugned Order has not denied the factual position which was contended before him, as detailed out in paragraph 10.2 of his impugned order : (1) the normal price of the products, inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oor, Member (T)]. - I have gone through the order recorded by Learned Member Judicial Shri G.P. Agarwal but have not been able to persuade myself to agree with the findings therein. I am therefore recording this separate order. 24. Since the facts of the case have been recorded in the order passed by Member Judicial, it is not necessary for me to repeat the same. It is an admitted fact that the appellants were engaged in the manufacture of Lacto Calamine Lotion on behalf of M/s. Duphar Interfran Ltd. Bombay according to the specifications provided by them. The Lacto Calamine Lotion manufactured by the appellants is initially filled in bottles of 30 ml., 60 ml. and 120 ml. capacity and thereafter such bottles are packed in 3-ply double faced corrugated boxes. The number of bottles of each type accommodated in a single 3-ply corrugated box was as under : (i)120 ml. 10 bottles (ii)60 ml. 15 bottles (iii)30 ml. 20 bottles. The supplementary agreement regarding packing and distribution of goods between the appellants and M/s. Duphar Interfran Ltd. provides that in order to avoid damage to the bottles in transit the appellants are to provide special packing in the form of 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be excluded. Further, even if the packing is necessary" in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case......" 26. Learned Member Judicial has held that the judgment in the case of Collector of Central Excise v. Ponds India Ltd. (supra) also does not support the Department s case since the Collector of Central Excise has not said in the impugned order that the special packing in the form of 7-ply double faced corrugated boxes, universal folding type was necessary for putting the subject product in the condition in which it is generally sold in the wholesale market at the factory gate nor there is any evidence on record to that effect. In this regard reference has been made to the statement dated 29-9-1989 of the Director of the appellant company wherein he had claimed that special packing was done on way to the transport company for despatch of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price declared in the price list i.e., inclusive of the cost of 3-ply double faced corrugated boxes and they recover from M/s. Duphar Interfran Ltd. the cost of the outer 7-ply double faced corrugated boxes through separate debit notes under the heading packing, forwarding and despatch expenses . From this arrangement for manufacture, invoicing and despatch of the goods to various wholesale buyers directly from the appellants factory, it is evident that the goods are invariably supplied with special packing in the form of 7-ply double faced corrugated boxes, universal folding type and there is no evidence on record that any goods were being sold in the wholesale market at the factory gate without such special 7-ply double faced corrugated boxes. There is also no evidence on record to show that the special packing in question was of durable nature and was returnable. Since the product, namely, Lacto Calamine Lotion was marketed in glass bottle it cannot be denied that in respect of such goods in addition to the 3-ply double faced corrugated box packing, additional protection in the form of 7-ply double faced corrugated box packing was indispensable as in the absence of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. Further, even if the packing is necessary" in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case. 44. Keeping the above principle in mind, we shall now turn to the facts in Civil Appeal No. [5375] of 1995 arising out of S.L.P. (C) 4041 of 1981 (Union of India v. Hinduatan Lever) because it is in this case that the issue of cost of packing has been argued by Shri Harish Salve. The assessee claims deduction of the cost of outer packing . The Assistant Collector who examined the claim pursuant to the format order rejected the claim. He has stated in his order that in the first instance, the assessee claimed that the said packages are of a durable nature and have a ready resale value all over the country and that to avoid tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the cost of transportation of the goods from factory premises to the transport company the disputed packing, forwarding and despatch expenses recovered by the appellants from their sole buyer over and above the declared sale price, through separate debit notes, would form a part of the assessable value of the goods. LIMITATION 29. As discussed earlier, the appellants were recovering the price of the 7-ply double faced corrugated boxes which was invariably provided by raising separate debit notes on M/s. Duphar Interfran Ltd., Bombay but in the price list filed by them, from time to time, the details regarding special additional packing and price realised in respect of such additional packing was not declared even though they were under obligation to declare such details in the relevant column of the Price List. In this regard, the findings of the Collector in Paras 18 to 18.2, being relevant, are reproduced below :- 18. It is proved beyond doubt from the discussion in the preceding paragraph that the Noticee Firm collected extra money by issuing debit notes, under the guise of packing, forwarding and despatch and accordingly their submissions that they were not under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods including packing and thereafter claim deduction on account of packing the cost of which according to them was not includible in the assessable value in terms of Section 4 of the Central Excises Salt Act. Failure on the part of the appellants to disclose to the Department the recoveries made through separate debit notes in respect of special packing of 7-ply double faced corrugated boxes, universal folding type, in my view, amounted to a deliberate suppression of fact with the intention of evading duty and cannot be attributed to any bona fide belief on their part that they were not required to disclose such additional recoveries on account of special packing in the price list. Hence the judgment in the case of Collector of Central Excise v. Chemphar Drugs Linimants and Padmini Products v. Collector of Central Excise (supra) cannot be of any assistance to them. 31. In view of the foregoing, I confirm the findings of the Collector and hold that the amounts recovered on account of separate packing, forwarding and despatch expenses through debit note less the amount and can be attributed to the charge for transportation of the goods after clearance to the transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also no evidence on record to show that the special packing in question was of durable nature and was returnable. He has, however, held that since the product, namely, `Lacto Calamine Lotion was marketed in glass bottle it cannot be denied that in respect of such goods in addition to the 3-Ply double faced corrugated box packing, additional protection in the form of 7-Ply double faced corrugated box packing was indispensable, as in the absence of the same it could not have been possible to conveniently deliver the goods to the customers. 35. I have carefully considered the submissions made by both the sides and have perused the impugned order and the opinions expressed by the respective Members. The Hon ble Supreme Court in the case of Madras Rubber Factory in para 43 has laid down the test regarding the includibility of packing charges. It has been held that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the same on the basis of statements of those transporters who removed the goods from godown and the Ld. Collector had not considered any evidence of packer or transporter who removed the goods from the factory gate. The appellants had further contended that packing of these goods were not done inside the factory and generally the goods were being sold at the factory gate in wholesale trade with 3-ply double faced corrugated boxes. It is further seen that the appellants were generally packing and sending these goods under the cover of gate passes and the officials were visiting the factory every now and then and it is very strange on the part of the revenue to contend that they have not seen packings being done outside the factory gate or for that matter the goods being removed at the factory gate with secondary packing. The assessee has also contended that the goods packed in 3-ply packing had been kept in the bonded store rooms. This assertion has not been denied by the department. Therefore, it falls to reason that special packing could have been done outside the factory gate. However, in the absence of any evidence adduced by the revenue it will not be possible to come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well in time at the time of approval of classification/price list stage itself. The revenue should have granted provisional approval and after thorough enquiry and after personal scrutiny on visit to the factory, and after examining of the records, should have granted the approval. In this case the approval of Price List has been granted mechanically and despite several visits by the Revenue Officials to the factory. The department official s contention that they had not noticed these packings is little hard to believe. When goods are removed in such numbers and officials visiting the factory time and again, can it be said that no one had noticed these clearances in special packing. In the circumstance, I am constrained to agree with the views expressed by Member (J). In the result, the impugned order is required to be set aside by allowing the appeal. 37. The appeal papers shall be placed before the original Bench by passing final orders. Sd/- (S.L . Peeran ) Dated : 12-12-1995 Member (J) FINAL ORDER ORDER 38. [Order per : G.P. Agarwal, Member (J)]. - As per maiority, it is held that in the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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