TMI Blog1996 (8) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... peals bearing Nos. E/2502/86-A and E/2640/86-A, filed by the Revenue Appeal No. E/2502/86-A is against the Order-in-Appeal No. M-623-624/AHD/272-273/86, dated 7-8-1986 passed by the Collector of Central Excise (Appeals), Bombay in which the respondents are (i) M/s. Nirma Sales and Mfg. Corpn. and (ii) Narayan Soap Factory. In Appeal No. E/2640/ 86-A the impugned Order-in-Appeal is M-1374-1375/AHD/726-727/86, dated 26-9-1986 in which the Collector of Central Excise (Appeals), Bombay had followed his earlier decision as recorded in Order-in-Appeal No. M-623-624/AHD/272-273/86, dated 7-8-1986, referred to above. In this appeal, the respondents are (i) New Kem Chemical Industries and (ii) International Detergents (I). Group 3 : One appeal bearing No. E/215/87-A filed by the Revenue against the Order-in-Appeal No. M-1381/AHD/729/86, dated 6-11-1986 passed by the Collector of Central Excise (Appeals), Bombay in which the respondents are M/s. K.K. Patel. 2. All these appeals involve common issues of packing, commission and handling charges. They were heard together and are being disposed of by this common order. 3. The goods involved in these proceedings are detergent washing powder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that they were not eligible for deduction from the sale price to arrive at the assessable value, and on these points, the assessees are in appeal before us. 4. We have been benefited by the analysis made by Sr. Advocate, Shri D. Dave and Shri G.D. Sharma, JDR. We have carefully considered the submissions made by both the sides and have gone through the facts and circumstances leading to the present controversies. 5. First, we will take-up the issue of secondary packing. Where the goods are delivered at the time of removal in a packed condition then their assessable value for the purposes of Section 4 of the Act will include the cost of such packing. The only exception is when the goods are delivered at the time of removal in a packing which is of a durable nature and is returnable by the buyers to the assessee. In such a situation the cost of such packing, which is of a durable nature and is returnable by the buyer to the assessee, is not includible in the assessable value of the goods under assessment. The nature of the packing, whose cost is includible in the assessable value of the goods in question, is to be determined by the fact as to how and in what condition, pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the individual polythene packs have to be placed in the larger cartons or container. Even if a wholesale dealer carries on business within a reasonable distance from the factory premises he will not accept individual pack/cake at the factory. The wholesale buyer is not a consumer. He further sells the goods down the line in the stream of trade to other wholesale dealers/retailers. For the wholesale dealer standing at the factory gate and asking for delivery of quantities in wholesale lot, it is not the question of facilitating the smooth transport or the possibility of the damage. For him, packing in a larger container in which a number of primary packs are packed is a basic requirement of delivery as such. 7. There is no evidence that any sale in wholesale lot was effected without such secondary packing in the form of gunny/HDPE bags and cartons/boxes. In fact no delivery is possible without such secondary packing. The powder and the cakes could not be delivered in the wholesale trade without this packing. It is seen from some of the delivery challans on record that number of bags were to be specifically recorded therein. In the statement of sales, the rate is shown as per 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated amount. In the agreements on record, there is no clause about packing what to talk of the return- ability of the packing. In this connection, reference may be made to the Hon ble Supreme Court s decision in the case of Mahalakshmi Glass Works Pvt. Ltd. v. C.C.E., Bombay - 1988 (36) E.L.T. 727 (SC) = 1988 (2) SCALE 111 at page 118 wherein the Hon ble Supreme Court had held that there being no evidence of the agreement that the cartons and gunny bags were returnable, they were not returnable for the purpose of Section 4(4)(d)(i) of the Act. 11. The whole of the case law on the subject of the secondary packing had been summarised by the Hon ble Supreme Court in their latest decision in the case of Government of India v. Madras Rubber Factory Ltd. reported in 1995 (77) E.L.T. 433 (SC). Paras 43 and 44 from that judgment are extracted below : 43. The position emerging from the review of the decisions aforesaid may now be summarised each and every decision has accepted and acted upon the law laid down in Bombay Tyre International. The test evolved in the said decision has been expressly reiterated in all the judgments, though it is a fact that there has been some divergence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is essential. It may be that in applying the principle having regard to the facts of a given case, there may be some divergence in conclusion but so far as the principle - the relevant test to be applied - is concerned, there should be no uncertainty. 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. 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 emphasis 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. If, however, the assessee wishes to challenge the correctness of the findings of fact recorded by the Assistant Collector, the proper course is to file an appeal as provided by law." 12. From the facts and circumstances of these cases and the case law on the subject there is no doubt that the cost of the gunny/HDPE bags and that of boxes/cardboard cartons is includible in the assessable value of the detergent washing powder/detergent cakes. To that extent the view taken by the Collector (Appeals), Central Excise is not correct and the Revenue s appeals on this ground are allowed. 13. Now coming to the question of the commission paid by the assessees to their agents. The manufacturers had claimed deduction from the assessable value of the commission paid by them to their consignee distributors who sold the goods to the buyers on behalf of such manufacturers at prices fixed by those manufacturers. The goods were disposed of by the consignee distributors on behalf of the manufacturers. They were the agents of the manufacturers. They were not the wholesale buyers for the purpose of Section 4 of the Act. The sale proceeds had to flow back to the manufacturers. In this connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es recoverable from the Distributor and if there has been any excess recovery during the Accounting year, such excess recovery shall be refunded to the Distributor." 14. The Collector of Central Excise (Appeals) on page 5 of his Order-in-Appeal No. M-1277-1279-AHD/687-689/86, dated 26-8-1986 had recorded as under :- With regard to the deduction claimed by the appellants on account of commission given by them to Stockists/Commission Agents, I find that according to the sale pattern of the appellants they are having distributors in different States to whom the goods are sent on consignment basis as stock transfer. The Consignee Distributors are required by the appellants to sell the goods to dealers or retailers at a fixed price. These Consignee Distributors are sending credit notes after selling the goods. Thus, according to this sales pattern it is quite clear that the sale does not take place between the distributors and the appellants but the distributors act as commission agents who sell the goods on behalf of the appellants. Moreover, the appellants are not selling their goods at the factory gate but the goods are sold by the Consignee/Commission Agents at the place of des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant to the selling agents is for services rendered by them as such agents. Such commission paid to agents for services rendered cannot be considered to be in the nature of any trade discount which may qualify for deduction in determining the assessable value of the goods for the purpose of imposition of excise duty under the Central Excises and Salt Act, 1944. 18. It is possible that in a given case, payment of what is termed as commission may, depending on the facts and circumstances of the case be in the nature of trade allowance. But every kind of trade allowance does not necessarily qualify for deduction in assessment of excise duty. Commission paid to an agent for services rendered by him in the matter of sale of the product of the appellant on behalf of the appellant on the basis of the agreement the appellant had with its selling agents cannot be considered to be in the nature of such trade discount as may qualify for deduction in the computation of the assessable value of the goods for the purpose of levy of excise duty. The commission paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer, it is not giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Tyre International Ltd. referred to above had observed, where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto to the date of delivery under the aforesaid heads cannot on the same grounds be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery. 19. Thus, the actual cost of transportation is eligible for deduction from the price at the place of delivery, and if handling charges incurred outside the factory gate are part of the cost of the transportation of the detergent washing powder/detergent cakes, from the factory gate to the place of delivery, then from the price at the place of delivery such charges on the basis of the actual evidence are eligible for deduction. The order on this account passed by the Collector (Appeals), Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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