TMI Blog1979 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ses their buyers supply the packing material and sometimes they purchase the packing material from the market, pack the goods in it and sell them to their wholesale buyers. The petitioner-Company's buyers sometimes require a particular kind of packing, as for example, in cartons or in corrugated sheets. Others are satisfied with ordinary packing consisting of buy or straw padding in gunny bags. The petitioner further contends that under Tariff Item 17 in First Schedule to the Central Excises and Salt Act, 1944, excise duty is leviable on packing materials themselves. It is further alleged that the cost of packing material is borne by the buyer and that the petitioner show the price of the excisable goods and the price of packing materials separately in its price-list. It next alleged that price of packing material is not identifiable with the value of the excisable goods and that, therefore, excise duty cannot be levied on the composite price of the excisable goods as well as the packing material. Next the petitioner alleges that packing material is not a part of the manufacturing process. In other words, according to them, it is not incidental to manufacture. The petitioner furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that actual return of the packing material of a durable nature by the buyer is not of any great consequence. In other words, what is excluded from the value of the excisable goods is the cost of packing which is of a durable nature and which can be returned by the buyer to the assessee irrespective of whether he returns it or not. Excluding such cost of packing, the cost of other packing is required to be included in the value of the excisable goods in order to find out its assessable value for the purpose of collecting excise duty. 3. Now packing material may originate, broadly speaking, from three sources : (i) the buyer may supply the packing material and the manufacturer may pack his excisable goods in it and deliver them to the buyer; (ii) the manufacturer may buy it from the market, pack the goods in it and deliver it to the buyer, and (iii) the manufacturer may himself manufacture it, pack the goods in it and deliver to the buyer. So far as the last category is concerned, it can be sub-divided into two parts; packing material which a manufacturer manufactures may be an integral part of the process of manufacture of excisable goods of it may not be such an integr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich defines the expression "wholesale dealer". It is not necessary to make any reference to it because for the purpose of deciding this case nothing turns upon it. Mr. Patel has invited our attention to Section 3 and emphasized the fact that this section which is the charging section levies a duty of excise on all excisable goods other than salt. This aspect he has emphasized with reference to several kinds of goods specified in the First Schedule. In other words, according to him, when Section 3 is read in light of Item 23A in the First Schedule, it is very clear that the width and amplitude of Section 3 is to impose or to levy only upon glass and glassware the excise duty. According to him, therefore, Section 4 by artificially definding the valuation of excisable goods cannot go beyond the charging section and levy excise duty on something which does not form a part of the value of the excisable goods. He has in particular emphasised the fact that in case of glass and glassware packing material is absolutely independent of the excisable goods. 6. He has invited our attention in that behalf to the decision of the High Court of Bombay in Ogale Glass Works v. Union of India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court of Bombay was rendered on the basis of old Section 4, which has now been amended. At the time the expression "value" was not defined by Parliament. The amended section defines that expression and includes in the value of the excisable goods the cost of packing which otherwise would not have been included in it. The question, therefore, is whether the cost of packing could be included in the value of the excisable goods by Parliament competently under Entry 84 of the Union List. 9. Mr. Patel has argued that cost of packing is a post-manufacturing or non-manufacturing operation. According to him excise duty on packing material overreaches Entry 84 of the Union List of Section 3 of the Central Excises and Salt Act and is, therefore, a bad in law. In that context he has invited our attention to Entry 17 in First Schedule which according to him read in light of Section 3, provides for levy of excise duty on packing material. We may, however, state that reference to is not at all helpful because it refers to paper packing and not packing in wooden cartons and such other things in which generally glass and glassware are packed. He has also submitted that packing services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the manufacturer of excisable goods purchased it must have paid excise duty if otherwise it was subject to excise duty. When the manufacturer purchases in the open market and supplies it to his buyer who pays the manufacturer its price, the tax collected on this activity will partake of the character of purchase tax of sales tax. It would be purchase tax if it is levied on purchase by the buyer or the petitioner from the market and it would be sales tax if there is levy on the sale thereof by the manufacturer of the excisable goods to his buyer. It is clear, therefore, that the impost on packing material under the aforesaid circumstances falls under Entry 84 in the State List. Obviously, therefore, the Parliament cannot levy and collect it. 12. Excise duty can be levied on excisable goods. Indeed it can be levied at different stages at which the goods undergo transaction and new goods or commodities are brought into existence. Change of identity or emergence of a new article or commodity of the test for levying excise duty afresh. Where the packing material is purchased by the manufacturer from the market and is used for packing the excisable goods, there is no chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him that packing costs are no post manufacturing costs and post manufacturing profits. In our opinion, they certainly enjoy that character because they have nothing to do with the manufacturing process or activity and they are incurred after manufacturing process or manufacturing activity is over or complete. Reliance has been placed on the unreported decision of this Court in Special Civil Application No. 858 of 1974 decided by Mr. Justice J.B. Metha, and Mr. Justice M.P. Thakkar, on September 9, 1976. That decision has no application to the instant came because this Court in that case was concerned with marketing expenses included in the assessable value of excisable goods. In that case this Court upheld the contention that marketing expenses could be included in the assessable value of excisable goods. The question which has been put to us in an over-simplified form is : If marketing expenses can be included in the excisable value of excisable goods, why can the cost of packing material not manufactured by the manufacturer of excisable commodity not be as an integral and inseverable part of its manufacturing process? The reason which this Court gave while upholding that argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within Entry 54 in the State List in respect of which Parliament is not competent to legislative. We read down the definition accordingly and hold that the definition or "value" has no application to these two categories of packing matter. We are not expressing any opinion in this petition on two sub-categories of the third category of packing material because it is not necessary for us to do so in this case. 20. The petitioner has tried to file a Civil Application for amendment of the original petition in the course of the hearing of this petition. We are unable to entertain this application at such a late stage. It is, therefore, rejected. As a result of the finding which we have recorded on the definition of "value" in Section 4(4)(d), we direct the respondents to make account of the excess duty recovered by them from the petitioner from October 1, 1975 till date and submit it to the petitioner for verification on or before August 30, 1979. After it has been verified by the petitioner, the respondents shall refund to the petitioner such amount as it undisputed between them. If any part of the refund is disputed by the respondents and which petitioner claims the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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