TMI Blog1984 (2) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... and wooden boxes, etc. used by them for packing of biscuits and, therefore, the petitioner company was liable to pay a sum of Rs. 1,27,031.97 as basic excise duty and Rs. 6351.34 as special excise duty. The correctness of this demand was contested before the Assistant Collector of Central Excise. According to the petitioner, the company sells biscuits in the wholesale market and at the factory gate duly packed in tins/corrugated boxes/cartons and, therefore, the entire value of the tins/corrugated boxes should be excluded from the assessable value. The company had also contended before the Assistant Collector that tins or corrugated boxes were returnable and durable in nature. The Assistant Collector took the view on the decision of the Madhya Pradesh High Court in Birla Jute Manufacturing Co. Ltd. v. Union of India and Others, 1980 E.L.T. 593, that in order that the value of the packing should be excluded, the packing had to be returnable by the buyers under the terms of the sale and the assessee had not brought forth any contract wherein it was agreed upon between the assessee and the buyers that the packing would be returnable. The Assistant Collector, therefore, took the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound." Mr. Hidayatullah contended that what was required for the purposes of excluding the packing was that the packing had to be durable and returnable. With regard to the word 'durable' the learned Counsel contended that the dictionary meaning of the word 'durable' was "able to exist for a long time". The word 'returnable' must be construed as meaning "capable of being returned" and, according to the learned Counsel, what was relevant and material for deciding whether the value of the tin containers and the corrugated fibre containers was excludible or not was whether these containers were capable of being returned. According to the learned Counsel, the tin containers and the corrugated fibre containers, when they were used for secondary packing, were both durable and capable of being returned and, therefore, in terms of the definition of 'value' reproduced above, the cost of such packing had to be excluded for the determination of value of the excisable goods. 5. Mr. Sethna appearing on behalf of the Department has contended that having regard to the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the test has now been laid down by the Supreme Court that if a secondary 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, then the degree of secondary packing which is necessary is the degree of packing whose cost can be included in the value of the article for the purpose of excise duty. In so far as the present case is concerned Mr. Sethna has contended that the tin containers and the corrugated fibre cartons are secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate and, therefore, the petitioner company was not entitled to have the value thereof excluded for the purposes of calculation of the excise duty. 7. How, if the matter had merely rested there, there might not have been much difficulty in holding that the degree of packing involved in the instant case is that degree of secondary packing which is necessary for putting the excisable article in the condition in which it is sold in the normal course to the wholesaler at the factory gate and in view of the observations o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the second requirement of being returnable by the buyer, what was obviously intended was that the durability must be of such a nature that the packing is capable of being re-used by the manufacturer. The possibility of re-use must, therefore, be established before a packing can be held to be of a durable nature. 10. When we come to the latter part of the definition, according to Mr. Hidayatullah, it is enough if it is shown that a packing is capable of being returned and, according to the learned Counsel, there could not be any obligation on the buyer to return and a consequent obligation on the manufacturer to accept the packing when it is returned. This contention, in our view, overlooks the fact that the words used by the legislature are "is returnable by the buyer". The words are not "of a durable nature and returnable by the buyer". The use of the word 'is' is relevant and is clearly an indication of a returnability, being a term of the contract between the manufacturer and the wholesaler. It is undoubtedly true that one of the dictionary meanings of the word 'returnable' is "capable of being returned" as given in Webster's Third New International Dictionary. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, the provision concerned [section 4(4) (d)(l) must be so construed that even if the contract does not provide for the return of the durable packing must be excluded. We are unable to agree with the submission in the face of the clear language of the provision. The expression "returnable by the buyer to the seller" places the matter beyond the pale of controversy. 'Returnable' means returnable as per agreement between the buyer and the seller. What else can it mean ? When the cost of such packing is included in the price by the seller, it is obvious that it is so done in order that the durable packing is returned- it is a sort of a security for the return of the packing. The basic idea is that when by the contract of sale, the sale-price of the excisable article is to be unleaded by the packing factor and the packing is to be returned in specie, the cost of packing does not form a part of the sale price and cannot, therefore, be included in the valuation for the purpose of computation of the levy." We are in respectful agreement with the view taken by the Full Bench of the Gujarat High Court. 12. We may also refer to the decision of the Madhya Pradesh High Court in Birla Jut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the observations of the Supreme Court in the order dated 15th November, 1983 in the Bombay Tyre International's case reported in 1983 E.C.R. 2233D (S.C.). This order is in the nature of a clarification of the earlier decision dated 7th October, 1983. With regard, to the trade discount, the Supreme Court observed as follows :- "Discounts allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price." According to Mr. Ganesh, the Supreme Court has clearly indicated that if discount was being given as a result of established practice, that was liable to be deducted from the value and consequently by analogy, the returnability must also be decided on the basis of established practice or trade usage. 16. Undoubtedly the Supreme Court has referred to the establi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
