TMI Blog1980 (4) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... es of computation of excise duty, the value of the articles manufactured by Messrs Alembic Glass Industries Ltd. the Excise Authorities were not justified in including the value of packing charges in the assessable value of the glass articles manufactured by the company. The State of U.P. then realised that it had been made to over pay the excise duty on the glass bottles manufactured by it by including the packing charges therefor in their assessable value, in circumstances similar to that in which M/s. Alembic Glass Industries Ltd. had been, in the case before the Mysore High Court, made to pay the same. Accordingly, on 27th March, 1973 it moved an application before the Collector, Central Excise, Varanasi praying that for purposes of levying excise duty on glass bottles manufactured by it, the price list submitted by it should be approved without including the packing charges therein and that the excise duty payable thereon should be calculated accordingly. It further prayed that the excess excise duty already paid on the amount of packing charges be refunded to it. 2. The Assistant Collector vide his order dated 5th July, 1973 rejected the aforesaid request made by the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by way of duty on packing charges. The petitioner further prayed that the respondents be directed to re-calculate the excise duty payable by the Vibhuti Glass Works Ltd., right up to the year 1961-62 and to refund the excess realization made by them. 5. On behalf of the respondents it is claimed that the two orders passed by the Assistant Collector, Central Excise and the Appellate Collector, Central Excise are perfectly valid and that in the circumstances of the case, the value of the packing charges has been correctly included in the assessable value of the articles manufactured by the petitioner. 6. Section 3(1) of the Central Excises and Salt Act, 1944 lays down that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in, or imported by land into any part of India. Item No. 23-A of Schedule I provides for payment of ad valorem duty at the rate mentioned therein on the manufacture of glass and glassware which expression includes within its ambit glass bottles as well. Section 4 of the Act, which lays down the criteria for determining the value of goods for purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or certain money consideration and further agrees with the customers to pack those goods on payment of packing charges. In such a case the packing charges collected by the manufacturer will not form part of the assessable value of the goods for purposes of calculating the excise duty payable thereon. It will thus be seen that each such transaction has to be scrutinized with a view to find out the precise money consideration for which the manufacturer agrees to transfer the property in the goods manufactured by him to its customer. 7. In the case of A.K. Roy and another v. Voltas Ltd. - 1973 S.C. 225 = 1977 E.L.T. (J 177), the Supreme Court, while interpreting the provision of section 4(a) of the Act pointed out that wholesale market does not always mean that there should be an actual place where the articles are sold and bought on wholesale basis. These words can also mean the potentiality of the articles being sold on a wholesale basis. So even if there is no market in the physical sense of the term at or near the place of the manufactured articles of like kind and quality are or could be sold that would not in any way effect the existence of market in the proper sense of the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges involved in the transport of the article. 8. Observations made by the Supreme Court in the aforementioned case make it clear that whatever cash price that a manufacturer charges from a customer in the normal course of business for selling the goods in wholesale at the factory gate is the wholesale cash price and that it is this amount which represents the manufacturing cost plus the manufacturing profits. Of course, any amount charged by the manufacturer over and above the price (cash consideration for transferring property in the goods sold) in the wholesale would not go to form part of the sale price. 9. This matter has been made absolutely clear in a subsequent decision of the Supreme Court in the case of Atic Industries Ltd. v. H.H. Dava - 1975 I SCC 499 = 1978 E.L.T. (J 444) wherein the learned Judges of the Supreme Court observed thus : "There is, therefore, no doubt that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arms length and in usual course of business the wholesale cash price charged by him to the dealer less trade discount would represent the value of the goods for purposes of assessment of excise. That w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Department. Although in this application the petitioner explained the loss which it was suffering because of non-exclusion of packing charges from the assessable value of the goods manufactured by it, it did not even whisper that the amount mentioned in the price list in fact represented only the consideration for which the petitioner had agreed to sell the goods manufactured by it to its customers in wholesale but also consideration for what it had undertaken to do after the goods had been sold. There is nothing in the application even to remotely suggest that the petitioner had at any time agreed to supply the bottles to its customers in unpacked condition or that if any customer agreed to take delivery of goods in unpacked condition the price charged from them would be correspondingly reduced. There is also no averment in the application that in case a particular customer wanted the goods to be packed in special packing the charges in respect of the packing in straw and gunny bags were deducted and the cost of the special packing was added thereto. It is true that in the appeal filed before the Appellate Collector the petitioner did mention that the mode of packing vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take delivery of the goods in unpacked condition it wanted the petitioner to reduce its price. The letter does not indicate either that Ayurved Sewa Ashram or any other customer of the petitioner had agreed to purchase the bottles at a price lower than that mentioned in the approved price list and that it were the packing charges together with the agreed price that came to be mentioned in the price list got approved by the petitioner. 11. In the circumstances we are not satisfied that the petitioner has been made to pay excise duty or anything other than the cash price for the wholesale of the goods manufactured by it. It is, accordingly, not entitled to any relief claimed in the writ petition. 12. We, however, find that there is some confusion in the minds of the Excise Authorities also in this regard when they claim that the value of the packing material being a part of the manufacturing process, it has necessarily to be added to the price for which the petitioner agrees to sell the goods to its customer in wholesale, for the purpose of determining their assessable value. This leads to an apprehension that even if the contract of sales entered into between the petitioner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re packed in grass and gunny bag and in the other card board or green board cartons were used for packing. The type of packing depended upon the customers' instructions. The customers who bought the bottles in grass and gunny packing were not charged anything extra for packing but those who insisted on carton packing were charged actual cost of the packing material. Even this was not charged if the buyer themselves supplied the cartons for packing. The authorities under the Act took the view that where the customers supplied the cartons for packing and the petitioner supplied the goods in the cartons, the company should notionally work out the packing charges on the basis that the said packing material was purchased and used by the company at its cost. They accordingly levied the excise duty on the wholesale price of the bottles and the packing charges. Further up to June 1, 1968, the approved price list did not mention the packing charges but it was separately shown in the invoices. From June 1968 the company was forced to include the packing charges in the price list of its article and the same was separately shown in the invoices prepared by the company. The petitioner claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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