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TMI Blog1985 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... s of cigarettes. They manufacture cigarettes in their factories and the cigarettes so manufactured are packed initially in paper/card board packets of 10 and 20 and these packets are then packed together in paper/card board cartons/outers. These cartons/outers are then placed in corrugated fibre board containers and it is these corrugated fibre board containers filled with cartons/outers containing packets of cigarettes of 10 and 20 which are delivered by the respondents to the wholesale dealers at the factory gate. It was common ground between the parties that the wholesale price charged by the respondents for the cigarettes sold to the whole-sale dealers includes not only the cost of primary packing in packets of 10 and 20, but also the cost of secondary packing in cartons/outers and the cost of final packing in corrugated fibre board containers. So far as the two items of cost, namely, cost of primary packing into packets of 10 and 20 and the cost of secondary packing in cartons/outers, are concerned, there was no dispute between the parties that the two items of cost must be included in determining the value of the cigarettes for the purpose of assessment to excise duty, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions urged on behalf of the parties and we shall now proceed to examine them. 3. We have broadly dealt with the question of cost of packing in the Judgment delivered by us in Bombay Tyre International case (supra) and it would be convenient at this stage to reproduce what we have said in that Judgment in regard to the cost of packing : "The case in respect of the cost of packing is somewhat complex. The new Section 4(4)(d)(i) has made express provision for including the cost of packing in the determination of "value" for the purpose of excise duty. Inasmuch as the case of the parties is that the new Section 4 substantially reflects the position obtaining under the unamended Act, we shall proceed on the basis that the position in regard to the cost of packing is the same under the Act both before and after the amendment of the Act.., Section 4(4)(d)(i) reads: "It is relevant to note that the packing, of which the cost is included, is the packing in which the goods are wrapped, contained or wound when the goods are delivered at the time of removal. In other words, it is the packing in which it is ordinarily sold in the course of wholesale trade to the wholesale buyer. The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packing and another. We posed the question: "Is all the packing, no matter to what degree, in which the wholesale dealer takes delivery of the goods to be considered for including the cost thereof in the-'value'?" Or does the law require a line to be drawn somewhere? "We did not answer this question specifically, leaving it to a alter date when this question would directly come up for consideration on the facts of a particular case. We, however, laid down the general proposition that "the degree of 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, is the degree of packing whose cost can be included in the 'value' of the article for the purpose of the excise duty". Where, therefore a question arises whether the cost of any particular kind of secondary packing is liable to be included in the value of the article, we would have to ask does the packed condition in which the article is generally sold in the wholesale market at the factory gate include such secondary packing? If it does, it would be liable to be included in the value of the article for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of container in which it can be said that the excisable goods are contained would be "packing" within the meaning of the Explanation and this would necessarily include a fortiorari corrugated fibre board containers in which the cigarettes are contained. When Bombay Tyre International case was argued before us, it was at one stage sought to be contended, though rather faintly, that it is only the immediate packing in which the excisable goods are contained, that is primary packing alone, which would be liable to be regarded as "packing" within the meaning of the Explanation. But this argument was given up when it was pointed out that even secondary packing would be within the terms of the Explanation, because such secondary packing would also constitute a wrapper or a container in which the excisable goods are wrapped or contained. That is why we held in the judgment in Bombay Tyre International case (supra) that secondary packing is also included within the term "packing" in the Explanation. There can therefore be no doubt that corrugated fibre board containers in which the cigarettes are contained fall within the definition of "packing" in the Explanation and if they form part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with Explanation that the packing of the goods ordinarily sold by the manufacturer in the wholesale trade is packing for the purpose of protecting the goods against damage during transportation or in the warehouse. The question is not for what purpose a particular kind of packing is done. 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 and if they are generally sold in the wholesale market at the factory gate in a certain packed condition, whatever may be the reason for such packing, the cost of such packing would be includible in the value of the goods for assessment to excise duty. Of course, as pointed out by us in the judgment in Bombay Tyre International case if any special secondary packing is provided by the assessee at the instance of a wholesale buyer which is no generally provided as a normal feature of the wholesale trade, the cost of such. special packing would not be includible in the value of the goods and would have to be deducted from the wholesale cash price. That takes us to the next contention of the respondents based on the letter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether during the period between 24th May, 1976 and 2nd November, 1982 the respondents were liable to pay excise duty on the basis that the cost of corrugated fibre board containers was includible in the value of the goods. It was contended on behalf of the respondents that the cost of corrugated fibre board containers was not includible in the value of the goods and there were two arguments urged in support of this contention. The first argument was that the letter dated 24th May, 1976 constituted an exemption under within the meaning of Rule 8 sub-rule (2) of the Central Excise Rules, 1944 and the respondents were accordingly exempt from payment of excise duty on the cost of corrugated fibre board containers used for packing the cigarettes. The second argument invoked the doctrine of promissory estoppel against the Government on the basis of the representation contained in the letter dated 24th May, 1976. The first argument is in our opinion not well-founded but so far as the second argument is concerned, we find that there is considerable force in it. Our reasons are as follows. 7. Rule 8 of the Central Excise Rules, 1944 deals with the power to authorise exemption from du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government as correctly representing the stand of the Revenue. It is significant to note that when the petitioners in Special Civil Application No. 787 of 1976 in the Gujarat High Court contended that the value of corrugated fibre board containers was not includible in the value of the goods manufactured by the petitioners, it was conceded on behalf of the Union of India and the Excise Authorities both in the affidavit in reply filed in that case as also in the course of the arguments that the cost of corrugated fibre board containers used for packing by the petitioners would not form part of the value of the goods for assessment of excise duty. The representation contained in the letter dated 24th May, 1976 could therefore legitimately be regarded by the respondents as a representation of the Central Government. The respondents could reasonably assume that such a representation could never have been made by the Central Board of Excise and Customs without the approval of the Central Government and if it did not have the approval of the Central Government, it would have been immediately objected to and the Central Government would have promptly directed the Central B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in Motilal Sugar Mills case (supra) marks a significant development in the law relating to the doctrine of promissory estoppel. The principal question debated in that case was as to whether and if so, to what extent, is the doctrine of promissory estoppel applicable against the Government. It was contended on behalf of the State of Uttar Pradesh that the plea of promissory estoppel is not available against the exercise of executive functions of the State, for the State cannot bind itself, so as to fetter its future executive action. This contention was sought to be supported by relying on the observations of Rowlatt J. in,an early decision in Rederiaktiebolaget Amphitrite v. The King, (1921) 3 K.B. 5i 0. But this Court observed in Motilal Sugar Mills case (supra) that what Rowlatt J. said in that case did not represent the correct law on the subject and pointed out that doctrine of executive necessity propounded by Rowlatt J. was disapproved by Denning, J. as he then was, in Roberston v. Minister of Pensions, (1949) 1 K.B. 227. Denning, J. categorically expressed the view in Roberston's case (supra) that the crown cannot escape its obligation under the doctrine of promi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be bound by a contractual obligation even though no formal contract in the manner required by Article 299 of the Constitution was executed. It was held by this Court that a party who has, acted in reliance on a promise or representation made by the Government, altered his position, is entitled to enforce the promise or the representation against the Government, even though the .promise or representation is not in the form of a formal contract as required by Article 299 and that Article does not militate against the applicability of the doctrine of promissory estoppel against the Government. 11. The resultant position was summarised by this Court in Motilal Sugar Mills case (supra) in the following words : "The law may therefore now be taken to be settled as a result of this decision that where the Government makes a promise knowing or intending that it would be acted on by the promises and, in fact; the promissee, acting in reliance on it, alters his position the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promises, notwithstanding that there is no consideration for the promise and the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arising out of representations made by it relying upon which a citizen has altered his position to his prejudice." The Court refused to make a distinction between a private individual and a public body so far as the doctrine of promissory estoppel is concerned. 12. There can therefore be no doubt that the doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental, public or executive, functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. We must concede that the subsequent decision of this Court in Jeet Ram v. State of Haryana, (1980) 3 S.C.R. 689 takes a slightly different view and holds that the doctrine of promissory estoppel is not available against the exercise of executive functions of the State and the State cannot be prevented from exercising its functions under the law. This decision also expresses its disagreement with the observations made in Motilal Sugar Mills case that the doctrine of promissory estoppel cannot be defeated by invoking the defence of executive necessity, suggesting by necessary implica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. This aspect has been dealt with fully in Motilal Sugar Mills case (supra) and we find ourselves wholly in agreement with that has been said in that decision on this point. 14. We may now turn to examine the facts in the light of the law discussed by us. Here a representation was undoubtedly made by the Central Board of Excise and Customs and approved and accepted by the Central Government, that the cost of corrugated fibre boards containers would not be includible in the value of the cigarettes for the purpose of assessment to excise duty. The respondents acted upon this representation and continued the use of corrugated fibre board containers for packing the cartons/outers of cigarettes and did not recover from the wholesale dealers the amount of excise duty attributable to the cost of such corrugated fibre board containers during the period 24th May, 1976 to 2nd November, 1982. It would be most inequitable to allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld therefore pass an order in these appeals in terms of the format order, which has been evolved by consent of parties in the Bombay Tyre International case (supra) and I would direct that the Assessing Authorities shall assess the excise duty under the format order in the light of the observations contained in this Judgment. There will be no order as to costs. 16. [Judgment per : Pathak, J.]. - I have perused the judgment proposed by the learned Chief Justice in these appeals and while I find myself in agreement with his views on the question of promissory estoppel, I am unable, with regret to subscribe to the view expressed by him on the question of secondary packing. I propose, therefore, to set down my own view in the matter. 17. In Union of India v. Bombay Tyre International Ltd. - (1984) 1 S.C.C. 467 = 1983 E.L.T. 1896 (S.C.) while construing sub-clause (i) of clause (d) of sub-section (4) of section 4 of the Central Excises and Salt Act, 1944, which provides for including the cost of packing in the determination of "value" for the purpose of excise duty, we observed that the cost of primary packing as well as of secondary packing in the sense explained in that case would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the factory gate or may have such transport arrangements available that damage or injury to the cigarettes can be avoided. The corrugated fibre board containers are not necessary for selling the cigarettes in the wholesale market at the factory gate. 19. I think the position expressed by the Central Board of Excise and Customs in its letter dated May 24, 1976 was perfectly right when it declared that the Collector of the Central Excise has been instructed that "the cost of corrugated fibre board containers in question does not form part of the value of cigarettes for the purpose of excise duty". 20. The assessing authorities will now proceed to make an assessment in accordance with the opinion expressed in this judgment. 21. [Judgment per : A.N. Sen, J.]. - I have read the judgment proposed to be delivered by the Learned Chief Justice in this appeal. After giving my anxious and careful consideration, I find with regret that I cannot persuade myself to agree with the view expressed by the Learned Chief Justice on the question of secondary packing. On the other question namely, the .question of promissory Estoppel, I am in entire agreement with his views. 22. The Learned Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acking a number of packets of cigarettes in a larger carton for delivery to the buyer in the wholesale trade according to his requirement constitutes secondary packing but the cost of this packing on a true construction of Section 4(4)(d)(i) of the Act read with Explanation to that clause must also be included in the value for the purpose of levy of excise duty. Packets of cigarettes in the larger cartons are to be delivered to the buyer in the whole-sale trade to enable the buyers in the wholesale trade to sell to the retail sellers in the same condition or by removing the packets from the cartons. Packets of cigarettes so packed in cartons can easily be delivered to the buyers in the course of wholesale trade at the factory gate without any further packing. If the buyer who is to take delivery in the course of the wholesale trade at the factory gate, carries on business within a reasonable distance from the factory premises, the wholesale buyer will very likely not want to have cartons of cigarettes further packed in corrugated fibre board containers. Cartons of cigarettes are usually further packed in corrugated fibre containers for facilitating transport in the course of delive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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