TMI Blog1989 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... r cartons are packed. The question is not whether these goods could be so sold, but the question is whether these goods are so sold usually and as such used to become marketable in such manner. In my opinion, there has been a misdirection by the Tribunal on this aspect of the matter. If the above be the true test, then the judgment and the order of the Tribunal must be set aside and the appeal must be allowed and the matter remanded back to the Tribunal to determine afresh this question from the stand point indicated above. Appeal allowed. - 2043 (NM) of 1989 - - - Dated:- 19-10-1989 - Sabyasachi Mukharji and S. Ranganathan, JJ. [Judgment per : Sabyasachi Mukharji, J.]. - This is an appeal under Section 35L(b) of the Central Excises Salt Act, 1944 (hereinafter called 'the Act') from the judgment and order of the Customs, Excise Gold {Control) Appellate Tribunal, New Delhi, (hereinafter called 'the Tribunal') dated 28th November, 1988. 2. M/s. Ponds India Ltd. (hereinafter referred to as 'the respondent') used to manufacture talcum powder and face powder falling under Tariff Item 14F of the Central Excise Tariff, which are now under sub-heading No. 3304.00 and wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the Hon'ble Supreme Court in the case of Godfrey Philips and which has been followed by different High Courts also from time to time. First of all, it is necessary to consider whether the goods sold by the appellants viz. talcum powder and face powder required an outer carton packing for purpose of safety in transit, which was the case before the Hon'ble Supreme Court in case of M/s. Godfrey Philips. It cannot be disputed that talcum powder and face powder are packed either in metal containers or in plastic packing also of cardboard packings, which are inner cartons and contain one dozen. The same are then put in the master carton for purpose of delivery to wholesale dealers. In the Hon'ble Supreme Court's judgment, it is stated that the corrugated fibre board containers are employed only for purpose of avoiding damage or injury during transit. But that is not as in the case of the appellants. There is no likelihood of any damage or injury to the tins or the plastic containers employed as a primary packing even if the goods are transported without the outer packing. Unlike cigarettes, even dampness is not going to affect the goods because they are hermetically sealed whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly question for determination was, whether the cost of third stage packing, the outer carton, intended for transport can be included in the assessable value. It was pleaded that all goods were cleared from the factory in the outer cartons with the smaller carton containing dozen containers of powder. It was further contended that the facts of this case were same as in the case of cigarettes dealt with by this Court in Union of India Ors. v. Godfrey Philips India Ltd. [1985 (22) E.L.T. 306 S.C. = 1985 3 Suppl. SCR 123]. It is contended that in view of the said decision of this Court, cost of cartons was included only if packing was necessary for the sale of goods in the wholesale market. It is submitted that it was not so necessary for sale. The Tribunal noted that the question of inclusion of cost of secondary packing in Section 4(4)(d)(i) of the Act, be it at the first stage, second or third stage of packing, has to be decided in each case depending upon the facts applicable. The Tribunal found that so far as the smaller carton is concerned, the inclusion of the cost of the same in the assessable value was not in dispute and the appellants have conceded that the value is includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue seeks to challenge this basis. What is to be included in the value, has to be determined in terms of Section 4(4) (d) (i) of the Act. The question has been examined from all points of views by this Court. 5. The question of secondary packing was examined by this Court in Bombay Tyres International's case (supra). There, this Court observed that for the purpose of determining the 'value', broadly speaking both old Section4(a) and the new Section 4(1) (a) speak of the price for sale .in the course of wholesale trade of an article for delivery at the time and place of removal, namely, the factory gate. Where the price contemplated under the old Section 4(a) or under new Section 4(l)(a) is not ascertainable, the price is determined under the old Section 4(b) or the new Section 4(l)(b). Now, the price of an article is related to its value (using this term in a general sense), and into that value have poured several components, including those which have enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber that while packing is necessary to make the excisable article, marketable, the statutory provision calls for strict construction because the levy is sought to be extended beyond the manufactured article itself. Therefore, this Court observed 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. To that extent, this Court observed, the cost of secondary packing cannot be deducted from the wholesale cash price of the excisable article at the factory gate. It was further held therein that if any special secondary packing is provided by the assessee at the instance of a wholesale buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such packing shall be deducted from the wholesale cash price. Therefore, it is clear by virtue of that decision that the cost of 'packing which is necessary to make the excisable article marketable, that is to say, in which it is generally sold in the wholesale market at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) (d) (i) of the Act provides an exclusive definition of the term "packing" and it includes not only outer packing but also what may be called inner packing. The question that the Chief Justice posed was not for what purpose a particular kind of packing was done. The test was whether a particular kind of packing was done in order to put the goods in the condition in which these were generally sold in the wholesale market at the factory gate and if these were 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. Pathak, J. (as the learned Chief Justice was then) and Sen, J. gave separate judgments in the aforesaid case. Setting out the passage from the Bombay Tyres International's case (supra), which is referred to hereinbefore, Pathak, J. posed the question : is the packing necessary for putting the cigarettes in the condition in which they are generally sold in the wholesale market at the factory gate? And answering that question, Pathak, J. held it is not. It is true that there is a divergence betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such or could these goods be sold without the containers, drums or packing? This Court in that case took into account the fact that 90% of the goods were delivered in tankers belonging to the assessee and only 10% of the goods were in packed condition at the time of removal. This was taken as an indicia of in what condition of packing the goods are sold. As mentioned hereinbefore, that principle has been clearly laid down in the Bombay Tyres International's case (supra) in the sense that only that degree of secondary packing which is necessary for putting the assessable article in the condition in which it is generally sold in the wholesale market should be included in the 'value' of the article. The majority judgment in Godfrey Philips' case (supra) also clarified this position. It is true that Pathak, J. and Sen, J. made it clear that secondary packing done for the purpose of "facilitating transport and smooth transit of the goods to be delivered to the buyer in the wholesale trade would be included in the value". Chief Justice Bhagwati held in the said case that the fibre board containers in which the cigarettes were packed fell within the definition of 'packing' in the Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employed only for the purpose of avoiding damage or injury to the goods during transit. But it may be indicative of the fact that the goods are so sold. 8. It may be mentioned in this connection that our attention was drawn to the unanimous order of three-Judge Bench presided over by the Chief Justice Bhagwati of this Court in Civil Appeals Nos. 642-45 of 1982 in Geep Industrial Syndicate Ltd. v. The Union of India Ors. There, the question that arose for determination was whether the cost of secondary packing in wooden boxes was liable to be added in determination of the value of batteries and torches for the purpose of excise duty. The torches and batteries manufactured by the appellants were first packed in polythene boxes and then these polythene boxes were placed in cardboard cartons. There were certain varieties of batteries which were packed directly in cardboard cartons. There was no doubt that packing in polythene bags and cardboard cartons was includible in the determination of the value of batteries and torches for the purpose of levy of excise duty. The question was whether the wooden boxes in which the cardboard cartons were placed at the time of delivery at the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily done or mainly done for protecting the goods, and not for making the goods marketable should not be included. In the instant case, therefore, could the powder be sold in smaller cartons at the wholesale market? The fact that these were usually sold in the wholesale market would be a good pointer for this question. Having considered the order of the Tribunal, which I have set out hereinbefore, I am of the opinion that the Tribunal was in error in approaching the problem before it by looking at the question whether the goods packed in the smaller cartons could be sold in a wholesale market in the course of wholesale trade at the factory gate without the outer cartons in which the smaller cartons are packed. The question is not whether these goods could be so sold, but the question is whether these goods are so sold usually and as such used to become marketable in such manner. In my opinion, there has been a misdirection by the Tribunal on this aspect of the matter. If the above be the true test, then the judgment and the order of the Tribunal must be set aside and the appeal must be allowed and the matter remanded back to the Tribunal to determine afresh this question from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Philips and Geep. In these cases, the conclusion of the Court was that the cost of packing of the goods in "corrugated fibre containers" and "wooden boxes" respectively was not includible in arriving at the assessable value. Had the matter been free from authority, one might have been inclined to agree with the reasoning of Bhagwati, C.J., that the condition of packing in which the goods are usually placed in the wholesale market would be conclusive of the issue and that, the condition in which the goods are generally placed in the wholesale market notwithstanding, a theoretical enquiry by the excise authorities into the purpose of such packing or as to whether such packing was "necessary" or not would be totally uncalled 4 for. Indeed, this was the test applied by one of us (Mukharji, J.) in Hindustan Polymers (supra) for holding that the cost of drums for packing fusel oil was not includible in the assessable value because the goods viz. fusel oil was generally sold in the wholesale market in the raw state, without any packing whatever, leaving it to the wholesale consumer to draw it from the manufacturer's tanks into his trucks, containers or drums. It will be appreciated that ..... 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