TMI Blog2005 (2) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and the conclusion of the Tribunal cannot be supported. In these cases it is not disputed that there is no agreement or arrangement making them returnable. Thus even though they may be considered to be durable the cost of wooden cases are includible in the value of the glass sheets sold by the Respondents. Appeal allowed. - 3819 of 1999 - - - Dated:- 22-2-2005 - S.N. Variava, Dr. A.R. Lakshmanan and S.H. Kapadia, JJ. [Judgment per : S.N. Variava, J.]. - These Appeals are against Judgments of the Customs, Excise Gold (Control) Appellate Tribunal (CEGAT). As the question of law involved in all these Appeals is the same, they are being disposed off by this common Judgment. 2.The question for consideration is whether the cost of wooden crates/boxes in which the Respondents pack their product, i.e., Glass Sheets, is includible in the assessable value of the glass. 3.For the sake of convenience, facts in Civil Appeal No. 3819 of 1999 will be referred to. In Civil Appeal No. 3819 of 1999 CEGAT has held in favour of the Respondents by following an earlier decision of CEGAT, dated 9th January 1987, in that Respondents' own case. In that case, the Order was bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds any other thing in which or on which the excisable goods are wrapped, contained or wound also show that the term Packing has a very wide connotation and includes anything used for wrapping and/or containing the excisable goods. Even though the statutory provision is clear and unambiguous, a concept of primary and secondary packing was developed by this Court in the case of Union of India v. Bombay Tyre International Ltd. [reported in 1983 (14) E.L.T. 1896]. In this case, it was recognized that the degree of packing would vary from one class of excisable goods to another. It was held that packing may be of different grades. It was held that the packing may be necessary to make an article marketable. It was held that by including the cost of packing the Legislature has sought to extend levy beyond the manufactured article itself. It was held that thus a strict construction must be put upon the said provision. It was held that only the cost of packing which was required to make the goods marketable would be includible in the value of goods. It was held that if any additional or special packing is provided, which packing is not generally required or provided as a normal feature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available that damage or injury to the cigarettes can be avoided. The corrugated fiber board containers are not necessary for selling the cigarettes in the wholesale market at the factory gate. Sen, J. :- Cartons of cigarettes are usually further packed in corrugated fiber board containers for facilitating transport in the course of delivery to buyers in the wholesale trade where there is any possibility of the cartons becoming otherwise damaged in course of transit. Naturally in such cases, delivery of the cigarettes in those cartons is effected to the buyers at the factory gate after further packing these cartons in corrugated fiber board containers. The further packing of cartons in which the packets of cigarettes have been packed in the corrugated fiber board containers is not, indeed, in the course of delivery to the buyer in the wholesale trade at the factory gate but is only for the purpose of facilitating the smooth transport of the cartons containing the packets of cigarettes to the buyer in the wholesale trade. 8.The qualification laid down by the learned Judges that the costs of such packing was not includible as this packing was merely to prevent damage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are generally sold in the wholesale market at the factory gate in 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. 11.Reference was then made to the Geep Industrial Syndicate Ltd. case and it was held as follows :- In my opinion, the correct position seems to be that the cost of that much of packings, be they primary or secondary, which are required to make the articles marketable would be includible in the value. How much packing is necessary to make the goods marketable is a question of fact to be determined by application of the correct approach. Packing, which is primarily done or mainly done for protecting the goods, and not for making the goods marketable should not be included.... 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. (emphasis supplied) 12. In the case of Hindustan Polymers v. Collector of C. Ex. [reported in 1989 (43) E.L.T. 165] the Appellant-assessee was engaged in the manufacture and sale of fusel oil. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale market at the factory gate is to be included, the Court enquired in Godfrey Philips (majority opinion) whether the CFCs were necessary for such delivery. The Court found on the facts of that case that they were not so necessary and accordingly held that the cost of CFCs is not includible. In Geep Industrial Syndicate, the Court adopted the approach of the majority in Godfrey Philips, on the footing that the wooden boxes were not 'necessary' for delivery at the gate. In Ponds, however, both the learned Judges constituting the Bench laid down tests consistent with the one in Bombay Tyre International. Indeed, Ranganathan, J. understood the majority decision in Godfrey Philips and the decision in Geep Industrial Syndicate in the same manner as we have done - a fact emphasised by us hereinabove, while discussing the ratio of Ponds. As pointed out by us hereinabove, it would not be reasonable to infer any conflict or deduce any inconsistency between the ratio of Bombay Tyre International and the ratio of Godfrey Philips for the reason that not only both Benches were of coordinate jurisdiction (Bombay Tyre International was thus binding upon the latter Bench) but also becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be to see whether the goods are capable of reaching the market without the type of packing concerned. Each case would have to be decided on its own facts. It must also be remembered that Section 4(4)(d)(i) specifies that the cost of packing is includible when the packing is not of a durable nature and returnable to the buyer. Thus, the burden to show that the costs of packing is not includible is always on the assessee. Also under Section 4(a) the value is to be the normal price at which such goods are ordinarily sold in the course of wholesale trade for delivery at time and place of removal. Thus, at this stage, it would be convenient to refer to the case of A.K. Roy Anr. v. Voltas Limited [reported in 1977 (1) E.L.T. (J 177)] wherein the concept of wholesale market has been explained in the following terms :- We do not think that for a wholesale market to exist, it is necessary that there should be a market in the physical sense of the term where articles of a like kind or quality are or could be sold or that the articles should be sold to so-called independent buyers. Even if it is assumed that the latter part of s. 4(a) proceeds on the assumption that the former part wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m their factory gate duly packed in wooden cases and they are sold as such both from the factory gate and through the depots. It has been found that the Respondents had not led any evidence to show that the goods were sold in paper packing as claimed by them. 17.In other cases facts may vary to some extent but the essential fact is that sheet glass is a very delicate item which is liable to crack or shatter. Mr. Venkatramani has submitted that the fragile nature of glass sheets is sufficient to show that they cannot be marketed without special packing or arrangement. He submitted that Respondents had led no evidence to show that the glass sheets were marketable without special packing. 18.On the other hand, Mr. Bagaria submitted that the Respondents in Civil Appeal No. 3819 of 1999 had relied upon an earlier Order passed by the Tribunal in their own case. He submitted that that Order clearly established that the Respondents' products, namely, glass sheets, were marketable without their being packed in wooden cases. He submitted that the Respondents therefore did not need to lead any further proof to show that the glass sheets were marketable without wooden packing. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r judgment in the case of M/s. MRF Limited - 1987 (27) E.L.T. 553 (S.C.). In regard to special packing, the criterion to judge is whether it is essential for delivery of the goods in wholesale at the factory gate. Secondly, it is not the relative figures of percentages of deliveries in ordinary packing and special packing which determine the issue but the question of principle whether the special packing is necessitated only by the consideration of safety of the goods during long distance transport or it is essential for wholesale deliveries effected even at the factory gate. We have to remember in the present case that the factory of the appellants was situated in a village and their nearest wholesale market at Calcutta was also 45 Kms. away. The local demand being limited, there could not be very large number of local deliveries at the factory gate. Their nearest big wholesale market was at Calcutta which itself was 45 Kms. away from their factory. The appellants explained to us that some of their Calcutta customers who wanted to sell their goods locally at Calcutta preferred to purchase the goods in ordinary packing while some others who proposed to re-sell the goods to outstati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve special trucks. Thus, wooden packing or frame packing would be necessary to make them marketable. In our view, the finding of the Tribunal, on the facts, is erroneous and unsustainable. 22.That brings us to Mr. Bagaria's submission that in the case of Respondents (in Civil Appeal No. 3819 of 1999) the Tribunal had, by its Order dated 9th January 1987, held that the cost of the wooden cases was not includible in the value of the glass sheets. As we have indicated hereinabove, this Order of the Tribunal was based on a finding of fact that barring stray instances, glass was delivered to the local customers. In that case, the Tribunal has failed to inquire or look into the question as to who were the local customers to whom glass was delivered without wooden packing. From the reply to the show cause notice given by the Respondents in this matter, it is clear that in Calcutta the majority of the deliveries were to original equipment manufacturers like car companies. It is clear that these companies would take delivery without wooden cases because they have their own special arrangements to see that the glass sheets are transported without breakages. The Calcutta case, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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