ivil Appeal Nos
4339 4186  4176 77 of 1984
From the Judgment and Order dated 4785  21684 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal Nos
EDSBT A Nos 513 514  544 of 1985A  EDSB 329  32484 A in Order Nos
450 45285 A 473  47484 A Harish Salve Ravinder Narain PK Ram and DN Mishra for the Appellant
K Parasaran Attorney General AK Ganguli and P Parmeshwaran for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
These appeals under Section 35Lb of the Central Excises  Salt Act 1944 hereinafter called the 979 Act  are against the order Nos
450 452 of 1985A dated 4th July 1985 473184A and 47484A both dated 21st June 1984 passed by the Customs Excise  Gold Control Appellate Tribunal hereinafter referred to as the Tribunal 
The appellant is a division of McDowell  Co Ltd It has its factory at inter alia Visakhapatnam
There it manufactures and sells fusel oilStyrene Monomer falling under Tariff Item No 68 of the Ist Schedule to the Act
The case of the appellant is that the said fusel oil is a com pletely manufactured article and after completion of its manufacture it is stored in storage tanks duly approved for this purpose
It is at this stage that the quantity of fusel oilStyrene Monomer manufactured according to the appel lant is entered in the RG 1 Register maintained for goods manufactured by the appellant
It is also the case of the appellant that the said fusel oilStyrene Monomer manufac tured by it is sold in bulk and delivered to the customers at the appellant s factory
The fusel oilStyrene Monomer is also capable of being supplied in road tankers to customers
The appellant had filed its price lists in respect of the same
In the said price lists which were duly approved by the Asstt
Collector the appellant had shown the value of fusel oilStyrene Monomer at the rate at which those were sold in wholesale as naked Ex Works and in bulk
According to the appellant the manufacture of fusel oil is complete and it is the fully manufactured fusel oilStyrene Monomer which is stored in the storage tank
On 2nd July 1983 a notice in respect of a consignment was issued to show cause as to why value of the drums should not be included in the value of the goods
There the drums had been supplied by the buyer
Another show cause notice as to why value of the drums should not be included in the assessable value of the goods was issued to the appellant on the 5th April 1983 pertaining to Gate Pass No 773 whereunder the appellant had cleared 24 KI of fusel oil in drums supplied by the buyer
Replies were duly filed to the said show cause notices by the appellant contending inter alia that as the drums were supplied by the buyer value thereof could not be included in the assessable value
On the 11th August 1983 two orders were passed by the Assist ant Collector one in relation to each of the aforesaid show cause notices
The Assistant Collector included the value of the drums in the assessable value of the said fusel oilStyrene Monomer
Appeals were filed by the assessee
The same were allowed by the Collector Appeals
He held that the appellant had not collected any amount in excess of the amount indicated in the price lists
Therefore in addition 980 to this amount according to the Collector Appeals it was not open to the Asstt
Collector to inflate the assessable value without establishing the receipt of the additional consideration by the appellant apart from what had been shown in the invoice
There was a further appeal to the Tribunal
The Tribunal held that at the time of removal the goods were delivered from the factory in packed condition and the containers were not returnable by the buyer there fore the value had to be included in the assessable value
The Tribunal therefore accepted the revenue s contention and restored the order of the Asst
Collector
Aggrieved therefrom the appellant has come up in these appeals to this Court
On behalf of the appellant Shri Salve contended that the Tribunal had failed to appreciate the admitted factual position that the fusel oilStyrene Monomer manufactured by the appellant is sold in bulk and is capable of being so sold
Hence according to the appellant it is not necessary for the said fusel oilStyrene Monomer to be supplied to the customers in drums in the aforesaid situation
The Tribunal therefore it was urged ought to have held that the value could not be included in the assessable value of the fusel oilStyrene Monomer
It was contended that in any event under the Act and the Rules the duty of excise is payable by the manufacturer on the manufactured goods
The appellant was not a manufacturer of drums
The said drums were sup plied by the customers for the purpose of filling the fusel oilStyrene Monomer
No duty of excise therefore could be collected from the appellant on such drums which were nei ther manufactured nor purchased by the appellant
It was further urged that on a correct and true interpretation of Section 44di of the Act the cost of packing could be included in the assessable value only when the packing is either manufactured by the assessee or is purchased by the assessee
The said sub section does not contemplate accord ing to the appellant the inclusion of the cost of packing in the value of goods when the packing is supplied by a customer to a manufacturer on its own cost
It was contended by Shri Salve appearing on behalf of the appellant that on a correct analysis of section 44d the duty being on the activity of manufacture whatever is necessary to bring the goods into existence alone can be taken into account for duty purposes
Reliance was placed by Shri Salve as well as by the learned Attorney General appearing on behalf of the revenue on the relevant provisions of the Act and the position as explained by this Court in Union of India  Ors
vs Bombay Tyre International Ltd  981 Shri Salve has however contended that so far as this Court is concerned this question is concluded by the deci sion of this Court in Collector of Central Excise vs Indian Oxygen Ltd Learned Attorney General however contended that this decision did not deal with the present controversy
The said decision according to learned Attorney General was concerned with the rentals of certain oxygen gas cylinders supplied by the assessee
Reference was made to the decision of this Court in K Radha Krishaiah vs Inspector of Central Excise Gooty  Ors Shri Salve referred to and relied on the decision of tile High Court of Bombay in the case of Govind Pay Oxygen Ltd vs Asstt
Collector of Central Excise Panaji  Ors as also the decision of the Karnataka High Court in Alembic Glass Industries Ltd vs Union of India  Ors Learned Attorney General urged before us that the question whether for determining the assessable value of the excisable goods sold by the assessee in drums or containers provided by its customers the asses see itself provided such drumscontainers on payment of price in Civil Appeals Nos
4339 41 of 1986 the value of such drumscontainers would also have to be included on a correct interpretation of charging sections namely sec tions 3 and 4 of the Act
It was submitted that while deter mining the scope and nature of levy as contemplated under section 3 of the Act of central excise and the measure of such levy as provided in section 4 of the Act the principles laid down in Union of India vs Bombay Tyre International Ltd supra should be followed and reliance was placed on the several decisions of this Court which we will refer to later
Learned Attorney General emphasised that it is a well settled principle of construction that in taxing statutes one has only to look merely at what is clearly stated
There is no room he contended for any intendment
There is no equity about a tax it was submitted
There is no presump tion as to tax
Reliance was placed for this proposition by the learned Attorney General on the observations of this Court in Gur Sahai Sehgal vs Commissioner of Income Tax Punjab  at 898
Learned Attorney General also drew attention to the decision of this Court in AK Roy vs Voltas Ltd and also to Atic Industries Ltd vs HH Dave Assistant Collector of Central Excise  at 568 to emphasise the point that percentages of sales do not in any manner affect determination of the assessable value of the excisable goods
In this connection it may be rele vant to mention that in CA 4339 4186 in respect of which show notice was issued as to why value of drums should not be included in the assessable value of fusel oil and Styrene Monomer 90 of Styrene Mono 982 mer had been sold directly in tanks and only 10 of Styrene Monomer had been sold in drums and the show cause notice on 20th October 1983 had been issued relating to clearance of fusel oil in 45 drums but the said drums had been supplied by the buyer
The Asstt
Collector in those appeals had included the costs of such drums in the value of styrene monomer
Relying on the two decisions referred to hereinbe fore learned Attorney General emphasised that percentages of sales would not in any manner affect determination of the assessable value of the excisable goods
In AK Roy s case supra it was held by this Court that though in that case that the fact that the assessee had effected sales to whole sale dealers only to the extent of 5 to 10 of its produc tion and that 90 95 of its production were only retail sales would not affect the question of determination of the assessable value of the excisable goods with reference to its value in the wholesale market
Therefore the learned Attorney General submitted the mere fact that the assessee in CA No 4339 of 1986 sold only 10 of the excisable goods to its buyer where drums were supplied by the buyers themselves and that 90 of the sales were through tankers belonging to the customers would not in any manner affect the question or determination of the assessable value of the excisable goods inasmuch as the 10 of its sales to whole sale buyers were in drums supplied by the buyers at the time of removal
According to the learned Attorney General the fact that 90 of the goods were supplied in tankers and not in containers had no relevance at all and the 10 represent ed the entire quantity of excisable goods delivered in packed condition
Learned Attorney General contended that the decision of Indian Oxygen Ltd s case supra cannot be relied on in view of the facts of this case
In that case the learned Attorney General contended the only question which arose was whether the rental charges received by the assessee for the gas cylinders lent by it to its customers could be included in the assessable value and whether inter est earned on deposits made by the customers for the securi ty of the cylinders supplied by the assessee could also be included in the assessable value of the excisable goods
This Court clarified in the said decision that the said charges could not be included in the value of the goods since these were only ancillary and not incidental to the activities for the manufacture of gases
Learned Attorney General submitted that this Court had no occasion in that decision to consider the question which arises in the present case namely whether the cost of packing materials would have to be included in the assessable value of the goods when goods are delivered in packed conditions
Learned Attorney General submitted that the decisions of the Bombay and Karnataka High Courts were wrong as they are contrary to the decision of this 983 Court in Bombay Tyre International s case supra
Reference was made both by the learned Attorney General and Shri Salve to the observations of this Court in Union of India vs Godfrey Phillips India Ltd 1985 Supp
3 SCR 123
In order to appreciate the controversy in this case it is necessary to refer to the relevant provisions
Section 2f of the Act provides the definition of the term manufacture
It states inter alia that manufacture includes any process incidental or ancillary to the comple tion of manufactured product
It is therefore necessary to bear in mind that a process which is ancillary or incidental to the completion of the manufactured product that is to say to make the manufacture complete would be manufacture
It is relevant and important to bear this aspect in mind
Section 3 of the Act provides that there shall be levied and collected in such manner as maybe pre scribed duties of excise on all excisable goods other than salt which are produced or manufactured in India Excisable goods under section 2d of the Act means goods specified in the Schedule to the as being subject to duty of excise and includes salt
Section 4 of the Act provides for the valuation of excisable goods for purposes of charging of duty of excise
The relevant provi sion of section 4 of the Act deals with the manner as to how the value is to be computed and section 44d stipulates as follows value in relation to any excisable goods i where the goods are delivered at the time of removal in a packed condition includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee
Explanation
In this sub clause packing means the wrapper container bobbin pirn spool reel or warp beam or any other thing in which or on which the excisable goods are wrapped contained or wound ii does not include the amount of the duty of excise sales tax and other taxes if any payable on such goods and subject t9 such rules as may be made the trade discount such discount not being refundable on any account whatsoever allowed in accordance with the normal practice of 984 the wholesale trade at the time of removal in respect of such goods sold or contracted for sale Explanation
For the purposes of this sub clause the amount of the duty of excise payable on any excisable goods shall be the sum total of a the effective duty of excise payable on such goods under this Act and b the aggregate of the effective duties of excise payable under other Central Acts if any providing for the levy of duties of excise on such goods  and the effective duty of excise on such goods under each Act referred to in clause a or clause b shall be i in a case where a notification or order providing for any exemption not being an exemption for giving credit with respect to for reduction or duty of excise under such Act on such goods equal to any duty of excise under such Act or the additional duty under Section 3 of the 51 of 1975 already paid on the raw material or component parts used in the production or manufacture of such goods from the duty of excise under such Act is for the time being in force the duty of excise computed with refer ence to the rate specified in such Act in respect of such goods as reduced so as to give full and complete effect to such exemption and ii in any other case the duty of excise computed with reference to the rate specified in such Act in respect of such goods
 The expression place of removal has been defined under section 44b of the Act to mean a factory or any other place or premises of production or manufacture of the excisable goods or a warehouse or any other place or prem ises wherein the excisable goods have been permitted to be deposited without payment of duty from where such goods are removed
It is in relation to Section 44d that it is contended that except the cost of packing which is of a durable nature and is returnable by the buyer to the asses see to the buyer in respect of all other costs of packing the costs should be included in the value of the 985 excisable goods
The explanation to the said sub section defines the expression packing as the wrapper container bobbin pirn spool reel or warp beam or any other thing in which or on which the excisable goods are wrapped contained or wound
The provisions of these two sections must be judged in the light of the principles laid down by this Court in Union of India vs Bombay Tyre International supra
In that decision it has been recognized that the measure employed for assessing a tax must not be confused with the nature of the tax while the measure of the tax may be assessed by its own standard to serve as a standard for assessing the levy the Legislature need not contonour it along lines which spell out the character of the levy it self
Reliance may be placed to the observations of this Court at pp
365 367 of the Report
This Court rejected the contention of the assessee in that case that because the levy of excise is a levy on goods manufactured or produced the value of an excisable article must be limited to the manufacturing cost plus manufacturing profit
This Court reiterated that section 4 of the Act provides the measure by reference to which the charge is to be levied
Therefore the charge is to be determined by the terms of section 4 of the Act
But it has to be borne in mind that the duty of excise is chargeable with reference to the value of the excisable goods and the value is defined in express terms in that section
Though the learned Attorney General referred to the fact that in taxing statutes one must look merely at what is clearly stated yet such a construction must be made in the context of the entire scheme of the Act
Learned Attorney General emphasised that the language of clause d of sub section 4 of section 4 of the Act made it clear beyond doubt that in cases where the Act provides for excise duty with reference to value of the excisable goods while determining the value of such goods the cost of packing where the excisable goods are delivered at the time of removal in packed condition would have to be included in the assessable value of the excisable goods
According to the learned Attorney General since the Act provides for only one exception to this measure namely non inclusion of the cost of such packing where the packing is durable in nature and is returnable by the buyer to the assessee in all other cases the cost of the packing would have to be included in the assessable value of the excisable goods where such goods are delivered at the time of removal in packed condition
According to him the plain language of the Statute does not permit of any further exceptions being read into the Act
To hold otherwise it was contended would make the provision of the measure of the levy unworka ble inasmuch as in every case the measure would have to differ in the light of the contentions as may be raised by the assessees depending upon the business arrangement of each assessee
986 It was contended that it is not correct to equate the meas ure of tax with the levy itself which is the basis of the contentions of the appellant
In my opinion however the correct position must be found out bearing in mind the essential nature of excise duty
Excise duty as has been reiterated and explained is a duty on the act of manufacture
Manufacture under the excise law is the process or activity which brings into being articles which are known in the market as goods and to be goods these must be different identifiable and distinct articles known to the market as such
It is then and then only that manufacture takes place attracting duty
In order to be goods it was essential that as a result of the activ ity goods must come into existence
For articles to be goods these must be known in the market as such and these must be capable of being sold or being sold in the market as such
See the observations of this Court in Union of India vs Delhi Cloth  General Mills Ltd 1963 Supp 1 SCR 586 South Bihar Sugar Mills Ltd etc
vs Union of India  Ors  and Bhor Industries Ltd Bombay vs Collec tor of Central Excise Bombay  In order therefore to be manufacture there must be activity which brings transformation to the article in such a manner that different and distinct article comes into being which is known as such in the market
If in order to be able to put it on the market a certain amount of packing or user of containers or wrappers or putting them either in drums or containers are required then the value or the cost of such wrapper or container or drum must be included in the assess able value and if the price at which the goods are sold does not include that value then it must be so included by the very force of the terms of the Section
The question there fore that has to be examined in this case is whether these drums containers or packing by whatever name they are called are necessary to make fusel oil or styrene monomer marketable as such or can these goods be sold without the containers or drums or packing In my opinion the facts established that these could be
The fact that 90 of the goods in CA No 4339 of 1986 were delivered in tankers belonging to the assessee and only 10 of the goods were in packed condition at the time of removal clearly establish that the goods were marketable without being packed or contained in drums or containers
These were in the storage tanks of the assessee and were as such marketable
In this connection it is necessary to refer to the observations of this Court in Collector of Central Excise vs Indian Oxygen Ltd supra
In that case as mentioned hereinbefore the respondent Indian Oxygen Ltd was manufacturer of dissolved acetylene gas and compressed oxygen gas called therein the gases 
The respondent supplied these gases in cylinders at their factory gate
987 For taking delivery of these gases some consumerscustomers used to bring their own cylinders and take the delivery while others used to have the delivery in the cylinders supplied by the respondent
For the purpose of such supply of cylinders certain rentals were charged by the respondent and also to ensure that these cylinders were returned prop erly certain amounts of deposit used to be taken from the customers
On these deposits notional interest  18 pa was calculated
The two amounts with which this Court was concerned were rentals of the cylinders and the notional interest earned on the deposit of cylinders whether these two amounts were includible in the value under section 4 of the Act was the question
The revenue s case was that the no tional value of deposit was rental and hence should be included in computing the assessable value
The respondent however disputed this
Analysing the scope of section 4 of the Act it was held by this Court that supply of gas cylinders might be ancillary activity to the supply of gases but this was not ancillary or incidental to the manufacture of gases
The goods were manufactured without these cylinders
There fore the rental of the same though income of ancillary activity was not the value incidental to the manufacture and could not be included in the assessable value
Similar ly in my opinion drums even though these were ancillary or incidental to the supply of fusel oil and styrene monomer these were not necessary to complete the manufacture of fusel oil or styrene monomer the cost of such drums cannot therefore be included in the assessable value thereof
Furthermore no cost was in fact incurred by the assessee
Drums had been supplied by the buyers
This position in my opinion was correctly approached in the decision of the Bombay High Court in Govind Pay Oxygen Ltd vs Assistant Collector of Central Excise Panaji  Ors supra where it was held that section 44di of the Act does not make any provision for including the cost of packing which was supplied by the buyer to the assessee for the obvious reason that the assessee did not spend for such packing
It was for this simple reason that the legislature had not thought it fit to exempt such pack ing from the value of excisable goods
In my opinion that is the correct approach to the problem
Similarly Karnataka High Court in Alembic Glass Industries vs Union of India  Ors supra held that the term value defined in section 44di provides for exclusion of cost of packing materi al which was of durable nature and was returnable by the buyer to the assessee
Hence there was no logic or reason for not excluding the value of packing material supplied by the buyer himself which is of durable nature and is return able by the assessee to the buyer
Furthermore in my opin ion in 988 terms of section it is not includible
The contention that the value of packing materials including those supplied by the buyer has to be included in the value of the goods is repugnant to the very scheme of section 4
It overlooks the use of the expression cost in relation to packing in the clause i of section 44d of the Act
The word cost has a definite connotation and is used generally in contra distinction of the expression value
Thus the clear implication of the use of the word cost is that only packing cost of which is incurred by the assessee ie the seller is to be included
The use of the expression cost could not obviously be by way of reference to packing for which the cost is incurred by the buyer
It has to be borne in mind that such a provision would make the provision really unworkable since in making the assessment of the seller there is no machinery for ascertaining the cost of the packing which might be supplied by the buyer
Such a contention further overlooks the scheme of clause i where under durable packing returnable by the buyer has to be excluded
It would create an absurd situation if durable packing supplied by the assessee and returnable to the assessee is not to be included in the assessable value but a durable packing supplied by the buyer to the assessee and returnable to the buyer is made a part of the assessable value
One has to bear in mind the scheme of clause d of section 44 of the Act
The two sub clauses of this clause deal with abatements or deductions in respect of actual burdens either by way of an expenditure or discount borne by the assessee
Clause ii deals with duties of excise sales tax and other taxes if any payable on such goods
Here also obviously the reference is not generally to the taxes payable on such goods by either the assessee or the buyer but is obviously to the taxes payable by the assessee
The trade discount is referable to that allowed by the assessee
Therefore in the same sense clause i would only be referable to the packing in respect to which cost is incurred by the assessee
It has to be borne in mind that the scheme of old section 4 of the Act and new section 4 is the same as was held by this Court in the case of Bombay Tyre International supra at pages 376 E F 377 H and 378 A B H of the Report
The scheme of the old section 4 is indisputedly to determine the assessable value of the goods on the basis of the price charged by the assessee less certain abatements
There was no question of making any additions to the price charged by the assessee
The essen tial basis of the assessable value of old section 4 was the wholesale cash price charged by the assessee
To con strue new section 4 as now suggested would amount to depart ing from this concept and replacing it with the concept of a notional value comprising of the wholesale cash price plus certain notional charges
This would be a radical departure from old section 4 and cannot be said to be on the 989 same basis
It has to be borne in mind that the measure of excise duty is price and not value
It has been so held by this Court in Bombay Tyre International s case supra
See in this connection the observations of this Court in Bombay Tyre s case at pages 368377379382 and 383 where this Court emphasised that in both the old section 4 and the new section 4 the price charged by the manufacturer on a sale by him represents the measure
Price and sale are related concepts and price has a definite connotation
Therefore it was held that the value of the excisable article has to be computed with reference to the price charged by the manufacturer the computation being made in accordance with the terms of section 4
This Court rejected the contention on behalf of the assessee in that case that section 4 also levied excise on the basis of a conceptual value which must exclude post manufacturing expenses and post manufacturing profit by observing that the contention proceeded on the assumption that a conceptual value governed the assessment of the levy
It was reiterated that the old section 4 and new section 4 determine the value on the basis of price charged or chargeable by the particular assessee
See in this connection the observations of this Court at p 388 F  G of the report
It has also to be borne in mind that in any event in so far as Styrene Monomer Oil is concerned the value of the drums in which it is packed is not includible in the assess able value of the goods
It is not all packing which is liable to be included under clause 44di in the assess able value of the goods
It is only that degree of secondary packing which is necessary for assessable articles to be in the condition in which it is generally sold in the wholesale market which can be included at the factory gate which should be included in the value of the article
See the observations of this Court in Bombay Tyre International s case supra at page 393 D  E
In the case of Union of India vs Godfrey Phillips Ltd  this position was clarified by the majority judgment
In that case the respondent therein manufactured cigarettes in their factories
The cigarettes so manufactured were packed initially in papercardboard packets of 10 and 20 and these packets were then packed together in papercardboard car tonsouters
These cartonsouters were then placed in corru gated fibreboard containers and delivered by the respondents to the wholesale dealers at the factory gate
There was no dispute that the cost of primary packing into packets of 10 and 20 and the cost of secondary packing in cartons outers must be included in determining the value of the cigarettes for the purpose of assessment of excise duty since such packing would fall under section 44di of the Act
The question that arose was whether the cost of final packing in corrugated fibreboard containers 990 would be liable to be included in the value of the ciga rettes for the purpose of assessment to excise duty
The question was answered in negative by a majority of 21 of this Court
Chief Justice Bhagwati dissented
It was held by Pathak J as the learned Chief Justice then was that such cost of corrugated fibreboard containers could not be in cluded in the determination of value in section 44di of the Act for the purposes of excise duty
For the purpose of measure of levy on cigarettes the statute has given an extended meaning to the expression value in section 44d of the Act
Plainly the extension must be strictly con strued for what is being included in the value now is something beyond the value of the manufactured commodity itself
The corrugated fibreboard containers could be re garded as secondary packing
These were not necessary it was emphasised by the majority of the Judges for selling the cigarettes in the wholesale market at the factory gate
These were only employed it was emphasised by the majority of the Judges for the purpose of avoiding damage or injury during transit
It was perfectly conceivable that the whole sale dealer who took delivery might have his depot at a very short distance only from the factory gate or might have such transport arrangements available that damage or injury to the cigarettes could be avoided
AN Sen J who agreed with Pathak J observed that on a proper construction of section 44di it was clear that any 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 could not be included in the value for the purpose of assessment of excise duty
Chief Justice Bhag wati on the other hand held that corrugated fibreboard containers in which the cigarettes were contained fell within the definition of packing  in the Explanation to section 44di and if these formed part of the packing in which the goods were packed when delivered at the time of removal then under section 44di read with the Expla nation the cost of such corrugated fibreboard containers would be liable to be included in the value of cigarettes
It is apparent from the wide language according to the learned Chief Justice of Explanation to section 44di that every kind of container in which it can be said that the excisable goods are contained would be packing  within the meaning of the Explanation
Even secondary packing would be within the terms of the Explanation because such second ary packing would also constitute a wrapper or a container in which the excisable goods are wrapped or contained
But the test to determine whether the cost of any particular kind of secondary packing is liable to be included in the value of the article 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 991 market at the factory gate
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
According to learned Chief Justice it makes no difference to the applicability of the definition in section 44di read with Explana tion 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 trans portation or in the warehouse
However if any special secondary packing is provided by the assessee at the in stance of a wholesale buyer which is not 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
It may be necessary in this connection to refer to the observations of this Court in Union of India  Ors
vs Bombay Tyre International Ltd supra dealing with the aspect of secondary packing where this Court reiterated that the degree of secondary packing which is necessary for putting the excisable article in which it is sold in the wholesale market at the factory was the degree of packing where the cost would be included in the value of the goods for the purpose of excise duty
Pathak J as the Hon ble Chief Justice was then observed whether it is necessary for putting the cigarettes in the conditions in which they were sold in the wholesale market or at the factory gate
He answered that it is not
It was found that these corrugated fibreboard containers are employed for the purpose of avoid ing damage or injury during the transit
It was conceivable that the wholesale dealer who takes delivery might have its depot at a very short distance only from the factory gate or may have such transport arrangements available that damage or injury to the cigarettes could be avoided
In those cases the corrugated fibreboard containers according to Pathak J were not necessary for selling the cigarettes in the wholesale market
I am of the opinion that the views expressed by the majority of the learned Judges were correct and it appears with respect that the observations of Chief Justice Bhag wati were not consistent with the judgment of this Court in Bombay Tyre International supra at p 379
The learned Attorney General sought to suggest that the decision of this Court in Union of India vs Godfrey Phillips Ltd supra perhaps might require reconsideration
I am unable to accept this suggestion
The ratio of the decision in Godfrey Phil lips  case supra is in consonance with the decision of Union of India vs Bombay Tyre International supra and further in consonance with the true basis of excise as explained in several decisions mentioned before
In the premises on 992 the facts of this case it is clear that the goods were not sold in drums generally in the course of the wholesale trade
There was evidence that 90 of the goods were deliv ered at the time of removal without being put in drums
There was no evidence that there was any necessity of pack ing or putting these in drums prior to their sale
It was not necessary that the articles were to be placed in drums for these to be able to generally to enter the stream of wholesale trade or to be marketable
On the other hand there was evidence that in the wholesale trade these goods were delivered directly in tankers and deliverable as such
But as a matter of fact delivery in drums was only to facilitate their transport in small quantities
The manufac ture of the goods was complete before these were placed in drums
The completely manufactured product was stored in tanks
From these tanks the goods were removed directly and placed in vehicles for their movement for 90 of the sales the vehicle of removal was tankers and 10 of the sales the vehicle of removals was drums
In the premises the value of the drums with regard to the fusel oilstyrene monomer irrespective of whether these were supplied by the assessee or not are not includible in the assessable value of the Styrene Monomer
In the aforesaid view of the matter I am of the opinion that these appeals have to be allowed and the orders of the Tribunal set aside
The Tribunal was in error in holding that as at the time of removal goods were delivered from the factory in packed condition and the containers were not returnable to by the buyer the value of the drums is to be included
It is reiterated that in order to be deliverable it is not necessary that the goods should be delivered in packed condition and that the containers were not necessary to make the goods marketable
In the aforesaid view of the matter the appeals are allowed and the orders of the Tribunal are set aside
The value of the aforesaid drums should therefore be excluded from the assessable value for the purpose of excise duty
In the facts and the circumstances however there will be no order as to costs
RANGANATHAN J I have perused the judgment proposed to be delivered by my learned brother Sabyasachi Mukharji J I agree with the conclusion arrived at by him but I would like to rest it entirely on the language of section 44di of the Central Excises  Salt Act 1944 without going into the larger questions raised by counsel and dealt with by my learned brother
The assessee company is manufacturing and selling fusel oil
993 It also manufactures and sells another liquid known as styrene monomer
The fusel oil and monomer are supplied generally in tankers brought by the customers Sometimes it is supplied in drums provided by the customers who are not charged anything for those drums
In the case of styrene monomer the finding is that the supply is in tankers to the extent of 90 and only 10 of the sales were made in drums
The issue before us is whether the costoat of the drums supplied by the customer for which he is not charged should be included in the assessable value of the goods in ques tion in other words whether a notional amount representing the cost of the drums should be added to the sale price charged by the assessee to its constituents
Shri Harish Salve arguing for the appellants con tended that the cost of packing referred to in section 44di is such cost incurred by a manufacturer and not the cost of packing borne by the buyer
In the alternative he contended that atleast so far as styrene monomer sales are concerned the cost of drums cannot enter into the picture
Citing several previous authorities of this Court he contended on the following lines It is not all packing that is liable to be included under section 44di
It is only that degree of secondary packing which is necessary for the assessable article to be placed in the condition in which it is sold in the wholesale market at the factory gate which can be in cluded in the assessable value of the article
On the facts of this case there is evidence that 90 of the monomer was delivered at the time of removal without being put in drums
There was no evidence that there was any necessity of packing or putting them in drums prior to their sale
Delivery in drums was only to facilitate their transport in small quantities
The manufacture of the monomer was complete when it was stored in tanks
From these tanks the goods were to the extent of 90 removed directly and placed in tankers
In 10 of the sales the vehicle of removal was drums
In the premises the value of the drums irrespective of whether these where supplied by the assessee or not is not inclu dible in the assessable value of the goods
The learned Attorney General on the other hand contended that the terms of section 44di are very clear and specific
He pointed out though manufacture is the taxable event the measure of the levy need not be and is not to be restricted to the cost of 994 manufacture
So it is open to Parliament to prescribe any measure by reference to which the charge is to be levied and this is what is done under section 4
In construing section 44di all that has to be seen is whether the goods are delivered in packed condition
If this question is answered in the affirmative then in respect of the goods so sold the cost of packing whether incurred by the manufacturer or by the supplier has to be automatically included in the assessable value if necessary by addition to the sale price except only where the packing is of durable nature and returnable to the manufacturer
He reminded us of the oft quoted truism that in tax matters one has to look at what is said and that there is no question of any intend ment implication equity or liberality in construing the taxing provision
I agree with Mukharji J that this con tention cannot be accepted
The principle referred to by the learned Attorney General is unexceptionable but the words of a statute have to be read in the context and setting in which they occur
The proper interpretation to be placed on the words of section 44di has been explained in the judg ment of my learned brother and I am in full agreement with him on this point
There is ample internal indication in the statute to show that the cost of packing referred to in the above clause is the cost of packing incurred by the manufac turer and recovered by him from the purchaser whether as part of the sale price or separately
The object and purpose of the levy the meaning of the expression assessable value  as interpreted in section before its amendment cou pled with the now well established position that the amend ment intended to make no change in this position the use of the word cost rather than value the nature of the other payments referred to in sub clause ii all these show beyond doubt that while generally the normal price for which the goods are sold at the factory gate is to be taken as the assessable value an addition thereto has to be made where in addition to the price the manufacturer levies a charge for the packing which is intrinsically and inevitably incidental to placing the manufactured goods on the market
It will indeed be anomalous if the cost of an item of pack ing charged for from the customer is to be excluded from the assessable value where the packing though durable is returnable to the manufacturer but the cost of an item of durable packing supplied by the customer and taken back by him is liable to be included in the assessable value
This conclusion in my opinion is sufficient to dispose of the present appeals
In this view of the matter I consider it unnecessary to discuss wider questions as to the circumstances in which the cost of packing primary or secondary can at all enter into the determination of the 995 assessable value under section 44di canvassed by the counsel for the assessee or as to the correctness or other wise of the decision of this Court in Union of India vs Godfrey Phillips by the learned Attorney General
My conclusion is that the answer to the question whether the cost of the container should be includ ed in the assessable value or not would depend upon whether the goods in question are supplied in a packed condition or not
If the answer is yes three kinds of situation may arise
Where the manufacturer supplies his own container or drum but does not charge the customer therefore then the price of the goods will also include the cost of the con tainer
There will be no question of separate addition to the sale price nor can the assessee claim a deduction of the cost of packing from the sale price except where the con tainer is a durable one and is returnable to the manufactur er
If the manufacturer supplies the drums and charges the customers separately therefore then under section 44di the cost of the drums to the buyer has to be added to the price except where the packing is of durable nature and is to be returned to the manufacturer
If on the other hand the manufacturer asks the customer to bring his own container and does not charge anything therefore then the cost or value of the packing cannot be notionally added to or subtracted from the price at which the goods have been sold by the manufacturer
VERMA J I have the benefit of perusing the judgments prepared separately by my learned Brothers Mukharji J and Ranganathan J both of whom have arrived at the same con clusion
My conclusion also is the same
However I append this short note only to emphasize that in my opinion also the view taken by all of us on the construction of section 44di of the here inafter referred to as the Act is alone sufficient in the present matters to support the conclusion we have reached and it does not appear necessary to consider the wider propositions canvassed by the two sides
I agree that the cost of packing envisaged in section 44di of the Act for determining the value in rela tion to any excisable goods is only the cost of such pack ing incurred by the manufacturer and recovered from the buyer except where the packing is of a durable nature and is returnable by the buyer to the manufacturer
The cost of such packing referred in section 44di does not in clude within its ambit the cost of packing not incurred by the manufacturer when the packing is supplied by the buyer and not the manufacturer
This construction of the expres sion cost of such packing in section 996 44di of the Act clearly excludes in these matters the question of its addition to the price of goods recovered by the manufacturer from the buyer for determining the value in relation to the excisable goods for computing the duty payable on it
In my opinion also the above conclusion reached on the language of section 44di of the Act is sufficient to allow these appeals
For this reason I agree with Rangana than J that the wider propositions canvassed by the two sides including the question of correctness of the view relating to secondary packing taken in Union of India vs Godfrey Phillips India Ltd raised by the learned Attorney General need not be considered and decided in these matters
I agree with my learned Brothers that both these appeals be allowed
RSS Appeals allowed


Summary:
The appellant companyassessee manufactures and sells fusel oil styrene Monomer falling under Tariff Item No 68 of the 1st Schedule to the 
The said fusel oilstyrene Monomer is sold in bulk and generally delivered to the customers at the appellant s factory in road tankers
Some times it is supplied in drums brought by the customers who are not charged anything for those drums
In the case of Styrene Monomer the finding is that the supply was in tankers to the extent of 90 and only 10 of the sales were made in drums
Two notices were issued to the appellant to show cause as to why the value of the drums should not be included in the assessable value of the goods
In reply the appellant contended that as the drums were supplied by the buyer the value thereof could not be included in the assessable value
The Assistant Collector however included the value of the drums in the assessable value of the said fusel oilStyrene Monomer
The Collector Appeals allowed the appellant s appeal and held that it was not open to the Assistant Col lector to inflate the assessable value without establishing the receipt of the additional consideration by the appellant apart from what had been shown in the invoice
The Customs Excise and Gold Control Appellate Tribunal allowed the further appeal filed by the Revenue and held that at the time of removal the goods were delivered from the factory in packed condition and the containers were not returnable by the buyer therefore the value had to be included in the assessable value
Before this Court it was contended on behalf of the appellant that it was not all packing that was liable to be included under section 44di of the Customs and Central Excises Act it was only that degree of secon 975 dary packing which was necessary for the assessable article to be placed in the condition in which it was sold in the wholesale market at the factory
gate which could be includ ed in the assessable value of the article fusel oilStyrene Monomer was sold in bulk and was capable of being so sold hence it was not necessary for the said fusel oilStyrene Monomer to be supplied to the customer in drums the duty of excise was payable on manufactured goods and no duty of excise could be collected from the appellant on such drums which were neither manufactured nor purchased by the appel lant the duty being on the activity of manufacture whatever was necessary to bring the goods into existence alone could be taken into account for duty purposes and the sub section did not contemplate the inclusion of the cost of packing in the value of goods when the packing was supplied by a cus tomer to a manufacturer on its own cost
On behalf of the Revenue the learned Attorney General contended that the value of drumscontainers would also have to be included on a correct interpretation of charging sections namely sections 3 and 4 of the Act the terms of section 44di were very clear and specific it was a well settled principle of construction that in taxing stat utes one had only to look at what was clearly stated and there was no room for any intendment percentages of sales did not in any manner affect determination of the assessable value of the excisable goods though manufacture was the taxable event the measure of the levy need not be and was not to be restricted to the cost of manufacture it is open to Parliament to prescribe any measure by reference to which the charge was to be levied and this is what was done under section 4 and in construing section 44di
all that had to be seen was whether the goods were delivered in packed conditions and if this question was answerable in the af firmative then in respect of the goods so sold the cost of packing whether incurred by the manufacturer or by the supplier had to be automatically included in the assessable value if necessary by addition to the sale price except only where the packing was of durable nature and returnable to the manufacturer
Allowing the appeals this Court HELD 1 The correct position must be found out bearing in mind the essential nature of excise duty
Excise duty is a duty on the act of manufacture
Manufacture under the excise law is the process of activity which brings into being articles which are known in the market as goods and to be goods these must be different identifiable and distinct articles known to the market as such
It is then and then only that 976 manufacture takes place attracting duty
986B 2 Section 2f of the Central Excises  Salt Act provides the definition of the term manufacture
It states inter alia that manufacture includes any process incidental or ancillary to the completion of manufactured product
In the instant case the drums even though these were ancillary or incidental to the supply of fusel oil and styrene monomer these were not necessary to complete the manufacture of fusel oil or styrene monomer
983B C 987D 3 In order to be manufacture  there must be activity which brings transformation to the article in such a manner that different and distinct article comes into being which is known as such in the market If in order to be able to put it on the market a certain amount of packing or user of containers or wrappers or putting them either in drums or containers are required then the value or the cost of such wrapper or container or drum must be included in the assess able value and if the price at which the goods are sold does not include that value then it must be so included by the very force of the terms of the section
986C E 4 The clear implication of the use of the word cost in relation to packing in the clause i of section 44d of the Act is that only packing cost of which is incurred by the assessee ie the seller is to be included
The use of the expression cost could not obviously be by way of reference to packing for which the cost is incurred by the buyer
988B Union of India  Ors
vs Bombay Tyre International Ltd   Collector of Central Excise vs Indian Oxygen Ltd  K Radha Krishaiah vs In spector of Central Excise Gooty  Ors  Govind Pay Oxygen Ltd vs Asstt
Collector of Central Ex cise Panaji  Ors  Alembic Glass Indus tries Ltd vs Union of India  Ors  Gur Sahai Sehgal vs Commissioner of Income Tax Punjab   AK Roy vs Voltas Ltd  Atic Industries Ltd vs HH Dave Assistant Collector of Central Excise  Union of India vs Godfrey Phillips India Ltd 1985 Supp 3 SCR 123 Union of India vs Delhi Cloth  General Mills Ltd 1963 Supp 1 SCR 586 South Bihar Sugar Mills Ltd etc
vs Union of India  Ors
   Bhor Industries Ltd Bombay vs Collector of Central Excise Bombay  and Union of India vs Godfrey Phillips Ltd  referred to
977 5 On the facts of this case it is clear that the goods were not sold in drums generally in the course of the wholesale trade
There was no evidence that there was any necessity of packing or putting these in drums prior to their sale or to be able to generally to enter the stream of wholesale trade or to be marketable
On the other hand there was evidence that in the wholesale trade these goods were delivered directly in tankers and deliverable as such
But as a matter of fact delivery in drums was only to facilitate their transport in small quantities
The manufac ture of the goods was complete before these were placed in drums
The completely manufactured product was stored in tanks
From these tanks the goods were removed directly and placed in vehicles for their movement for 90 of the sales the vehicle of removal was tankers and for 10 of the sales the vehicle or removal was drums
In the premises the value of the drums with regard to the fusel oil styrene monomer irrespective of whether these were supplied by the assessee or not
are not includible in the assessable value of the Styrene Monomer
992A D Per section Ranganathan J agreeing with the conclusion but resting it entirely on the language of section 44di of the Central Excises  Salt Act 1 There is ample internal indication in the statute to show that the cost of packing referred to in section 44di of the Central Excises  Salt Act 1944 is the cost of packing incurred by the manufacturer and recovered by him from the purchaser whether as part of the said price or separately
994D 2 While generally the normal price for which the goods are sold at the factory gate is to be taken as assessable value an addition thereto has to be made where in addition to the price the manufacturer levies a charge for the packing which is intrinsically and inevitably incidental to placing the manufactured goods on the market
994F 3 The answer to the question whether the cost of the container should be included in the assessable value or not would depend upon whether the goods in question are supplied in a packed condition or not
If the answer is yes three kinds of situation may arise
Where the manufacturer sup plies his own container or drum but does not charge the customer therefore then the price of the goods will also include the cost of the  container
There will be no ques tion of separate addition to the sale price nor can the assessee claim a deduction of the cost of packing from the sale price except where the container is a durable one 978 and is returnable to the manufacturer
If the manufacturer supplies the drums and charges the customer separately therefore then under section 44di the cost of the drums to the buyer has to be added to the price except where the packing is of durable nature and is to be returned to the manufacturer
If on the other hand the manufacturer asks the customer to bring his own container and does not charge anything therefore then the cost or value of the packing cannot be notionally added to or subtracted from the price at which the goods have been sold by the manufac turer
995B D Per JS Verma J agreeing with Ranganathan J that the conclusion reached on the language of section 44di of the Act is sufficient to allow these appeals
1 The cost of packing envisaged in section 44di of the Act for determining the value in relation to any excisable goods is only the cost of such packing incurred by the manufacturer and recovered from the buyer except where the packing is of a durable nature and is returnable by the buyer to the manufacturer
995G 2 The cost of such packing referred to in section 44di does not include within its ambit the cost of packing not incurred by the manufacturer when the packing is supplied by the buyer and not the manufacturer
995H