Case: Wipro Products Limited Vs. Union of India

to the petitioners that the petitioners had failed to produce any evidence to establish that the containers were in fact return to them. By letter dated April 28, 1979, copy of which is annexed as Exhibit b to the petition, the Superintendent, Central Excise, informed that the checking gate passes for the period from December 5, 1978 to March 31, 1979 at the time of finalisation of the assessment, it was observed that the petitioners had deducted the price of metal containers from the value of vegetable products. The superintendent informed the petitioners that no evidence was product to establish that the metal containers are durable and returnable. The Superintendent also claimed that the petitioners are not entitled to deduct any amount in respect of packing material and the duty will have to be determined on the basis of the price, including the value of the packing material. After receipt of this latter the petitioners paid the duty, assessed by inclusion of value of value of packing material, from May 7, 1979 under protect. The petitioners challenge the action of the Superintendent, Central Excise in declining the relief sought by the petitioners by excluding the value of packing material, while assessing the duty payable on manufacture of vegetable products. ( 4 ) SHRI Rana, learned counsel appearing on behalf of the petitioners, submitted that the petitioner company had entered into an agreement with the stockists in respect of return of tin containers and in support of the submission reliance is placed on the circular dated a November 1, 1978. The learned counsel submitted that the circular makes it crystal clear that the petitioners had agreed to take back the tin containers in which the vegetable products were sold by refund Rs. 7. 65 per tin provided the container is in good condition. The learned counsel urged that the fact that the containers are durable and returnable is also reflected from paragraph 4 of the return field by Jitendra Chaturvedi, Assistant Collector of Central Excise and Customs, Jalgaon division, and sworn on April 21, 1984. In paragraph 4 of the return it is claimed that as per the data available with the excise authorities the petitioners have sold by many as 80 lakhs containers science 1978 and the containers received back are 4303. The retain claims that the circular issued by the petitioners cannot be claimed to be a term of sale offered to every customer. The return claims that there is no material to indicate that such circular was issued every financial year and therefore the promise to refund Rs. 7. 65 per tin container cannot be treated as a term of sale. It is not possible to accept the claim made in the return. It is difficult to appreciate why circular dated November 1, 1978 is required to be issued every financial year. Once the circular is issued and the stockists and customers are aware that the company willing to refund Rs. 7. 65 on return of the tin container, then it is hardly necessary that such circular should be issued periodically to spell out the term of sale in favor of the petitioners. The observation of the Superintendent of Central Excise in letter dated April 28, 1979 that the company is not produce evidence to establish that the tin containers area durable and returnable also cannot be accepted in view of the fact that in the return it is clearly mentioned that at least 4303 containers were returned. Shri Rana very appropriately relied upon the decision of the Supreme Court reported in 1988 (36) E. L. T. 727 [Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise]. The Supreme Court observed. "What Section 4 (4) (d) (i) of the Central Excises and Salt Act, 1944 excludes from computation is the cost of packing which is durable nature is "returnable by the buyer to the assessee". The packing must be one which is retunable by the buyer to the assessee and obviously that must by under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in that event, the words "by the buyer to the assessee" need not have found a place in the section; they would be superfluous. The actual or extent of return has not relevance". What is necessary is that if the buyer choose to return the packing, the seller should be obliged to accept it and refund the stipulated amount. In the present case there was no evidence of the agreement that the cartons and gunny bags were returnable, the cost thereof is not excludible as that of durable and returnable packing. " It is obvious from the decision of the Supreme Court that the actual return or extent of return has no relevance while determining whether the cost packing, which is of a durable nature and is returnable by the buyer, can be excluded while determining assessable value under Section 4 of the Act. Shri Rana submitted that though the petitioners had promised to return Rs. 7. 65 per tin on the customers returning the durable tin containers while computing the amount of packing to be deducted, the actual cost incurred by the petitioners for the tin containers should be taken into consideration. The learned counsel urged that amount of Rs. 7. 65 is determined as a depreciated value of the container and while computing the assessable value the actual cost incurred by the petitioners for securing the tin containers should be borne in mind. The submission is correct and deserves acceptance. The petitioners will have to lead evidence before the Superintendent of central Excise to establish what is the actual value of the tin containers at the time when the tin containers left the factory. The actual value of the tin containers which are durable and returnable, will have to be excluded while computing the assessable value of the vegetable products sold by the petitioners.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In paragraph 4 of the return it is claimed that as per the data available with the excise authorities the petitioners have sold by many as 80 lakhs containers science 1978 and the containers received back are 4303. The retain claims that the circular issued by the petitioners cannot be claimed to be a term of sale offered to every customer. The return claims that there is no material to indicate that such circular was issued every financial year and therefore the promise to refund Rs. 7. 65 per tin container cannot be treated as a term of sale. It is not possible to accept the claim made in the return. It is difficult to appreciate why circular dated November 1, 1978 is required to be issued every financial year. Once the circular is issued and the stockists and customers are aware that the company willing to refund Rs. 7. 65 on return of the tin container, then it is hardly necessary that such circular should be issued periodically to spell out the term of sale in favor of the petitioners. The observation of the Superintendent of Central Excise in letter dated April 28, 1979 that the company is not produce evidence to establish that the tin containers area durable and returnable also cannot be accepted in view of the fact that in the return it is clearly mentioned that at least 4303 containers were returned. Shri Rana very appropriately relied upon the decision of the Supreme Court reported in 1988 (36) E. L. T. 727 [Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise]. The Supreme Court observed. "What Section 4 (4) (d) (i) of the Central Excises and Salt Act, 1944 excludes from computation is the cost of packing which is durable nature is "returnable by the buyer to the assessee". The packing must be one which is retunable by the buyer to the assessee and obviously that must by under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in that event, the words "by the buyer to the assessee" need not have found a place in the section; they would be superfluous. The actual or extent of return has not relevance". What is necessary is that if the buyer choose to return the packing, the seller should be obliged to accept it and refund the stipulated amount. In the present case there was no evidence of the agreement that the cartons and gunny bags were returnable, the cost thereof is not excludible as that of durable and returnable packing. " It is obvious from the decision of the Supreme Court that the actual return or extent of return has no relevance while determining whether the cost packing, which is of a durable nature and is returnable by the buyer, can be excluded while determining assessable value under Section 4 of the Act. Shri Rana submitted that though the petitioners had promised to return Rs. 7. 65 per tin on the customers returning the durable tin containers while computing the amount of packing to be deducted, the actual cost incurred by the petitioners for the tin containers should be taken into consideration. The learned counsel urged that amount of Rs. 7. 65 is determined as a depreciated value of the container and while computing the assessable value the actual cost incurred by the petitioners for securing the tin containers should be borne in mind. The submission is correct and deserves acceptance. The petitioners will have to lead evidence before the Superintendent of central Excise to establish what is the actual value of the tin containers at the time when the tin containers left the factory. The actual value of the tin containers which are durable and returnable, will have to be excluded while computing the assessable value of the vegetable products sold by the petitioners.