Case: Sathe Biscuits &amp; Chocolate Company&amp; Others Vs. Union of India &amp; Others

and the packing is to be returned in specie, the cost of packing does not "form a part of the sale price and cannot, therefore, included in the valuation for the purpose of computation of the levy."We are in respectful agreement with the view taken by the Full Bench of the Gujarat High Court.12. We may also refer to the decision of the Madhya Pradesh High Court in Birla Jute Manufacturing Co. Ltd. v. Union of India and others, 1980 E.L.T. 593. In that decision, the Division Bench while construing the definition of Value in section 4(4)(d)(i) has held that it is not necessary to get the benefit of the exception in the definition for the assessee to show that the packing material has been returned or the cost of the packing has been refunded because it is impossible to show at the stage of removal and "All that is necessary is to show that the packing is returnable by the buyer to the assessee under the terms of the sale." and "The question of actual return is entirely irrelevant".13. It was contended before us by Mr. Hidayatullah that this construction would not be beneficial to the Revenue because even if the packing is not returned to the manufacturer, though there is a term in the contract regarding returnability, the Revenue will be put to a great loss because for the purposes merely of excise duty, by merely relying on the contract, the cost of packing will be excluded from the value. When the words of the statute are clear and are not, in our view, capable of any other construction the consideration that the cost of the packing will wrongly get excluded in our view, appears to be wholly irrelevant.14. It need not be mentioned that the question whether in a given case, the packing is of a durable nature and is returnable by the buyer will have to be determined on the facts of each case and possibly in most cases on evidence with regard to the durability, and returnability. It is not therefore, possible to lay down whether in each case, the corrugated fibre containers or the wooden packing, as in the instant case, is of a durable nature or not. Mere assertion by the petitioners that these packings were of a durable nature would not be conclusive and if and when a question arises in a given case, these matters will have to be decided by the appropriate authorities in evidence, if necessary.15. It was contended by Mr. Ganesh, now appearing on behalf of the petitioners, that when we are laying down a criterion that the returnability must be under the terms of the sale or the contract between the wholeseller and the manufacturer, this must also include the usage of trade. In other words, the contention is that the returnability could depend on the usage of any particular trade or business and reference was made to the observations of the Supreme Court in the order dated 15th November, 1983 in the Bombay Tyre Internationals case reported in 1983 .C.R. 2233-D (S.C.). This order is in the nature of a clarification of the earlier decision dated 7th October, 1983. With regard to the trade discount, the Supreme Court observed as follows :---"Discount allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price."According to Mr. Ganesh, the Supreme Court has clearly indicated that if discount was being given as a result of established practice, that was liable to be deducted from the value and consequently by analogy, the returnability must also be decided on the basis of established practice or trade usage.16. Undoubtedly the Supreme Court has referred to the established practice of giving trade discount. But the Supreme Court also pointed out that the allowance and the nature of discount must be known at or prior to the removal of the goods. The value to be ascertained for the purposes of excise duty is the value at the time of removal of the goods. If there has to be some certainty with regard to the method and the manner by which allowance in respect of durable and returnable packing is to be given, the only way by which this can be done is to ascertain at the time of removal of the goods as to whether it is a term of the sale that the durable packing will be liable to be returned. It cannot be left to doubt as to whether in a given case, there is a practice or usage of returning the packings or not, because, as earlier pointed out, what is the obligation of the manufacturer to accept the returned packing which can be reused and the price of such packing is left out of consideration because if the said packing is reused, it will become liable to excise duty for the second time. We are, therefore, not satisfied that if it is not shown at the time of removal of the goods that under the terms of the sale, the packing was durable and liable to be returned, the price of such packing will still be excluded from the value.17. In this petition, the Company has proceeded on the footing that the packing is capable of being returned and not that it was returnable under the terms of the sale and, therefore, having regard to the view which we have taken, it is not possible to accept the contention of the petitioner company that they were not liable to pay the amount which was demanded.

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

Explanation:
0[ds]By excepting the cost or packing which is of a durable nature and is returnable by the buyer, the legislature was clearly giving effect to the principle that no excise duty would be leviable on a packing which was capable of being reused because this would mean that the value of the same packing would being subject to excise duty more than once. We are, therefore, of the view that the cost of only such packing which is of a durable nature and is returnable under the terms of the contract between the manufacturer and the wholesaler is excludable from the value for the purposes of excise duty.It was contended before us by Mr. Hidayatullah that this construction would not be beneficial to the Revenue because even if the packing is not returned to the manufacturer, though there is a term in the contract regarding returnability, the Revenue will be put to a great loss because for the purposes merely of excise duty, by merely relying on the contract, the cost of packing will be excluded from the value. When the words of the statute are clear and are not, in our view, capable of any other construction the consideration that the cost of the packing will wrongly get excluded in our view, appears to be wholly irrelevant.Undoubtedly the Supreme Court has referred to the established practice of giving trade discount. But the Supreme Court also pointed out that the allowance and the nature of discount must be known at or prior to the removal of the goods. The value to be ascertained for the purposes of excise duty is the value at the time of removal of the goods. If there has to be some certainty with regard to the method and the manner by which allowance in respect of durable and returnable packing is to be given, the only way by which this can be done is to ascertain at the time of removal of the goods as to whether it is a term of the sale that the durable packing will be liable to be returned. It cannot be left to doubt as to whether in a given case, there is a practice or usage of returning the packings or not, because, as earlier pointed out, what is the obligation of the manufacturer to accept the returned packing which can be reused and the price of such packing is left out of consideration because if the said packing is reused, it will become liable to excise duty for the second time. We are, therefore, not satisfied that if it is not shown at the time of removal of the goods that under the terms of the sale, the packing was durable and liable to be returned, the price of such packing will still be excluded from the value.17. In this petition, the Company has proceeded on the footing that the packing is capable of being returned and not that it was returnable under the terms of the sale and, therefore, having regard to the view which we have taken, it is not possible to accept the contention of the petitioner company that they were not liable to pay the amount which was demanded.