TRIVENI GLASS LTD.; ALLAHABAD A v .

. UNION OF INDIA AND ORS.

, . FEBRUARY 22, 2005

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[S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] B

Centr~I Ei:cises and Salt Act, 1944-Sction 4~/rus sheets-Valuation of-For levy of excise duty-/nc/usin of cost of wooden packing in l1Ssessabl~ value thereof-Permissibility"of-Held : The cost .of wooden packing is C inc/udible In the assessable value of glass sheets-Homer, if the packing is of durable and returnable. nature, its cost not to be included in the value of glass sheets.· ..

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Appellani-manufacturer of glass sheets filed .a price list in which the co; t or wooden crates sd for'packing the glass sheets was not included.

Assistant Colleetor pssed orders including the costs ofthe wooden packing in the 1asessable value of the glass sheets. Appeal thereagainst was allowed holding tht the special packing was not necessary for making them marketable a;; d ihus .the .cost thereof was not includible in the value or

the glass shets: Despit~ the' order in the appeal Assistant Collector approved prie list by incldig the cot of wooden crates. Appellants filed E Writ Petition seeking direction to Assistant Collector to exclude the cost of wooden crates as this order was in defiance of order.in appeal. High Court held that the cost of wooden crates was includible in the assessable value of glass sheets; and that the wooden crates were. not durable and returnable; that mere theoretical possibility of the crates being returned F was not sufficient and there was no evidence of the return of the crates; and that 'durable' meant_ packing being of.such nature that the manufacturer intended the repeted use of the same.

Department had also filed Revision Petition wherein Customs, Excise and Gold (Control) Appellate Tribunal held that cost of wooden crates G was not includible in the assessable value_ of glass sheets.

In appeal, against the order o( the High Court, the appellant contended that because as per the bills/invoices the packing was of durable and returnable nature and the same was to be refunded if returned intact

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A after facilitating safe transport, the same was liable to be excluded from assessable value of glass sheets. ··• .

Partly allowing the appeal, the Court

HELD: I. The costs of wooden packing is includible in the assessable B value of glas sheets. (227-AI

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Commissioner of Central Excise, Allahabad v. Mis. Hindustan Safety Glass Works Ltd Judgment dated 22.2.2005 passed by Supreme Court in Civil Appeal No. 3819 of 1999, relied on. • c

2. Jn view of the specific term in the bills/invoices, the wooden crates, are durable and returnable packing whose costs is not to be included in : the value of glass sheets. High Court was wrong in holding that the wooden crates are not durable or returnable. Wooden crates merely consist of planks of wood which are nailed together. Therefore, even if they are dismantled by the buyer nd the planks are returned to the Appellants D the Appellants wold be in a position' to u•e them again~ There is no

necessity that the crates m.usi be actually returned. So long as there is an

~ ·. - . . . . -·. obligation on the seller to take back the. crates, if the buyer chooses to return them, it is sufficient. The terin iri° the on tract, imposes an obligation on the AppellantS to take back the woode~ crates and to pay the stipulated E amount to 'the' buyer if the buyer chooses to retrn them: (228-C-E)

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/lfahalakshmi Glass Works (P) Ltd v. Collector of Central Excise, (1988) 36 E.L.T. 727; Wipro Products Lid v. Union of India, (1991) SJ ELT 281

Born. and GobindGlasslndustries Ltd v. Commissioner of Central Excise, Ahmedabad (2002) 150 ELT 293 CEGAT, referred to.·

.,' . " ' CIVIL APPELLATE JURISDICTION : Civil Appeal No .. I 115 of2000.

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. .' I .. ' From the Judgment and Order dated I4.10.99 of the Allahabad High Court in C.M. W.P. No. 57(; of 1981.. . . . . . , . , . . ' S.K~ Bagaria, Tarun Gulati and Praveen 'Kumar for the A

0 ppellant. . . . . ' . . . ' - . . . .

R. Venkataramani; cC Umapathy, Ashok Panigrahi, S. Gowtham, P.

Parmeswaran and B. Krishna Prasad for the Respondents. . . . . . . , . ' '

The Judgment of the Court was deli~red by ,

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;:,.N. V ARIA VA, J. This Appeal is against the Judgment dated A 14.10.1999 passed by the High Court of Allahabad at Allahabad.

Briefly stated the facts are as follows :-

The Appellants are manufacturers of sheet glass. The question for consideration is whether the costs of wooden crates, in which the sheet glass B is packed, is includible in the assessable value of sheet glass.

The relevant portion of Section 4 of The Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') reads as follows :

"SECTION 4. Valuation of excisable goods for purposes of charging C of duty of excise. - (I) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be

(a) the nonnal price thereof, that is to say, the p!"ice at which such goods are ordinarily sold by the assessee to a buyer in the course D of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale :

xxx xxx xxx

E xxx xxx xxx

(4) For the purposes of this section, -

xxx xxx xxx

xxx xxx xxx F

(d) "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.

A xxx xxx xxx

xxx xxx xxx"

Thus, as per the statutory provision the cost of packing is includible in the value of the goods unless the packing is of the durable nature and is B returnable by the buyer to the assessee.

In this case the Appellants filed a price list in which the cost of wooden crates was not included. The Assistant Collector passed orders including the costs of the wooden packing in the assessable value of the glass sheets. The Appeals filed by the Appellants were allowed by the Collector {Appeals) and C it was held that the special packing was not necessary for making them

. marketable and thus the costs is not includible in the value of the glass sheets.

It appears that the Assistant Collector still approv6-9 the price list only by including the costs of the wooden crates. The Appelli; infs thus filed a Writ D Petition in the Allahabad High Court claiming that the action of the Assistant Collector was in defiance of the Order of the Collector (Appeals) and that the Assistant Collector be directed to exclude the costs of wooden crates.

It must be mentioned that against the Order of the Collector (Appeals) E the Department had filed Revisions before the Central Government. With the constitution of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGA T) the Revisions were transferred to CEGA T. CEGA T disposed off these Revisions by concluding that the cost of wooden crates was not to be includible in the assessable value of glass sheets.

F However, in the Writ Petition filed by the Appellants the High Court

has, by the impugned Judgment, held that the costs of the wooden crates was includible in the value of the glass sheets as it was necessary to put the glass sheets in a condition in which they can be sold in the wholesale trade. The High Court also held that the wooden crates were not durable and returnable.

Thus this Appeal.

Two questions arise for consideration by us :

(i) Whether the costs of wooden crates is inc.ludible in the value of glass sheets; and

(ii) Whether the wooden crates can be said to be "durable and

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returnable packing".

We have today delivered a Judgment in Civil Appeal No. 3819/1999 and a batch of similar Appeals wherein it has been held that the costs of wooden cases is includible in the value of glass sheets. For the reasons set

out in that Judgment we answer the first question against the Appellants and hold that the costs of wooden packing is includible :n t!it value of glass B sheets. To this extent the impugned Judgment cannot be faulted.

In support of their contention that the. wooden cases are durable and returnable the Appellants rely upon a Clause in their bills/invoices which reads as follows :

"Packing charge :- packing of durable and returnable nature subsequent to initial packing for facilitating safe transport which will be refunded if the same are returned intact @ Rs.140/- per crate."

Reliance is also placed upon the case of Mahalakshmi Glass Works (P) Ltd v. Collector of Central Excise, reported in (l 988) 36 E.L.T. 727 SC D wherein it has been held that under Section 4( 4 )( d)(i) of the Act the costs of packing which is of durable and returnable nature is to be excluded. It is held. that there must be an arrangement between the buyer and the a5sessee that the packing be returned to the assessee. It is held that it is not the physical capability of the packing to be returned which is the determining factor but E the condition that if the buyer chooses to return the packing the seller is obliged to accept it and refund the stipulated amount. It is held that the question whether the packing is actually returned or not has no relevance.

Reliance was also placed upon the case of Wipro Products Ltd v.

Union of India .. reported in ( 1991) 51 EL T 281 (Bombay). In this case Bombay F High Court took the view that actual return or the extent of return has no relevance and that all that is required is that there must be an obligation on the seller to accept the packing if the buyer chooses to return it.

In the case of Go bind Glass Industries ltd. v. Commissioner of Central. G Excise, Ahmedabad, reported in (2002) 150 EL T 293, CEGAT has also taken the same view. In this case CEGAT has held that the costs of wooden crates used for packing glass sheets would be excludible from the value of glass sheets ifthere was an arrangement under which the seller was obliged to take back the crates and pay the stipulated amount if the buyer chooses to return the crates.

A In the impugned Judgment the Allahabad High Court has held that there was no evidence that, even in a single case any wooden crate had been returned to the Appellants. The High Court has held that term "durable" meant that the packing was of such a nature that the manufacturer intended to use it again and again and thus the condition must be one that the buyer B must return the packing to the seller. It has been held that the mere theoretical possibility of the crates being returned was not sufficient. ·

Mr. Venkataramani has supported the view of the High Court and submitted that the cost would only get excluded if the crates are actually returned.·

We have considered the submission of the parties. In our view, the law laid down by this Court in Mahalakshmi Glass Works (P) Ltd (supra) is the correct law. There is no necessity that the crates must be actually returned.

So long as there is an obligation on the seller to take back the crates, if the buyer chooses to return them, it is sufficient. The term in the contract, set out D above, imposes an obligation on the Appellants to take back the wooden crates and to pay the stipulated amount to the buyer if the buyer chooses to return them. Wooden crates merely consist of planks of wood which are nailed together. Therefore, even if they are dismantled by the buyer and the planks are returned to the Appellants the Appellants would be in a position E to use them again. In our view, the High Court was wrong in holding that the wooden crates are not durable or returnable. The answer to the second question therefore has to be in favour of the Appellants. It is held that, in view of the specific term in the bills/invoices, the wooden crates are durabl~ and returnable packing whose costs is not to be included in the value of glass sheets.

F In this view, the impugned Judgment is set aside on this point. To this extent the Appeal is allowed. There will be no order as to costs.

K.K.T.

Appeal allowed.

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