The following Judgment of the Court was delivered: B.P. JEEVAN REDDY, J.
These appeals are preferred against the orders of Central Excise and Gold [Control] Appellate Tribunal. Civil Appeals Nos. 4608-4612 of 1996 and 4960 of 1996 are preferred by the assessee, Geep Industrial Syndicate Limited, while Civil Appeal No.14407 of 1996 is preferred by the Revenue. Though preferred against different orders, the issue is one and the same. The assessee is engaged in the manufacture of batteries and torches. These goods are initially packed in small boxes. These small boxes are packed in medium size cartons. The medium size carton are in turn packed in larger corrugated cartons, called "7-ply corrugated cartons". The assessee does not dispute that the value of small boxes and medium size cartons is liable to be included in the value of the goods packed. The dispute is only with respect to the inclusion of the value of 7-ply corrugated cartons. Differing views have been expressed by different Benches of the Tribunal on this question in the case of this very assessee, as would be evident from the fact that while against some orders, the assessee has filed appeals, certain other orders have been appealed against by the Revenue.
Sri Soli J. Sorabjee, learned counsel appearing for the assessee, submitted that the factual and legal situation in the present appeals is the same as was considered by this Court in Geep Industrial Syndicate Limited v. Union of India [(1992) 61 E.L.T. 328]. Learned counsel submitted that the said decision rendered by a three-Judge Bench between the same parties is binding and conclusive on the question at issue. Sri Sorabjee submitted further that even according to the principles enunciated in Union of India v. Bombay Tyre International [1984 (1) S.C.C.467] and Government of India v. Madras Rubber Factory Limited [1995 (4) S.C.C.349], the assessee is entitled to succeed. Sri Gauri Shankar Murthy, learned counsel appearing for the Revenue, however, submitted that according to the principles affirmed by this Court in Madras Rubber Factory after a full consideration of all the earlier decisions, the value of 7-ply corrugated cartons is also liable to be included in the value of the goods packed.
Inasmuch as differing interpretations are placed upon the principles affirmed in Madras Rubber Factory, it is necessary to ascertain, in the first instance, the precise principle enunciated in the said decision. After referring to the definition of "value" in Section 4(4)(d)(i), this court observed in Para-24:
"The provision in the sub-clause is
a plain one and does not admit of
any ambiguity. What it says is that
where the goods are delivered in a
packed condition, at the time of
removal, the cost of such packing
shall be included and that only
where such packing is of a durable
nature and is returnable by the
buyer to the assessee, should the
cost of such packing be not
included in the value of the goods.
The concept of primary and
secondary packing has, however,
been urged by the assessees and
recognised to some extent in the
decisions of this Court including
Bombay Tyre International. While it
may not be possible for us to wish
away the said distinction, we
cannot but remind ourselves that
this is a refinement not borne out
by the express language of the
enactment and must, therefore, be
resorted to with care and
circumspection."
In Para 25, the Court referred to the holding in Bombay Tyre International on this aspect to the effect: "(I)t seems to us that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the ‘value’ of the article for the purpose of the excise levy." Reference was then made to the decision of this Court in Union of India v. Godfrey Phillips India Limited [1985 (4) S.C.C. 369]. It was pointed out that the said decision was rendered by the very same Bench which decided Bombay Tyre International. It was also pointed out that the test evolved by the majority [R.S.Pathak and A.N.Sen,JJ.] and minority [P.N.Bhagwati, CJ.] was identical and that the different conclusions arrived at by them was mainly attributable to the difference in perception of the factual situation [see Para 30]. The Court then referred to the decision in Geep Industrial Syndicate Limited and pointed out again that the factual position in this case too was perceived to be the same as in Godfrey Phillips, viz., that the wooden boxes were not necessary for putting the torches and batteries in the conditions in which they are generally sold in the wholesale market at the factory gate. It was stressed that so far as the test applicable is concerned, there was no departure from the one enunciated in Bombay Tyre International.
The decision in Madras Rubber Factory next referred to the opinions of Sabyasachi Mukharji, J. and S. Ranganathan, J. in C.C.E. v. Ponds (India) Limited [1989 94) S.C.C.759] and expressed its entire and respectful agreement with the test evolved by Mukharji, J. which reads:
"The question is not for what
purpose a particular kind of
packing is done but the test is
whether a particular packing is
done in order to put the goods in
the condition in which they are
generally sold in the wholesale
market at the factory gate and if
they 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........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."
The Bench also expressed its respectful concurrence with the opinion of Ranganathan, J. where the learned Judge pointed out that the words "which is necessary" in the test evolved in Bombay Tyre International has led to certain further refinement in Godfrey Phillips and Geep industrial Syndicate and then observed:
".......in judging the condition of
packing whose cost is to be
included in the assessable value,
one should go by the conduct of the
parties and the nature of the
packing in which the goods
generally are - not, can be -
placed in the wholesale
market.......what is to be really
seen in this: What is the condition
of packing considered by the
manufacturers, having regard to the
nature of the business, the type of
goods concerned, the unit of sale
in the wholesale market and other
relevant considerations, to be
generally necessary for placing the
goods for sale in the wholesale
market at the factory gate. In
Godfrey Phillips and Geep, this
Court was concerned with a special
type of packing which seemed
intended more to protect the packed
goods against injury or damage
rather than to enable it being
placed in the market. Indeed, in
Godfrey Phillips, this was a
factual position that had been
accepted by the departmental
authorities earlier for a period of
a little over six years which they
later wanted to go back upon."
After considering some other cases, the decision in Madras Rubber Factory stated the test in the following words:
"The test is: whether packing, the
cost whereof is sought to be
included is the packing in which it
is ordinarily sold in the course of
a wholesale trade to the wholesale
buyer. In other words, whether such
packing is necessary for putting
the excisable article in the
condition in which it is generally
sold in the wholesale market at the
factory gate. If it is, then its
cost is liable to be included in
the value of the goods; and if it
is not, the cost of such packing
has to be excluded."
Sri Sorabjee placed a good about of emphasis upon the word "necessary" occurring in the above test. It appeared as if the learned counsel was emphasising the said expression to the exclusion of all others in the said test. The test, as stated by this Court in Madras Rubber Factory, is "whether packing, the cost of where of is sought to be included, is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer". The same was reiterated employing the words in Bombay Tyre International, to wit: "In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate". We think it appropriate to point out that the test evolved by this Court in Madras Rubber Factory should be read and understood in the context of the preceding discussion including the express and repeated affirmance of the test evolved by Mukharji and Ranganathan, JJ. in Ponds India Limited which is, in truth, nearer to the definition of the word "value" in Section 4(4)(d)(i) of the Act. The word "necessary" in the test evolved by Bombay Tyre International and as reiterated in Madras Rubber Factory need not be over-emphasised. According to madras Rubber Factory, the true test is in terms of the one evolved by Mukharji and Ranganathan, JJ. in Ponds India Limited, viz., "whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of wholesale trade to the wholesale buyer". While judging the necessity of the packing, what one must see is whether it is necessary for putting the excisable article in the condition in which they are generally sold in the wholesale market at the factory gate and this must be judged from the conduct of the manufacturer himself. Ordinarily speaking, no manufacturer would provide a packing which is not necessary for putting the excisable articles in the condition in which they are sold in the wholesale market at the factory gate. [Where a special kind of packing is provided by the manufacturer at the specific request of a buyer, the situation would be different but that is not the situation herein.] Therefore, one can proceed on the footing that whatever packing is provided at the time of delivery of the goods at the gate is the packing necessary for the purpose of putting the excisable articles in the condition in which they are generally sold in the wholesale market at the factory gate. Unless the manufacturer establishes that a particular packing, provided at the time of such delivery, was not really necessary for that purpose, the value of the packing cannot be excluded. In our respectful opinion, the above is the correct understanding of the principle and the ratio of Madras Rubber Factory.
Now coming to the facts of the case before us, we find that the factual situation considered by this Court in 1986 in Geep Industrial Syndicates [this very assessee] and the factual situation now obtaining is no different. It was held by this Court in the said decision that packing in wooden boxes was not necessary for putting the articles in the condition in which they are generally sold in the wholesale market at the factory gate and that it was done only for the purpose of protecting them from damage during the course of transport, i.e., transport after delivery. The 7-ply corrugated cartons have now taken the place of wooden boxes. But for this, there is no change in the factual situation since 1986. In such a factual situation, it would not be permissible for us to arrive at a different conclusion than the one arrived at in 1986*. On this * The decision in Geep Industrial Syndicate was actually rendered on April 2, 1986 though reported in Excise Law Times in the year 1992.
ground alone, we hold in favour of the assessee.
For the reasons recorded hereinabove, Civil appeals Nos. 4608-4612 of 1996 and 4960 of 1996 [preferred by the assessee] are allowed and Civil Appeal No. 14407 of 1996 [preferred by the Revenue] is dismissed. There shall be no order as to costs.