Case Note & Summary
The Supreme Court heard cross-appeals arising from orders of the Central Excise and Gold (Control) Appellate Tribunal concerning the correct assessable value of batteries and torches manufactured by Geep Industrial Syndicate Limited. The assessee packed its goods in small boxes, then medium size cartons, and finally in larger 7-ply corrugated cartons. The assessee conceded that the value of small boxes and medium cartons was includible in the assessable value but contested the inclusion of the cost of 7-ply corrugated cartons. Differing views among Tribunal Benches led to appeals by both the assessee and the Revenue. The dispute centered on Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, which defines value for excise duty and includes the cost of packing except durable returnable packing. The assessee relied on its earlier Supreme Court decision in Geep Industrial Syndicate Limited v. Union of India, where wooden boxes were held not necessary for putting the goods in the condition in which they are generally sold in wholesale market at factory gate because they were used only for protection during transport. The Revenue contended that under the later decision in Government of India v. Madras Rubber Factory Limited, all packing provided by the manufacturer at the time of removal should be included unless the manufacturer proves that particular packing was not necessary. The Court examined Madras Rubber Factory in detail. It noted that the provision in Section 4(4)(d)(i) was plain and did not admit of ambiguity. Madras Rubber Factory recognized the primary and secondary packing distinction but cautioned that it was a refinement not borne out by the express language of the enactment. The test evolved in Bombay Tyre International was whether the degree of secondary packing was necessary for putting the excisable article in the condition in which it is generally sold in wholesale market at factory gate. In Godfrey Phillips and Geep, the Court was concerned with special packing intended to protect packed goods against injury or damage rather than enable placing in market. Madras Rubber Factory ultimately stated the test as whether the packing is that in which goods are ordinarily sold in wholesale trade to wholesale buyer, or in other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in wholesale market at factory gate. The Court in the present case emphasized that this test must be read with the affirmed tests of Mukharji and Ranganathan in Ponds India, which focused on the conduct of the manufacturer and the nature of packing in which goods generally are, not can be, placed in wholesale market. The word 'necessary' should not be over-emphasised; ordinarily no manufacturer would provide packing which is not necessary for putting the excisable articles in the condition in which they are sold in wholesale market at factory gate. Therefore, whatever packing is provided at the time of delivery at the gate is presumed necessary unless the manufacturer establishes otherwise. Applying these principles to the facts, the Court found that the factual situation before it was no different from that considered in the 1986 decision: the 7-ply corrugated cartons had taken the place of wooden boxes, but there was no other change. Accordingly, it held that it would not be permissible to arrive at a different conclusion. The appeals filed by the assessee were allowed, the appeal filed by the Revenue was dismissed, and no order was made as to costs.
Headnote
A) Central Excise - Assessable Value - Inclusion of Packing Cost - Central Excises and Salt Act, 1944, Section 4(4)(d)(i) - The assessee manufactured batteries and torches packed in small boxes, medium cartons, and 7-ply corrugated cartons; the dispute concerned whether the cost of the 7-ply corrugated cartons must be included in the assessable value. The Supreme Court examined the test enunciated in Government of India v. Madras Rubber Factory Limited and held that the true test is whether the packing is that in which the goods are ordinarily sold in wholesale trade at the factory gate, judged from the manufacturer's conduct, unless the manufacturer establishes that a particular packing was not necessary for that purpose. Because the 7-ply corrugated cartons had replaced wooden boxes earlier held by this Court to be used only for protection during transport and not for making goods marketable, their cost was excluded. Held that the assessee succeeded and the appeals of the Revenue were dismissed (Paras not numbered). B) Precedent - Stare Decisis - Binding Nature of Earlier Decision on Identical Facts - Central Excises and Salt Act, 1944, Section 4(4)(d)(i) - The earlier decision in Geep Industrial Syndicate Limited v. Union of India was rendered by a three-Judge Bench between the same parties and held that wooden boxes were not necessary for putting torches and batteries in the condition in which they are generally sold in wholesale market at factory gate. The only change was that 7-ply corrugated cartons took the place of wooden boxes. The Court held that in such a factual situation, it would not be permissible to arrive at a different conclusion than the one arrived at in 1986. Held that the earlier binding decision must be followed (Paras not numbered).
Issue of Consideration
Whether the cost of 7-ply corrugated cartons was includible in the assessable value of batteries and torches under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944; what is the correct test for inclusion of packing cost; whether the earlier binding decision between the same parties on identical facts must be followed.
Final Decision
Civil Appeals Nos. 4608-4612 of 1996 and 4960 of 1996 (assessee's appeals) allowed; Civil Appeal No. 14407 of 1996 (Revenue's appeal) dismissed; no order as to costs. Cost of 7-ply corrugated cartons excluded from assessable value.
Law Points
- Cost of packing includible in assessable value if packing is that in which goods ordinarily sold in wholesale trade at factory gate
- manufacturer's conduct determines necessity
- manufacturer bears burden to prove packing not necessary
- earlier binding decision on identical facts must be followed
- 'necessary' in Bombay Tyre test not to be over-emphasised
- primary and secondary packing distinction not borne out by express language of Section 4(4)(d)(i)
- Central Excises and Salt Act
- 1944
