Glass Ltd. Vs. Union of India & Ors  Insc 114
(22 February 2005)
N. Variava,Dr. Ar. Lakshmanan & S. H. Kapadia S. N. Variava, J.
Appeal is against the Judgment dated 14.10.1999 passed by the High Court of Allahabad
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 is packed, is includible in the assessable value of sheet
portion of Section 4 of The Central Excises and Salt Act, 1944 (hereinafter
referred to as 'the Act') reads as follows:
4. Valuation of excisable goods for purposes of charging of duty of excise.-
(1) 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 normal price thereof, that
is to say, the price at which such goods are ordinarily sold by the assessee to
a buyer in the course 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 xxx (4) For the purposes of this section, - xxx xxx xxx xxx xxx xxx
(d) "Value", in relation to any excisable goods, -
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.
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 returnable by the buyer to the assessee.
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 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.
appears that the Assistant Collector still approved the price list only by
including the costs of the wooden crates. The Appellants thus filed a Writ
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.
must be mentioned that against the Order of the Collector (Appeals) the
Department had filed Revisions before the Central Government. With the
constitution of the Customs, Excise and Gold (Control) Appellate Tribunal
(CEGAT) the Revisions were transferred to CEGAT. CEGAT disposed off these
Revisions by concluding that the cost of wooden crates was not to be includible
in the assessable value of glass sheets.
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.
questions arise for consideration by us:
Whether the costs of wooden crates is includible in the value of glass sheets;
Whether the wooden crates can be said to be "durable and returnable
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 in the value of glass sheets. To this
extent the impugned Judgment cannot be faulted.
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
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 1988 (36)
E.L.T. 727 (SC) 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 assessee 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 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
was also placed upon the case of Wipro Products Ltd. v. Union of India reported
in 1991 (51) ELT 281 (Bombay). In this case Bombay 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.
case of Gobind Glass Industries Ltd. v. Commissioner of Central Excise, Ahmedabad
reported in 2002 (150) ELT 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 if there 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.
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 must return the
packing to the seller. It has been held that the mere theoretical possibility
of the crates being returned was not sufficient.
has supported the view of the High Court and submitted that the cost would only
get excluded if the crates are actually returned.
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
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 to use them again. In
our view, the High Court was wrong in holding that the wooden crates are not
durable or returnable.
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 durable and returnable packing whose costs is not to be included in
the value of glass sheets.
this view, the impugned Judgment is set aside on this point.
this extent the Appeal is allowed. There will be no order as to costs.