M/S Essel Propack Ltd.
Vs. Commissioner of Central Excise, Mumbai-III
These appeals are filed
under Section 35L(b) of the Central Excise Act, 1944 (for short "the Act"),
against the order dated 30th January, 2003 of the Customs, Excise & Gold (Control)
Appellate Tribunal (for short "the Tribunal"), West Zonal Bench at
manufactured plastic tubes in its factory and supplied the same to M/s Colgate
Palmolive (I) Ltd. (for short "Colgate"). After considering the reply
to the show cause notices, the Commissioner of Central Excise, Mumbai III,
passed an order dated 17th July, 1997, confirming the demand of excise duty amounting
to Rs.54,30,713/- and imposing a penalty of Rs.41,00,000/- under Rule 173-Q of the
Central Excise Rules, 1944 and also directing the appellant to pay interest at the
rate of 20% under Section 11-AB of the Act, on delayed payment of duty for the
relevant periods, saying that the plastic caps, which were put on the plastic tubes,
were not included in the assessable value of the plastic tubes manufactured and
cleared from the factory of the appellant.
Aggrieved, the appellant
filed appeals before the Tribunal and by the impugned order, the Tribunal
confirmed the demand of duty and modified the penalty and interest imposed by the
Commissioner. The reason given by the Tribunal in the impugned order is that
this Court in Union of India versus J.G. Glass Industries Ltd.,[1998 (97)
E.L.T. 5 (S.C.)], had held that printing carried out on plain glass bottles in
a different factory would not amount to "manufacture" under Section
2(f) of the Act, but, if manufacture of bottles and printing thereon are carried
out within the same factory, then the ultimate product, which happens to be excisable
item at the factory gate, is the printed bottle.
Applying the decision
of this Court in J.G. Glass Industries Ltd. (supra), the Tribunal took the view
that where the plastic caps are fitted to the tubes before removal from the
appellant's factory, duty is to be paid on the total value of the tubes
including the value of the plastic caps. Mr. A.R. Madhav Rao, learned counsel
appearing for the appellant, submitted that the plastic caps, which are fitted to
the tubes manufactured and removed from the appellant's factory, are not actually
manufactured by the appellant in its factory and these are being supplied by
Colgate to the appellant and are fitted to the tubes before removal of the same
from the factory of the appellant.
He relied upon the
decision in Metal Box of India Ltd., Calcutta versus Collector of Central
Excise, Calcutta [1983 (13) E.L.T. 956 (C.E.G.A.T)], in which the Tribunal has held
that where the caps made of plastic had been separately manufactured for the aluminium
collapsible tubes and were not part of the manufacturing process of Metal Box of
India Limited, such caps have to be treated separately while charging the
weight based portion of the duty of excise on aluminium as envisaged in Item 27
of the Central Excise Tariff.
He submitted that
although an appeal was preferred against the aforesaid decision of the Tribunal
to this Court, the appeal was dismissed on 20th November, 1989, as reported in Collector
versus Metal Box of India Ltd. [1990 (45) E.L.T. A33(S.C.). He submitted that
in Col. Tubes (P) Ltd. versus Collector [1994 (72) E.L.T. 342 (Tribunal)], the Col.
Tubes (P) Ltd., which was manufacturing aluminium collapsible tubes, was clearing
its product from its factory along with a plastic cap manufactured elsewhere
and the Tribunal, by a majority decision, held that cost of plastic cap, a
bought-out item and labour charges for fixing it are not includible in the
assessable value of the aluminium collapsible tube under Section 4 of the Act.
He submitted that the
Collector, Central Excise preferred an appeal to this Court, but the appeal was
dismissed following its decision in Collector versus Metal Box of India Ltd.
(supra). Mr. Rao further submitted that considering these authorities, in the very
case of the appellant, for a subsequent period, the Tribunal has now taken a view
that the caps, not being integral part of a toothpaste tube, cannot be included
in the assessable value of the toothpaste tube removed by the appellant from
He submitted that in its
decision, for a later period, the Tribunal has distinguished the case of the
appellant from the case in J.G. Glass Industries Ltd. (supra), saying that in
that case printing on the bottles was integral to the bottles whereas in the
case of the appellant, the cap was not integral to the tubes but was only an
Ms. Aruna Gupta, learned
counsel appearing for the respondent, on the other hand, submitted that it is
not clear from the facts as found by the Tribunal whether the plastic caps are
manufactured in the factory premises of the appellant or are being supplied by
Colgate and in the absence of any finding on this aspect, it is difficult for this
Court to take the view that the plastic caps were not manufactured in the factory
of the appellant and were supplied by Colgate and, therefore, were not an
integral part of the tube and could not be includible in the assessable value
of the tubes.
We have considered
the submissions made by learned counsel for the parties and we find that the consistent
view of the Tribunal as well as this Court has been that if the caps are
manufactured separately and not in the same factory in which the tubes are
being manufactured, the caps cannot form integral part of the assessable value
of the tubes, manufactured and cleared from the factory.
This is the view that
the Tribunal and this Court have been taking in Metal Box of India Ltd., Calcutta
(supra) and Col. Tubes (P) Ltd. (supra). Thus, if in the present case, the caps
are not manufactured in the factory of the appellant but are being supplied by
the customers of the appellant, the value of the caps will not form part of the
assessable value of the tubes manufactured by the appellant.
On a reading of the
reply to the show cause notice in the present case, we find that the appellant
has stated in Para 3.3 that the appellant manufactures tubes on orders received
from their customers and whenever the customers order, the appellant fixes
plastic caps to the tubes and in such cases the value of the tubes fixed with
caps are also included in the assessable value of tubes, but in case such caps
are supplied by the customers free of cost, such tubes are cleared without
including the value of the caps in the assessable value of the tubes.
The Commissioner has not
recorded any clear finding as to whether for the tubes that were cleared by the
appellant during the relevant periods in respect of which show cause notices
were issued, the caps were supplied free of cost by the customers of the appellant
and such caps were fitted to the tubes manufactured in the factory of the appellant.
As we have already held, in respect of the tubes for which caps have been supplied
by the customers free of cost, the assessable value of the tubes will not
include the value of the caps.
The Commissioner, therefore,
will have to record a clear finding as to whether for the tubes cleared during the
three relevant periods, the caps were supplied by the customers of the
appellant free of cost and accordingly pass a fresh order. In the result, the appeals
are allowed to the extent indicated above; the impugned order of the Tribunal
as well as the original order passed by the Commissioner are set aside.
The matter is
remanded to the Commissioner for fresh decision in accordance with the observations
made in this order. No costs.
(ANIL R. DAVE)