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1997 Supreme(SC) 198
1997(2) Supreme 629
SUPREME COURT OF INDIA
B.P. Jeevan Reddy & K.S. Paripoornan, JJ.
Geep Industrial Syndicate Ltd. Etc. -Appellants
versus
Collector of Central Excise, Allahabad Etc. -Respondents
Civil Appeal Nos. 4608-12 of 1996
With
Civil Appeal No. 4960 of 1996
And
Civil Appeal No. 14407 of 1996
Decided on 4-2-1997
Counsel for the Parties :
For the Appellants in C.A. Nos. 4608-12 and 4960/96 and Respondent in C.A. No. 14407/96 : Soli J. Sorabjee, Sr. Advocate, V. Lakshmikumaran, V. Balachandran, and Ms. Nisha Bagchi, Advocates.
For the Respondents in C.A. No. 4608- 12/96, 4960/96 and Appellants in C.A. No. 14407/96 : M. Gaurishankar Murthi, G. Prakash and V.K. Verma, Advocates.
Headnote:Excise Act-Section 4(4)(d)(i)-Goods manufactured by appellant assessee initially were packed in small boxes and then in medium cartons and finally in larger corrugated cartons value of 7-ply corrugated cartons was liable to be included in the value of goods packed?-No.
Held : 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 Syndicate (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 an 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 ground alone, we hold in favour of the assessee. (Para 7 & 8)
JUDGMENT
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 goods are initially 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 failed appeals, certain other orders have been appealed against by the Revenue.
2. 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 India1. 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 International2 and Government of India v. Madras Rubber Factory Limited3, 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 Factor 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.
3. 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 assessee 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 restored to with care and circumspection."
4. 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 Limited4. It was pointed out that the said decision was rendered by the very same Bench which decided Bombay Tyre International. It
