JUDGMENT

BHAGWATI, C.J.I. :— These appeals by special leave raise a number of questions relating to excise duty leviable on cigarettes manufactured by the respondents. Barring one, all the other questions are now settled as a result of the decision of this Court in Union of India v. Bombay Tyre International Ltd., (1984) 1 SCC 467 and all that is required is to direct the assessing authorities to assess the excise duty leviable on the respondents on die basis of the law laid down, in Bombay Tyre International case (supra). The only question which remains to be considered is in regard to cost of packing includible in the value of the cigarettes for the purpose of assessment to excise duty.

2. The respondents in these appeals are manufacturers of cigarettes. They manufacture cigarettes in their factories and the cigarettes so manufactured are packed initially in paper/card board packets of 10 and 20 and these packets are then packed together in paper/card board cartons / outers. These cartons / outers are then placed in corrugated fibre board containers and it is these corrugated fibre board containers filled with cartons / outers containing packets of cigarettes of 10 and 20 which are delivered by the respondents to the wholesale dealers at the factory gate. It was common ground between the parties that the wholesale price charged by the respondents for the cigarettes sold to the wholesale dealers includes not only the cost of primary packing in packets of 10 and 20, but also the cost of secondary packing in cartons / outers and the cost of final packing in corrugated fibre board containers. So far as the two items of cost, namely, cost of primary packing into packets of 10 and 20 and the cost of secondary packing in cartons / outers are concerned, there was no dispute between the parties that these two items of cost must be included in determining the value of the cigarettes for the purpose of assessment to excise duty, since such packing would admittedly fall within the terms of S. 4(4)(d)(i) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) read with the Explanation to that provision. But the question whether the cost of final packing in corrugated fibre board containers would be liable to be included in the value of the cigarettes for the purpose of assessment to excise duty raised a serious controversy between the parties. The appellant contended that on a true construction of S. 4(4)(d)(i) read with the Explanation, whatever be the packing, primary or secondary, in which the cigarettes were packed when delivered to the buyer in the course of wholesale trade at the factory gate, the cost of such packing would be liable to be included in the value of the cigarettes. The argument of the appellant was that it was a totally unwarranted gloss on the language of S. 4(4)(d)(i) read with the Explanation to make A distinction between primary and secondary packing because that section did not make any such distinction and on the contrary, provided in the clearest terms for inclusion of the cost of the entire packing in which the cigarettes were packed when delivered to the wholesale buyer at the time of removal. The respondents on the other hand urged that though it was true that S. 4(4)(d)(i) read with the Explanation did not make any distinction between primary packing and secondary packing, the cost of only such secondary packing was liable to be included in the value of the cigarettes as was necessary for sale of the cigarettes in the wholesale trade and not the cost of secondary packing which was necessitated in order to protect the packed cigarettes and to prevent them from being damaged during the course of transportation from the factory gate to the godown or warehouse of the wholesale dealer. The packing in corrugated fibre board containers, contended the respondents, was not necessary or essential for the purpose of sale of the cigarettes to the wholesale dealer at the factory gate but it was do