Important point
For valuation of excisable goods, glass sheets, wooden packing or frame packing being necessary to make them marketable, the cost of wooden packing is includible in the value of goods.

Headnote:Central Excise and Salt Act, 1944 —Section 4(4)(d)(i)—Valuation of excisable goods—Manufacturer of glass—Cost of wooden crates/boxes in which respondents pack their products i.e. glass sheets—Whether includible in assessable value of the glass—(Yes)—Cost of wooden cases are includible in the value of glass sheets sold by respondents—Special arrangement for transport of glass sheets is packing in wooden cases—In such cases liability to include cost of wooden crates in the value of glass sheets cannot be avoided by claiming that wooden crates are for purposes of protecting the glass—In such cases, wooden crates are for purposes of making the glass sheet marketable.
       Held : The question is not for what purpose the packing is done. The test is whether the packing is done in order to put the goods in a marketable condition. Another way of testing would be to see whether the goods are capable of reaching the market without the type of packing concerned. Each case would have to be decided on its own facts. It must also be remembered that Section 4(4)(d)(i) specifies that the cost of packing is includible when the packing is not of a durable nature and returnable to the buyer. Thus, the burden to show that the costs of packing is not includible is always on the assessee. Also under Section 4(a) the value is to be the normal price at which such goods are ordinarily sold in the course of wholesale trade for delivery at time and place of removal. (Para 13)
       In this case, the Assistant Collector had found that the cost of wooden crates is recovered by the Respondents from the buyers. It is found that even when the goods are sent to their own godown, they are sent in wooden cases and are stored/packed in wooden cases for delivery in the wholesale trade to the customers. It is found that the goods are generally cleared by the Respondents from their factory gate duly packed in wooden cases and they are sold as such both from the factory gate and through the depots. It has been found that the Respondents had not led any evidence to show that the goods were sold in paper packing as claimed by them. (Para 15)
       The products of the Respondents are large glass sheets. Very fairly, it was not denied that the goods are fragile. Without special protection such glass sheets could not be transported. It was submitted that for short distances they could be transported without wooden crates. However, it is clear that even in such cases special care would have to be taken. The test is not whether in a few stray instances or in a small percentage of cases or by making some other special arrangement the glass sheets can be so transported. The test is whether for the purposes of delivery in the wholesale trade, glass sheets can be moved without special arrangements. The answer has to be an obvious ‘No’. In most cases the special arrangement is packing in wooden cases. In such cases the liability to include the costs of the wooden crates in the value of the glass sheets cannot be avoided by claiming that the wooden crates are for purposes of protecting the glass. In such cases, the wooden crates are for purposes of making the glass sheets marketable. (Para 23)

Judgment

S.N. Variava, J.—These Appeals are against Judgments of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT). As the question of law involved in all these Appeals is the same, they are being disposed off by this common Judgment.

2. The question for consideration is whether the cost of wooden crates/boxes in which the Respondents pack their product, i.e., Glass Sheets, is includible in the assessable value of the glass.

3. For the sake of convenience, facts in Civil Appeal No. 3819 of 1999 will be referred to. In Civil Appeal No. 3819 of 1999 CEGAT has held in favour of the Respondents by following an earlier decision of CEGAT, dated 9th January 1987, in that Respondents’ own case. In that case, the Order was based on a finding of fact that barring stray instances glass was delivered to local customers with just a paper packing interleaved with straws. CEGAT had, on those facts, held that the ratio laid down by this Court in the case of Union of India & Ors. vs. Godfrey Philips India Ltd. [reported in 1985(22) ELT 306] and in the case of Geep Industrial Syndicate Ltd. vs. Union of India [reported in 1992(61) ELT 328] applied.

4. Before the arguments of the parties are considered, it is essential that the provision of law and the authorities of this Court be first looked at.

The relevant portion of Section 4 reads as follows :

“SECTION 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

(4) For the purposes of this section,-

xxx xxx xxx

(d) “Value”, in relation to any excisable goods,–

(i) where 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 xxx xxx”

5. Thus under Section 4(4)(d)(i) the cost of packing is to be included in working out the value of the goods, unless the packing is of a durable nature and is returnable by the buyer to the assessee. The Explanation indicates the various types of packing whose costs have to be included. A wrapper and/or a container is packing whose cost has to be included. The words “wrapper” and “container” are wide enough to include all types of wrappers or containers. The further words “any other thing in which or on which the excisable goods are wrapped, contained or wound” also show that the term “Packing” has a very wide connotation and includes anything used for wrapping and/or containing the excisable goods. Even though the statutory provision is clear and unambiguous, a concept of primary and secondary packing was developed by this Court in the case of Union of India vs. Bombay Tyre International Ltd. [reported in 1983(14) ELT 1896]. In this case, it was recognized that the degree of packing would vary from one class of excisable goods to another. It was held that packing may be of different grades. It was held that the packing may be necessa

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2005 Supreme(SC) 318

Important pointFor valuation of excisable goods, glass sheets, wooden packing or frame packing being necessary to make them marketable, the cost of wooden packing is includible in the value of goods.

Cases Referred (7)

Important point
For valuation of excisable goods, glass sheets, wooden packing or frame packing being necessary to make them marketable, the cost of wooden packing is includible in the value of goods.