K.L. Rekhi, Member (T)

1. Common issues are involved in the 7 matters listed above. They were heard together and are being disposed of by this common order.

2. We have heard both, sides and examined the record. The facts, in brief, are that M/s. United Glass ('the assessee') manufacture Glass and Glassware at their factory situated at Bangalore. They supply empty glass bottles to M/s. H.M.M. Ltd. ('the customer') who are situated nearby. The customer uses these bottles for packing their product 'HORLICKS' therein. The customer sent empty cardboard cartons to the assessee. These cartons belonged to the customer and were supplied free of cost to the assessee. The cartons were printed with the customer's legend "Horlicks the great Nourisher, made in India by H.M.M. Ltd.". The assessee placed empty glass bottles in the cartons and despatched the same to the customer without closing the lids of the cartons.

3. Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, reads as under :-

"(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."

4. The point of dispute in these 7 matters is :

(1) whether the cost of carton is includible at all in the assessable value of the glass bottles sold by the assessee to the customer;

(2) if includible, at what rate.

5. The assessee filed a price list on 1.7.1980. It contained the following entry on cost of packing :

"Rs. 79.00 (Rupees Seventy-nine only) per thousand bottles, (packed in returnable carton and the cost of one carton, which can be used repeatedly to supply 100 bottles)".

The assessee calculated the amount of Rs. 79/- on the basis that each carton cost Rs. 7.90 and was capable of carrying 108 bottles in six trips.

6. Without any notice or hearing to the assessee, the Assistant Collector enhanced the packing cost from Rs. 79/- to 442/- per thousand bottles. He did so on the ground that there was no evidence to show that each carton was used to carry empty bottles six times. The assessee started paying duty on the enhanced value under protest. On 9.10.1980, the assessee represented to the Assistant Collector and asked for total exclusion of the packing cost. The Assistant Collector, on adjudication on 29.12.1980, stuck to his earlier order. The proceedings were then taken before the Appellate Collector. As time passed, further price lists were filed by the assessee. They gave rise to the same type of dispute. The various proceedings have ultimately culminated into the present three appeals of the department, three corresponding cross-objections of the assessee and one independent appeal of the assessee. The assessee's independent appeal No. E-2620/86-A and the assessee's cross-objection No. E-24/87-A are really a duplication of each other.

7. The department's case is that the full cost of carton at Rs. 442/- per thousand bottles should be added in the assessable value. The assessee's case is that there should be no addition on account of the cost of packing at all. The assessee's alternative case is that if the addition has got to be made, it should be only @ Rs. 79/- per thousand bottles. It is a common ground between the two parties that there was no basis for adding the notional cost of imaginary gunny and straw packing which, in fact, was not used in delivering the bottles to the customer but which the Collector (Appeals) ordered to be included (vide appeal No. E-2637/ 86-A).

8. The assessee's pleas in support of their case for total exclusion of the packing cost are as follows :-

(1) The packing cost envisaged in Section 4(4)(d)(i) was the cost incurred by the manufacturer of the goods. Since in their case the cartons belonged to the customer and were supplied free to the assessee, the assessee incurred no cost on packing. The assessee sold only naked empty glass bottles to