MAHALAKSHMI GLASS WORKS (P) LTD.versusCOLLECTOR OF CENTRAL EXCISE, BOMBAY

            MAHALAKSHMI GLASS WORKS (P) LTD.                                  A
                                     v.
         COLLECTOR OF CEN>RAL EXCISE, BOMBAY

                              JULY 26, 1988
                                                                              B
   [SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.)

       Central Excises and Salt Act, 1944: Section 4(4)(d)(i)-Assessing
 of value in relation to. excisable goods-Whether price includes cost of
 packing-Arrangement between buyer and assessee for return of such
 packing is essential to determine the includibility.
                                                                              c
       The appellant manufactured various types of glass Mltles which
 were assessed to duty under Item No. 23A of the Central Excise Tariff.
 It sold the glass bottles to the customers on wholesale basis packed iri
 gunny bags and cartons which were durable and returnable. According
 to the appellant it has been paying duty on glass bottles on the basis of    D
 the" assessable value which included ·the cost of packing materfal,
 namely, the gunny bags and cartons. The returned 11\lnny bags and
 cartons were re-used by the appellant.

       The appellant submitted for approval, price list in regard to the
 glass bottles manufactured by it showing separately the price at which       E
 the goods were actually sold and the cost of packing. Returning the
 price list duly approved; the Superintendent of Central Excise noted
 therein that the price should be inclusive of .the cost of packing and
 packing charges in terms of Section 4(4)(d) of the Act. The appellant
 was paying duty on the cost of packing under protest and lOdged claims
 of refund. As the appellant did not receive either the refund or any         F
 intimation rejecting the claim for refund, it tiled a writ petition before
 the High Court which remanded the case back to the Assistant Collector
 for deciding the matter after giving the appellant fair and adequate
 opportunity to adduce evidence.

        The Assistant Collector, after considering the written statements     G
  filed by the appellant rejected the appellant's claim for refund and
  demanded duty for the subsequent periOd. The appellant tiled an
• appeal before the Collector of Central Excise (Appeals) which was
  rejected. The appeal filed before the Customs Excise and Gold
  (Control) Appellate Tribunal was also dismissed. This appeal under
  Section 35L of the Act is against the Tribunal's judgment.                  H

                                    587
    588         SUPREME COURT REPORTS                [1988] Supp. 1 S.C.R.

          Dismissing the appeal,
A
         HELD: 1. In view of the facts of the case, and the expressions
    used in Section 4(4)(d)(i) of the Act, there being no evidence of the
    agreement that the cartons and gunny bags were returnable, the Tri-
    bunal was right in coming to the conclusion that the cartons and gunny
B   bags were not returnable in the accepted sense of the term. [S92G, B-C I

        2.1 The appellant manufactured glass bottles and delivered these
  in two types of packing, namely, in open crates and in cartons and
  gunny bags. So far as the crates were concerned, the same belonged to
  the appellant. The customer was billed for the cost of glass bottles only.
C The crates were returnable to the appellant within 30 days. The revenue
  has not included the cost of such crates in the assessable value. The
  revenue has also not included the cost of packing, if any, supplied by the
  customer himself. There was no dispute about these packings. So far as
  the packings in cartons and gunny bags were concerned, it was noted.by
  the Tribunal, that these belonged to the appellant but their cost was
D realised from the customer along with the cost of glass bottles. It cannot
  be said that the packing is returnable by the buyer to the assessee unless
  there is an arrangement between them that it shall be returned. Actual
  return or extent of return is not relevant. What is necessary is that if the
  buyer chooses to return the packing, the seller should be obliged to
  accept it and refund the stipulated amount. In this case there was no
E clause about returnability of the cartons and gunny bags. ls91B-F J

        2.2. So far as the question of durability is concerned, there can-
  not be such controversy about it, but a question has been raised as to
  what is the meaning and connotation of the word "returnable". What             •
  Section 4(4)(d)(i) excludes from computation in cost of packing which is
F of a durable nature and is returnable by the buyer to the assessee. The
  packing must be one which is returnable by the buyer to the assessee
  and obviously that must be under an arrangement between the buyer
  and the assessee. It is not the physical capability of the packing to be
  returned which is the determining factor because, in that event, the
  words "by the buyer to the assessee" need not have found a place in the
G section; they would be superfluous. [S92D-F

           K. Radhakrishnaiah v. Inspector of Central Excise and others,
     [1987] 2 sec 457 referred to.

        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1037
H of 1988.
- MAHALAKSHMI GLASS v_ COLLECTOR OF C.E- [MUKHARJI, J.]              589
                                                                        .-·
      From the Order dated 14.12.1987 of the Customs Excise and
                                                                              A
 Gold (Control) Appellate Tribunal New Delhi in Appeal No. 469/87-
 A Order No. 807/87-A

      S.N. Kackar, R.K. Habbu, P.G. Gokhale, Ms. Sushma Man-
 chanda and B.R. Agarwal for the Appellant.
                                                                              B
      The Judgment of the Court was delivered by

       SABYASACHI MUKHARJI, J. This is an appeal under section
 35 L of the Central Excises and Salt Act, 1944 (hereinafter called 'the
 Act'). The Superintendent of Central Excise returned the price list of
 the appellant with a covering letter satating that the price should          C
 include all the cost of packing and packing charges in terms of section
 4(4)(d)(i) of the Act.

       The appellant, a private limited company, manufactured various
 types of glass bottles which were assessed to duty under Item No. 23A
 of the Central Excise Tariff. According to the appellant, it sold to the     D
 customers on wholesale basis the glass bottles manufactured by it,
 packed in gunny bags and cartons which it purchases from the market..
 According to the appellant further, it has been paying duty on the
 value of the glass bottles including the cost of gunny bags or the
·cartons in which these are packed at the time of sale. It appears,
 therefore, according to the appellant, that it has been paying duty on       E
 glass bottles on the basis of the assessable value which included the
 costs of pa~king material, namely, the gunny bags and the cartons. The
 case of the appellant further is that the glass bottles are normally sold
 by it in the packing consisting of gunny bags which are durable and
 returnable and in several cases the gunny bags are returned by the
 buy.:rs and are used by the appellant again for packing the glass bot-       F
 ties. It is only when. the customers specifically ask for delivered in
 cartons instead of in gunny bags that the appellant delivered the glass
 bottles packed in cartons which are also durable and returnable. To-
 wards the end of 1977 and early 1978 the appellant submitted price list
 in regard to the glass bottles manufactured by it for approval by show-
 ing separately the price at which such goods were actually sold in the       Q
 course of "wholesale trade" and "the cost of packing". By his letter
 dated 10th January, 1978 0 the Superintendent of Central Excise re-
 turned to the appellant the price list duly approved but nothing therein
 that the price should -be .. inclusive oLthe cost of packing and pa_cking
 charges in terms of section 4(4)(d) of the Act. Section 4(4)(d)(i) as it
 stood read as follows:        ·                                              H
    590         SUPREME COURT REPORTS                [1988] Supp. 1 s.c.~.

A
               "( 4) For the purposes of this section:

               (a) 'assessee' means the person who is liable to pay the
               duty of excise under this Act and includes his agent;

               (b) 'place of removal' means-
B
               (i) &(ii)xxx

                (c) xxx

               (d) 'value', in relation to any excisable goods,-
c              (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.

D              Explanation:-In this sub-clause, 'packing' means the
               wrapper, container, bobbin, pirn, spool, reel or wrap beam
               or any other thing in which or on which the excisable goods
               are wrapped, contained or wound,"

          Since then the appellant has been paying duty on the cost of
E   packing under protest and lodging claims of refund. The appellant,
    however, did not receive any refund nor any intimation that the claims
    of refund are or were bein~.rejected. Various representations made by
    the appellant were in vain. The Assistant Collector of Central Excise
    wrote a letter dated 8th March, 1980 advising the appellant to file an
    appeal before the Appellate Collector if the appellant felt aggrieved.
F   Feeling aggrieved, the appellant filed a writ petition under Article 226
    of the Constitution in the High Court of Bombay. The High Court
    passed an interim order on 18th July, 1984 remanding the case back to
    the Assistant Collector of Central Excise and to decide the matter
    after giving the appellant fair and adequate opportunity to adduce
    evidence.
G
        After considering the written statements filed by the appellant,
  the Assistant Collector passed an order on 29th April, 1986 rejecting
  the appellant's refund claim for about Rs.17 lakhs for the period from
  1st January, 1978 to 31st December, 1980 and demanding duty for the
  period 6th January, 1981 to 31st December, 1985 in terms of the bank
H g_uarantees executed by the appellant. There was an appeal before the
MAHALAKSHMI GLASS v. COLLECTOR OF C'.E. [MUKHARJI, J.]              591

Collector of Central Excise (Appeals). The Collector on 21st January,      A
1987 rejected the appeal and upheld the order of the Assistant
Collector. The appellant filed an appeal before the Customs Excise
and Gold (Control) Appellate Tribunal (hereinafter called 'CEGAT').
CEGAT dismissed the appeal. Aggrieved thereby the appellant filed
the appeal in this Court.
                                                                           B
       The Tribunal noted that the appellant manufactured glass
 bottles. It delivered these in two types of packing, namely, in open
 crates and in cartons and gunny bags. So far as the crates were con-
 cerned, the same belonged to the appellant. The customer was billed
 for the cost of glass bottles only. The crates were returnable to the
 appellant within 30 days. The revenue has not included the cost of such
 crates in the assessable value. The revenue has also not included the c
 cost of packing, if any, supplied by the customer himsel{ There was no
 dispute about these packings. So far as the packings in cartons and
 gunny bags were concerned, it was noted by the Tribunal, that these
 belonged to the appellant but their cost was realised from the customer
 along with the cost of glass bottles. The appellant's case was that these D
 packings were also returnable and in many cases they were actually
 returned and re-used by the appellant. There were no evidence about
 the durability of the cartons and gunny bags but nothing to show that
 these were returnable. The position seems to be as follows: The
 Tribunal has rightly applied the returnability test. In K. Radha Krish-
 naiah v. Inspector of Central Excise and others, [1987] 2 S.C.C. 457, E
 this Court observed that it cannot be said that the packing is returnable
 by the buyer to the assessee unless there is an arrangement between
'them that it shall be returned. Therefore, such arragement has been ·
 established. Actual return or extent of return is not relevant. What is
 necessary is that if the buyer chooses to return the packing, the seller
 should be obliged to accept it and refund the stipulated amount. In this F
 case after examining the facts, the Tribunal found that there was no
 clause about returnability of the cartons and gunny bags. The appellant
 invited the attention of the Tribunal to the following cl;iuse in their
 standard contractor. It reads as follows:                              ·

            "6. All packing cases, other than such as may be supplied      G
            or ·paid for by buyer, shall be returnable in good order and
            condition within 30 days after receipt."

     The Tribunal was of the view that the above clause related to
"cases". It could have meant only the crates which belonged to the
appellant and for which the customers had not paid anything,.. The         H
    592         SUPREME COURT REPORTS                11988] Supp. l S.C.R.

    property in the crates having remained with the appellant all along, the
A
    buyers were naturally obliged to return them to their rightful owners.
    But that was not the case with the cartons and gunny bags. The buyers
    pay for these and the property in these pass on to the buyers. They could
    be asked to return them to the appellant only under a term of sale and
    on payment of the agreed amount and not for the free. No such contract
B   or agreement was forthcoming. The Tribunal was not convinced_that in
    the normal course of business anyone could be asked to part with its
    property, and in addition incur return freight therefor too for nothing.
    In those circumstances, the Tribunal held that the cartons and gunny
    bags were not returnable in the accepted sense of the term. The Tri-
                                                                                  ...
    bunal further noted that since the statute insisted on the packing being
    returnable, in addition to being durable, the authorities are bound to
c   see whether the transaction fulfilled the test~ of returnability as per the
    Supreme Court and High Court judgments.
                                                                                  (
           In that view of the matter, the Tribunal dismissed the appeal.

D          As noted above, this Court has considered the meaning of the
    expression "returnable" in the Section in K. Radha Krishnaiah's case
    (supra). This Court held that so far as the question of durability is
    concerned, there cannot be such controversy about it, but a question
    has been raised as to what is the meaning and connotation of the word
    "returnable". Does it mean physically capable of being returned or
E   does it postulate an arrangement under which the packing is return-
    able. While interpreting this word, we must bear in mind that what
    section 4(4)(d)(i) excludes from computation is cost of packing which
    is of a durable nature and is "returnable by the buyer to the assessee".
    The packing must be one which is returnable by the buyer to the
    assessee and obviously that must be under an arrangement between
F   the buyer and the assessee. It is not the physical capability of the
    packing to be returned which is the determining factor because, in that
    event, the words "by the buyer to the assessee" need not have found a
    place in the section; they would be superfluous.

           In that view of the matter we are of the opinion that in the facts
G   found and the expressions used in section 4(4)(d)(i) of the Act which
    ha ye been set out hereinbefore, there being no evidence of the agree-
    ment that the cartons and gunny bags were returnable, we are of the
    opinion that the Tribunal came to the correct conclusion. This appeal
    fails and is rejected accordingly.

    G.N.                                                    Appeal dismissed.