Supreme Court of India
UNION OF INDIA & ORS.versusGODFREY PHILIPS INDIA LTD. ETC, ETC.
- Citation
- 1985 INSC 211
- Decided
- 30 September 1985
- Bench
- P N BHAGWATI
Holding
The cost of corrugated fibre‑board containers is part of the "packing" and must be included in the value of cigarettes for excise duty, but the Government is estopped from levying duty on that cost for the period 24 May 1976 to 2 Nov 1982 due to its earlier representation.
Summary
The respondents, cigarette manufacturers, packed cigarettes in primary packets, secondary cartons and finally in corrugated fibre‑board containers and argued that the cost of the final containers should not be part of the "value" for excise duty. The Union of India contended that all packing, whether primary or secondary, must be included under Section 4(4)(d)(i) of the Central Excise and Salt Act, 1944. The Court held that the corrugated fibre‑board containers are "packing" within the meaning of the Act and their cost is includable in the value of the cigarettes, but the Government was estopped by its 1976 representation to the industry from demanding duty on that cost for the period 24 May 1976 to 2 Nov 1982. The Court also rejected the view that the 1976 letter was a valid exemption order under Rule 8, and affirmed that the doctrine of promissory estoppel applies to the Government in administrative matters. Accordingly, the assessing authorities must include the cost of the containers except for the estopped period.
Issues considered
- Whether the cost of corrugated fibre‑board containers used as final packing is includable in the "value" of cigarettes for the purpose of excise duty under Section 4(4)(d)(i) and its Explanation.
- Whether the representation made by the Central Board of Excise and Customs in the letter dated 24 May 1976 constitutes a binding exemption order under Rule 8 of the Central Excise Rules, 1944.
- Whether the doctrine of promissory estoppel can be invoked against the Government to prevent it from reverting to the earlier position.
- Whether a distinction can be drawn between primary and secondary packing for the purpose of computing value.
- Whether the Government may rely on the defence of executive necessity to escape the estoppel.
Legislation cited
- Central Excise and Salt Act, 1944s. 3, s. 4(4)(d)(i)
- Central Excise Rules, 1944s. Rule 8(1), s. Rule 8(2)
- Constitution of Indias. Article 141
Subjects
Excise dutyValue of goodsPacking (primary, secondary)Promissory estoppelAdministrative lawRule 8Central Excise ActGovernment representationEquity
Judgment
123
UNION OF INDIA & ORS, A
Vo
GODFREY PHILIPS INDIA LTD. ETC, ETC.
~EPTEMBER 30, 1985
[P.N. BHAGIATI, CJ., R.S. PAT!JAK AND AMARENDRA NATH SEN, JJ.]
B
Central Excise and Salt Act 1944, Section 4(4) (d) (i) and
~xplanation thereto - 'value' - 'in a packed condition' - CoBt of
such packing - Whether to be included for excise duty - Primary
packing and secondary packing - Difference between.
c
Cigarettes - Manufactured and packed in paper/card board
packets and then in cartons - Cartons packed in corrugated fibre
board containers - Cost of corrugated fibre board containers
Exclusion for levy of excise duty - Whether arises.
Promissory estoppel D
Doctrine of promissory estoppel - Applicability of -
Explained.
Constitution of India 1950, Article 141
E
Supreme Court - Enunciation of law by a Bench of the Court
- Whether Co-ordinate Bench entitled to express disagreement.
Words and Phrases
'Value' - 'in a packed condition' - Meaning of - Central
Excise and Salt Act, 1944 Section 4(4)(d)(i).
F
The respondents in the appeals were manufacturers of
cigarettes• They manufactured cigarettes in their factories and
the cigarettes so manufactured were packed initially in
paper/card board packets of 10 and 20 and these packets were then
packed together in paper/card board cartons/outers. These car
G
tons/outers were then placed in corrugated fibre board containers
and these corrugated fibre board containers filled with cartons/
outers containing packets of cigarettes of 10 and 20 were deli-
vered by the respondents to.the wliolesale dealers at the factory
gate.
The wholesale price charged by the respondents for the
H
cigarettes sold to the wholesale dealers included not only the
124 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A
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.
On May 19, 1976 the Cigarette Manufacturers Association
B made a representation to the Central Board of Excise and Customs
pointing out that corrugated fibre board containers "are not an
integral or essential requirement for the sale of cigarettes and
are used for the sole purpose of protecting cigarettes from any
damage that may arise during transportation", and that the cost
of such corrugated fibre board containers should not therefore be
included in the value of goods for the purpose of excise duty.
C The Board accepted this plea of the Association and by a letter
dated May 24, 1976 intimated to the Association that
"instructions have been issued to the Collectors of Central
Excise that the cost of corrugated fibre board containers in
question does not form part of the value of cigarettes for the
purposes of excise duty". This representation contained in the
letter dated May 24, 1976 continued to hold the field until
November 2, 1982 when the Central Board of Excise and Customs
0
addressed a circular to all Collectors of Central Excise, stating
that the matter had been re-examined and the ear lier advice
should be treated as cancelled.
In the appeals by the Revenue to this Court, the question
for consideration was whether the cost of packing is includible
E
in the value of the cigarettes for the purpose of assessment to
excise duty.
On behalf of the appellant-Revenue it was contended that on
a true construction of section 4 (4)(d)(i) read with the
F Explanation, that whatever be the packing, primary or secondary,
in which the cigarettes were packed when deli.vered to the buyer
in the course of wholessle trade at the factory gate, the cost of
such packing would be liable to be included in the value of the
cigarettes, and that it was a totally unwarranted gloss on the
language of section 4 (4)(d)(i) read with the Explanation to make
G 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 whole-sale buyer at the time of removal.
H On behalf of the respondents - companies, i t was contended
that though section 4(4) (d)(i) read with the F.xplanstion did not
make any distinction between the primary packing and secondary
U.Q.I. V• GODFREY PHILIPS INDIA LTD. 125
packing, the cost of only such secondary packing was liable to be A
included in the value of the cigarettes as wao necessary for sale
of the cigarettes in the wholesale trade, and not the cost of
.secondary packing whieh 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. It was further contended B
that the cost of corrugated fibre board containers was not
includible in the value of the goods because the letter dated
24th May, 1976 constituted an el!l!lllj>tion order within the meaning
of Bule 8 sub-rule (2) of the Central Excise Hules, 1944 and the
respondents were accordingly exempted from payment of excise duty
on the cost of corrugated fibre board containers used for packing C
the cigarettes, and the doctrine of promissory estoppel was
invoked against the Government on the basis of the representation
contained in the letter dated 24th May, 1976.
llELI>: 1. (per llbapati, c.J., Patbalr. and Sen, JJ· J The
Central Government and the Central Board of Excise and Customs D
were clearlY bound bypromissory estoppel to exclude the c~st of
corrugated fibre board containers from the value of the goods for
the purpose of assessment of excise duty for the period 24th May
. 1976 to 2nd November 1982, The respoudents would be entitled to
exclusion of the cost of corrugated fibre board containers from
the value of the cigarettes only during the period 24th May 1976 E
to 2nd November 1982. [147 B, C]
In the instant case, a representation was undoubted!y made
by the Central Board of Excise and Customs and approved and
accepted by the Central Government, that the cost of corrugated
fibre boards containers would not be includible in the value of
the cigarettes for the purpose of assessment to excise duty. The F
respondents acted upon this representation and continued the use
of corrugated fibre containers for packing the cartons/outers of
cigarette and did not recover from the wholesale dealers the
SD¥>unt of excise duty attributable to the cost of such corrugated
fibre board containers during the period 24th May 1976 to 2nd
November 1982. It would be most inequitable to allow the Excise G
authorities to assess excise duty on the basis that the value of
the cigarettes manufactured by the respondents should include the
cost of corrugated fibre board containers, when it was clearly
represented by the Central Board of Excise and Cuatoms that the
cost of corrugated fibre board containers would not be includible
in the value of the cigarettes for the purpose of assessment of
excise duty. [146 C-F] H
126 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A 2. What has been laid down in Hotilal Sugar Mills case
[1979] 2 s.c.R. 641 represents the correct law in regard to the
doctrine of promissory estoppel. The observations in Jeet Kara's
case [1980] 3 s.c.R. 689 to the extent that they conflict with
the statement of the law in Hotilal Sugar Mills case and
introduce reservations cutting down the full width and amplitude
B of the propositions of law laid down in that case are dissented
from. If the Bench of two Judges in Jeet Ball's case fourul
themselves U11Sble to agree with the law laid down in Hotilal
Sugar Mills case they could have referred Jeet 11811 1 s case to a
larger Bench. It was not right on their part to express their
disagreement with the enunciation of the law by a co-ordinate
Bench of the same Court in Hotilal Sugar Mills case. [145 C-E]
c
3. Union of India v. Bombay International Ltd. [1984] 1
s.c.c. 467 broadly dealt with the question of cost of packing,
and it was conceeded on behalf of the respondents in that case
that the cost of prilllary packing DllBt be regarded as falling
within the teflDS of s. 4(4)(d)(i) read with the Explanation and
it was only the cost of secondary packing which gave rise to
D dispute between the parties. [131 F; 134 F]
{Per llbagvati, c.J.)
1. Whenever a question arises whether the cost of any
particular kind of secondary packing is liable to be included in
E the value of the article, the question to be asked is does the
packed condition in which the article is generally sold in the
wholeasle market at the factory gate include such secondary
packing? If it does, it would be liable to be included in the
value of the article for the purpose of excise duty. It DllBt
therefore follow that if the packed condition in which the
cigarettes manufactured by the respondents are generally sold in
the wholesde market at the factory gate includes packing in
corrugated fibre board containers, the cost of such corrugated
fibre board containers would be liable to be included in the
value of the cigarettes for the purpose of excise duty. [135 B-D]
G 2. The condition for applicability of the inclusive
defenition of "value" in s. 4 (4)(d)(i) is that the goods are
delivered at the time of removal "in a packed coodition• and
where this condition is satisfied, the "value" of the goods would
include "the cost of such packing" and "such packing" oust
obviously mean the packing in w-hich the goods are when they are
H delivered at the time of removal. The question therefore to be
u.o.I. V· GODFREY PHILIPS INDIA LTD. 127
asked is - what is the packed condition in which the goods are A
when delivered at the time of removal? Whatever is the packing of
the goods at the time when they are delivered at the time of
rerooval, the cost of such packing would be liable to be included
in the 'value' of the goods. The Explanation to s. 4 (4)(d)(i)
provides an exclusive definition of the term "packing" and it
includes not only outer packing but also what may be called inner B
packing. [135 F-G)
3. Oridinarily bobbin, pirl, spool, reel and warp beam on
which yarn is wound would not be regarded as packing of such
yarn, but brought within the definition of "packing" by the
Explanation• The Explanation thus extends the meaning of the word c
"packing" to cover items which would not ordinarily be regarded
as forming part of "packing"• The Explanation then proceed& to
say that "packing" meana wrapper, container or any other thing in
which the excisable goods are wrapped or contained. [135H; 136B]
4. It is apparent from the wide lsngusge of the Explanation D
that every kind of container in which it can be said that the
excisable gooda are contained would be "packing" within the
meaning of the Explanation and this would necessarily include a
fortiorari corrugated fibre board containers in which the
cigarettes are contained. [136 CJ
E
5. The question is not for what purpose a particular kind
of packing is done. The test is whether a particular kind of
packing is done in order to put the goods in the condition in
which they are generally sold in the wholesale market at the
factory gate and i f they are generally sold in the wholesale
market at the factory gate in a certain packed condition,
whatever may be the reason for such packing, the cost of such F
packing would be inciudible in the value of the goods for
assessment to excise duty. [137 E-F]
In the inatant case, there can therefore be no doubt that
corrugated fibre board containers in which the cigarettes are
contained fall within the definition of "packing" in the G
Explanation and i f they form part of the packing in which the
gooda are packed when delivered at the time of removal, it ia
difficult to resist the conclusion that under s. 4 (4)(d)(i) read
with the Explanation, the cost of such corrugated fibre board
containers would be liable to be included in the value of the
cigarettes. [136 E~F]
H
128 · SUPREME COURT REPORTS (1985) SUPP.3 s.c.R.
A.· 6. IWJ.e 8 of the Central Excise J.WJ.es, 1944 deals with the
power to authorise exemption from duty in aped.al cases. Sub-rule
(2) . IWJ.e 8 postulates the making of a special order i>y the
Central Board of Excise and Custans in each case exempting from
payment of duty s:ny ~sesble goods. (139 c, G) ·
B 7 • The letter dated 24th May 1976 could not possibly be
regarded as a special order by the Central Board of Excise and
Custans in the case of each of the mam.:.facturers of cigarettes
exempting cigarettes from ·payment of duty· to the extent of the
cest of pack•ng by way of corrugated fibre board containers~ The
ars=ent of the respondents 'baaed on sub-rule (2) of IWJ.e 8 lllWlt
be therefore rejected. ( 139 G; 140 A) ·
c
8 •. The doctrine of promissory eatoppel is well-established
in the adminiatrative law of India. It represents a principle
evolved by equity to avoid injustice and, though commonly named
promissory estoppel, it is· neither in the realm of contract nor
in the realm of estoppel. The i>aais of this doctrine is the inter
.
D
position of equity which has always, true to its form,,· stepped
in to mitigate the ri"gour of strict law.
g, The doctrine of promissory - estoppel is applicable
against the Goverment in the exercise of its govermental,
public or eucutive functions and the doctrine of executive
necessity or freedaa of future executive action cannot be invoked
E ·to defeat the applicability of the doctrine of promissory
eatoppel. [144 G) ..
. - Ce>ttal Lmdca PlopeLtj Trust I.1Jlited v. B1&h .Trees llouae
Lbdted, (1966) l AU. E. JI., 256, ll2deriaktieholaget A=pbitrite y,
2he E!Dg, ll921] 3 Jt,B, 500, lohentoo "• llilliater of Pmaiolls,
'•, F (1949) l Jt,B. 227, 1lni<a of Ind1a v. lDdo Afghan ~- [1968) -
., , 2 . s.c.11.. 366 and Century SpimW>g and l!l!mifacturl"3 Coapimy
L1llited .... tnhnn•gar lbl1cipal a---n, (1970) 3 s.c.11.. 854,
·referred to. ·
10. The doctrine of promissory eatoppel being s:n equitable .
G doctrine, lllWlt yield when the e(iuity so requires, i f it can be
shown by the Goverment or public authority that having regard to
the facts as they have transpired, it would be· inequitable· to
bOld the Goverment · or public authority to · the promise or.
representation made by it. The Court would not raise s:n equity in
favour . of the person to wbaa the promise or representation is
H made .and enforce the promise or representation againa t th8
Goverment or public · authority. The doctrine of. promissory
u.o.I. V• GODFREY PHILIPS INDIA LTD. 129
estoppel would be displaced in such a case, because on the facts A
equity would not require that the Government or public authority
should be held bouud by the promise or representation made by it.
[145 G; 146 AJ
(Per Pathalt 6 Sen, JJ. d1ssentfng)
B
The corrugated fibre board containers are not necessary for
sel.liJl8 the cigarettes in the wholesale market at the factory
gate. The cost of such packing cannot be included in the 'value'
for the P'Jrpose of assessment of excise duty. (148 G; 151 BJ
(Per 11..s. Pathak, .r.) c
1. Under s. 3 of the Central Excise and Salt Act, 1944 the
levy of .excise duty is made on manufactured cigarettes, the
exclsable goods. Section 4 of the Act provides how the ·•value'
shall be determined. The expression 'value' has been extended to
include the cost of packing. The packing itself is not the D
subject of the levy of excise duty. (148 BJ
2. For the purpose of computing the measure of the levy,
the statute has given an extended meaning to the expression
'value' in clause (d) of sub-a. (4) of sec. 4 of the Act. The
expression 111USt be strictly construed. What is being included in E
the value now is something beyond the value of the manufactured
comaodity itself, [148 CJ
3. The corrugated fibre board containers are employed only
for the purpose of avoiding damage or injury during transit. The
wholesale dealer who takes delivery may have his depot a very
short distance only ·from the factory gate or may have such F
transport arrangements available that damage or injury to the
cigarettes can be avoided. The corrugated fibre board containers
are not necessary for selling the cigarettes in the wholesale
market at the factory gate. [148 F-<;J
4. The position expressed by the Central Board of Excise G
and Custom in its letter dated May 24, 1976 was right wnen it
declared that the Collector of the Central Excise has been
instructed that "the cost of corrugated fibre board containers in
question does not form part of the value of cigarettes for the
purpose of excise duty." (148 HJ
Uaf.au. of India v. Bombay tyre Int:ematianal Ud., (1984] l H
s.c.c. 467, referred to.
130 SUPREME COURT REPORTS (1985] SUPP.3 s.c.R.
A
(Per A.II. Sm, J.)
II
l. Excise duty which is levied on the goods is ultimately
passed on to the consumers of the goods and they have ultillately
to bear the burden. So far as the consumers are concerned they
bu)' cigarettes, loose or in packets or even in cartons. Cartons
packed in corrugated fibre board containers are not purchased by
the consumers. So far as the retail sellers are concerned who
I
may buy frOll wholesalers, they usually buy loose packets of
cigarettes or packets of cigarettes packed in cartons. So far as
the buyers in the wholesale trade are concerned, they buy the
cartons of cigarettes in which the packets of cigarettes are
c packed in the course of their wholesale trade for selling the
same to retailers or to their customers. It is only for the sake
of convenience in the matter of BlDOOth delivery of cartons in
which the packets of cigarettes are packed that the cartons may
be further packed in corrugated fibre board containers for
facility of transport and BlDOOth transit of the cartons before
delivery of the same to the wholesale buyer. (151 11-!l]
D
2. On a proper conatruction of s.4(4)(d)(i) of the Act read
with the Explanation any secondary packing done for the purpose
of facilitating transport and B1D00th transit of the goods to be
delivered to the buyer. in the wholesale trade cannot be included
in the value for the purpose of assessment of excise duty.
E (150 G-1!]
In the inatant case, the cost of corrugated fibre board
containers which the cartons containing the packets of cigarettes
is packed, cannot be included in the value for the purpose of
assessment of excise duty. (151 A]
F
UniaD of India V• Bomllay TJre lntenlatiollal Ltd. (1984] 1
s.c.c. 467, referred to.
CIVIL APPELIATE JURISDICTION : Civil Appeal No. 1136 of
1977.
G
From the Judgment and Order dated 29.4.1976 of the Bombay
High Court in Misc. Petn. No. 548 of 1974.
AND
H Civil Appeal No. 1244 of 1977.
u.o.I. v. GODFREY PHILIPS INDIA LTD. [BHAGWATI, C.J.] 131
From the Judgment and Order dated 15.12.1975 of the Bombay A
High Court in Spl. Misc. Petition No. 293 of 1974.
AND
Civil Appeal Nos. 55-61 of 1979.
B
From the Judgment and Order dated 18.8.1977 of the Andhra
Pradesh High Court in Writ Appeals NOs. 252, 435, 550, 553 and
560 of 1976 and Writ Petition Nos. 3114 and 6044 of 1975.
K· Parasaran, Solicitor General, N.C. Talukdar, Suraj Udai
Singh, Dalveer Bhandari, c.v. Subba Rao and R.N. Poddar for the c
Appellants.
N.A. Palkhiwala, J.C. Bhatt, D.B. Engineer, B.H. Antia,
Ravinder Narain, o.c. Mathur, Kamal Mehta, Talat Ansari, Mrs.
A.K. Verma, Ashok Sagar, Sukumaran, D.N. Mishra, Kamal Mehta and
Ms. Rainu Walia for the appearing Respondents. D
s. Roy Chowdhury, Jatin Ghosh, D.N. Gupta, s.
Ramsubramaniam, D.N. Gupta and S.K. Nandy for the Intervener•
The following Judgments were delivered
E
BHAGWATI, C.J. These appeals by special leave raise a
m.unber 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] l s.c.c. 467, and all that is required is to direct the
assessing authorities to assess the ·excise duty leviable on the F
respondents on the 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.
G
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
H
132 SUPREME c;<>URT REPORTS [1985] SUPP.3 s.c.R.
A 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 whole sale dealers
at the factory gate. It was common ground between the parties
that the whole-sale price charged by the respondents for the
cigarettes sold to the whole-sale dealers includes not only the
B 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
C the cigarettes for the purP.,se of assessment to excise duty,
since such packing would admittedly fall within the terms of
section 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 f'l.bre board containers would be liable to
be included in the value of the cigarettes for the purpose of
D assessment to excise duty raised a serious controversy between
the parties. The appellant contended that on a true construction
of Section 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 whole-sale
trade at the factory gate, the cost of such packing would be
E 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 Section 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 clearast terms for inclusion
F of the cost of the entire packing in which the cigarettes were
packed when delivered to the whole-sale buyer at the time of
removal. The respondents on the other hand urged that though it
was true that Section 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
G included in the value of the cigarettes as was necessary for sale
of the cigarettes in the whole sale 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 warehous~ of the whole-sale dealer. The packing in corrugated
H fibre board containers, contended the respondents, was not
u.o.I. V• GODFREY PHILIPS INDIA LTD. [BllAGWATI, c.J.] 133
necessary or essential for the purpose of sale of the cigarettes
to the whole-sale dealer at the factory gate but it was done only A
with a view to facilitating transportation of the cigarettes from
the factory gate to the godown or warehouse of the whole-sale
dealer and protecting the cigarettes against damage during such
transportation and therefore the cost of such packing was not
liable to be included in the value of the cigarettes. These were
the rival contentions urged on behalf of the parties and we shall B
now proceed to examtne them·
We have broadly dealt with the question of cost of packing
in the Judgment delivered by us in Bombay Tyre International
case (supra) and it wou1'1 be convenient at this stage to
reproduce what we have said in that Judgment in regard to the C
cost of packing:
"The case in respect of the cost of packing is
somewhat .complex. The new Section 4(4)(d)(i) has made
express provision for including the cost of packing in
the determination of "value" for the purpose of excise D
duty. Inasmuch as the case of the parties is that the
new Section 4 substantially reflects the position
obtaining under the unamended Act, we shall proceed on
the basis that the position in regard to the cost of
packing is the same under the Act, both before and
after the amendment of the Act. Section 4(4)(d)(i) E
reads
x x x x x x
It is relevant to note that the packing, of which the
cost is included, is the packing in which the goods
are wrapped, contained or wound when the goods are F
delivered at the time of removal. In other words, it
is the packing in which it is ordinarily sold in the
course of wholesale trade to the wholesale buyer. The
degree of packing in which the excisable article is
contained will vary from one class of articles to ·
another. From the particulars detailed before us by G
the a9sessees, it is apparent that the cost of primary
packing, that is to say, the packing in which the
article is contained and in which it is made
marketable for the ordinary consumer, for example a
tube of toothpaste or a bottle of tablets in a
card-board carton, or biscuits in a paper wrapper or
H
134 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
in a tin container, muat be regarded aa falling within
A section 4(4){d){i). That is indeed conceded by
learned counsel for the assessee. It is the cost of
secondary packing which haa raised serious dispute.
Secondary packing is of different grades. There is the
secondary packing which consists of larger cartons in
which a standard number of primary cartons (in the
B sense mentioned earlier) are packed•, The large cartons
may be packed into even larger cartons for
facilitating the easier transport of the goods by the
wholesale dealer. Is all the packing, no matter to
whst degree, in which the wholesale dealer takes
detlvery of the goods to be considered for including
the cost thereof in the "value" ? We 1111st remember
c that while packing is necessary to make the excisable
article marketable the statutory provision calls for
strict construction because the levy is sought to be
extended beyond the manufactured article itself. It
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 solJ in the
D 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. To
that extent, the cost of secondary packing cannot be
deducted from the wholesale cash price of the
excisable article at the factory gate."
E
It will be noticed that so far aa primary packing is concerned,
it was conceded on behalf of the respondents in that csae that
the cost of primary packing 1111st be regarded as falling within
the terms of section 4(4)(d)(i) read with the Explanation and it
was only the cost of secondary packing which gave rise to dispute
F between the parties. But we did not proceed to decide whether the
cost of every degree of secondary packing would be liable to be
included in the value of the goods or whether a distinction could
be drawn between one degree of secondary packing and another. We
posed the question: "Is all the packing, no matter to whst
degree, in which the whole-sale dealer takes deli very of the
G goods to be considered for including the cost thereof in the
"value"? Or does the law require a line to be drawn somewhere?"
''We did not answer this question specifically, leaving it to a
later date when this question would directly come up for
consideration on the facts of a particular case. We however laid
H
u.o.I. v. GODFREY PHILIPS INDIA LTD. [BHAGWATI, c.J.] 135
down the general proposition 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 whole-sale
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 duty". Where therefore a question arises whether the
cost of any particular kind of secondary packing is liable to be B
included in the value of article, we would have to ask does the
packed condition in which the article is generally sold in the
whole-sale market at the factory gate include such secondary
packing? If it does, it would be liable to be included in the
value of the article for the purpose of excise duty. On this
reasoning it must follow that if the packed condition in which C
the cigarettes manuf actu~ed by the respondents are generally sold
in the whole-sale market at the factory gate includes packing in
corrugated fibre board containers, the cost of such corrugated
fibre board containers would be liable to be included in the
value of the cigarettes for the purpose of excise duty.
D
We may leave aside for the moment the above
observations made by us in the Judgment in Bombay Tyre
InternatioDaJ. case (supra) and turn to examine the language of
Section 4(4)(d)(i) read with the Explanation. Section 4(4) (d)
(i) enacts an inclusive definition of "value" and provides that E
"value" in relation to any excisable goods, "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. The condition for applicability of this inclusive
definition of "value" is that the goods are delivered at the time
of removal in a packed condition" and where this condition is F
satisfied, the "value" of the goods would include "the cost of
such packing" and "such packing" must obviously mean the packing
in which the goods are when they are delivered at the time of
removal. The question which has to be armed is: what is the
packed condition in which the goods are when delivered at the
time of removal? Whatever is the packing of the goods at the time G
when they are delivered at the time of removal, the cost of such
packing would be liable to be included in the •value' of the
goods •. The Explanation to Section 4(4)(d)(i) provides an
exclusive definition of the term "packing" and it includes not
only outer packiIJtl but also what may be called inner
packing. Ordinarily bobbin, pirl, spool, reel and warp beam on
H
136 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A which yam is wound would not be regarded as packing of such
yam, but they are brought within the definition of "packing" by
the Explanation. The Explanation thus extends the meaning of the
word "packing" to cover items which would not ordinarily be
regarded as forming part of packing. The Explanation then
proceeds to say that "packing" means wrapper, container or any
B other thing in which the excisable goods are wrapped or
contained. It is apparent from the wide language of the
Explanation that every kind of container in which it can be said
that the excisable goods are contained would be "packing" within
the meaning of the Explanation and this would necessarily include
a fortiorari corrugated fibre board containers in which the
cigarettes are contained. When Bombay Tyre International case was
c argued before us, it was at one stage sought to be contended,
though rather faintly, that it is only the immediate packing in
which the excisable goods are contained, that is primary packing
alone, which would be liable to be regarded as "packing" within
the meaning of the Explanation. But this argument was given up
when it was pointed out that even secondary packing would be
within the terms of the Explanation, because such secondary
D packing would also constitute a wrapper or a container in which
the excisable goods are wrapped or contained. That is why we held
in the Judgment in Bombay Tyre International case (supra) that
secondary packing is also included within the term "packing" in
the Explanation. There can therefore be no doubt that corrugated
fibre board containers in which the cigarettes are contained fall
E within the definition of "packing" in the Explanation and if they
form part of the packing in which the goods are packed when
delivered at the time of removal, it is difficult to resist the
conclusion that under Section 4(4)(d)(i) read with the
Explanation, the cost of such corrugated fibre board containers
would be liable to be included in value of the cigarettes.
F
But then it was contended on behalf of the respondents that
it is not the cost of every kind of secondary packing which is
includible in the value of the excisable goods. Whether the cost
of secondary packing is includible or not must depend upon the
necessity or essentiality of such secondary packing for sale of
G the excisable goods at the factory gate in the course of
wholesale trade. The argument was that where the secondary
packing is necessitated in order to protect the packed excisable
goods from damage during the course of transportation from the
factory gate to the godown or warehouse of the wholesale dealer,
the cost of such secondary packing cannot be included in the
H value of the goods. The respondents thus sought to draw a
u.o.I. v. GODFREY PHILIPS INDIA LTD. [BHAGWATI, c.J.] 137
distinction between secondary packing necessary for the purpos~ A
of selling the goods at the factory gate in the course of
wholesale trade and the secondary packing . uaed in order to
protect the goods against damage during the course of
transportation so that they may safely reach the consumer in
proper condition. We find it difficult to appreciate this
distinction so far as assessment to excise duty is concerr.ed. B
Obviously every wholesale dealer would like to take delivery of
the goods from the manufacturer in such packing that he can
safely transport the goods to his godown or warehouse and sell
the same to the retailer or consumer in ma'ketable condition •. The
wholesale dealer would therefore insist that the goods purchased
by him in wholesale should be properly packed so that they do not c
get damaged during transportation or even storage. The
manufacturer would accordingly have to deliver the goods at the
facotry gate in such packed condition as demanded by the
wholesale dealer. It is apparent that unless the goods are in
such packed condition the wholesale dealer would not ordinarily
take delivery of the goods and necessarily therefore such would D
be the packed condition in which the goods are generally sold in
the wholesale market at the factory gate. It makes no difference
to the applicability of the definition in Section 4(4)(d)(i) read
with Explanation that the packing of the goods ordinarily sold by
the manufacturer in the wholesale trade is packing for the
purpose of protecting the goods against damage during E
transportation or in the warehouse. The question is not for what
purpose a particular kind of packing is done. The test is whether
a particular kind of packing is done in order to put the goods in
the condition in which they are generally sold in the wholesale
market at the factory gate and if they are generally sold in the
wholesale market at the factory gate in a certain packed
cond.itioµ, whatever may be the reason for such packing, the cost F
of such packing would be includible ln the value of the goods for
assessment to excise duty. Of course, as pointed out by us in the
judgment in Bombay Tyre International case if any special
secondary packing is provided by the assessee at the instance of
a wholesale buyer which is not generally provided as a normal
feature of the wholesale trade, the cost of such' special packing G
would not be includible in'the value of the goods and would have
to be deducted from the wholesal~ cash price.
That takes us to the next contention of the respondents
based on the letter dated 24th May 1976 addressed by the Under
Secretary, Central Board of Excise and Customs to the Cigarette
Manufacturers' Association. It is necessary, in order to H
138 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A appreciate the contention based on this letter, to state a few
facts. On 19th May 1976 the Cigarette Manufacturer's Association
made a representation to the Central Board of Excise and customs
pointing out that corrug&.ed fibre board containers "are not an
integral or essential r~quirement for the sale of cigarettes and
are used for the sole purpose of protecting cigarettes from any
B damage that may arise during transportation" and that the cost of
such corrugated fibre board containers should not therefore be
included in the value of the goods for the purpose of excise
duty. The Central Board of Excise and Customs after examining
this question accepted the plea of the Cigarette Manufacturers'
Association and by a fetter dated 24th May 1976 intimated to the
Cigarette Manufacturers' Association that "instructions have been
c issued to the Collector of Central Excise that the cost of
corrugated fibre board containers in question does not form part
of the value of cigarettes for the purposes of excise duty". The
respondents and other manufacturers of cigarettes, acting upon
this representation made by the Central Board of Excise and
Customs, proceeded on the basis that the cost of corrugated fibre
board containers was not liable to be included in the value of
D cigarettes for the purpose of assessment to excise duty snd did
not recover from the wholesale dealers to whom they sold the
cigarettes, any amount by way of excise duty attributable to the
cost of such corrugated fibre board containers. This representa-
tion contained in the letter dated 24th May 1976 continued to
hold the field until 2nd November, 1982 when the Central Board of
E Excise and Customs addressed a circular letter to all the
Collectors of Central Excise stating that the matter had been
re-examined in consultation with the Ministry of Law and in view
of the provisions of Section 4, the cost of packing "whether
initial or secondary in which the excisable gosds are packed at
the time of the removal may form part of the assessible value of
F such goods" and the earlier advice inconsistent with this
position should be treated as cancelled. The question which was
raised on behalf of the respondents on this set of facts was as
to whether during the period between 24th May 1976 and 2nd
November 1982 the respondents were liable to pay excise duty on
the basis that the cost of corrugated fibre board containers was
G includible in the value of the goods. It was contended on behalf
of the respondents that 'the cost of corrugated fibre board
containers was not includible irr the value of the goods and there
were two arguments urged in support of this contention. The first
argument was that the letter dated 24th May 1976 constituted an
exemption order within the meaning of Rule 8 sub-rule (2) of the
H Central Excise Rules, 1944 and the respondents were accordingly
u.o.I. v. GODFREY PHILIPS INDIA LTD. [BHAGWATI, c.J.] 139
exempt from payment of excise duty on the cost of corrugated A
fibre board containers used for packing the cigarettes. The
second argument invoked the doctrine of promissory estoppel
agains.t the aovernment on the basis of the representation
contained in the letter dated 24th May 1976. The first argument
is in our opinion not well-founded but so far as the second argu-
ment is concerned, we find that there is considerable force in B
it. Our reasons are as follows.
Rule 8 of the Central Excise Rules, 1944 deals with the
power to authorise exemption from duty in special cases and it
reads as follows:-
c
"Rule 8. Power to authorise eumption fron duty ill
special cases-
(l) The Central Government may from time to time, by
notification in the Official Gazette, exempt (subject
to such conditions as may be specified in the 0
notification) any excisable goods from the whole or
any part of duty leviable on such goods.
(2) The Central Board of Excise and Customs may by
special order in each case exempt from the payment of
duty, under circumstances of an exceptional nature, E
any excisable goods."
The respondents obviously could not invoke the aid of Rule 8
sub-rule (l) since the letter dated 24th May 1976 was a
cOlllID.lnication addressed by the Central Board of Excise and
Customs and could not even by the farthest stretch of imagination
b<j construed as a notification by the Central Government. The F
respondents were therefore constrained to place reliance on Rule
8 sub-rule (2) because that sub-rule confers power on the Central
Board of Excise and Customs to grant exemption and if at all, the
letter dated 24th May 1976 could be justified only under that
sub-rule. But we fail to see how Rule 8 sub-rule (2) can
possibly avail the respondents. That · surrrule postulates the G
making of a special order by the Central Board of Excise and
Customs in each case exempting from payment of duty any excisable
goods. The letter dated 24th May 1976 could not possibly be
regarded as a special order by the Central Board of Excise and
Customs in the case of each of the manufacturers of cigarettes
exempting cigarettes from payment of duty to the extent of the
cost of packing by way of corrugated fibre board containers. We H
140 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
do not think the letter dated ·24th May 1976 could be brought
A within the terms of sub-rule (2) of Rule 8 and the argument of
the respondents based on that sub-rule must be rejected.
The respondents are however on firmer ground in their plea
of promissory estoppel against the Central Board of Excise and
Customs and the Central Government. The representation contained
B in the letter dated 24th May, 1976 was undoubtedly made by the
Central Board of Excise and Customs but we may safely assume, and
for this asswnption there is clear warrant in the proceedings-in
~pecial Civil Application No. 787 of 1976 in the Gujarat High
Court, that this representation was made with the approval of the
Central Government and it was accepted by the Central Government
as correctly representing the stand of the Revenue. It is
C significant to note that when the petitioners in Special Civil
Application No. 787 of 1976 in the GuJarat High Court contended
that the value of corrugated fibre board containers was not
includible in the value of the goods manufactured by the
petitioners, it was conceded on behalf of the Union of India and
the Excise Authorities both in the affidavit in reply filed in
the case as also in the course of the argwnents that the cost of
D corrugated fibre board containers used for packing by the
petitioners would not form part of the value of the goods for
assessment of excise duty. :rhe representation contained in the
letter dated 24th May 1976 could therefore legitimately be
regarded by the respondents as a representation of the Central
Government. The respondents could reasonably assume that such a
E representation could never have been made by the Central Board of
Excise and Customs without the approval of the Central Government
and if it did not have the approval of the Central Government,
it would have been immediately objected to and the Central
Government would have. promptly directed the Central Board of
Excise and Customs to withdraw it. The question is whether this
F representation made by the Central Board of Excise and Customs
and approved and accepted by the Central Governmentcouldvalidly
found the plea of promissory estoppel.
Now the doctrine of promissory estoppelis well-established
in the administrative law of India.It represents a principle
G evolved by equity to avoid injustice and, though commonly named
promissory estoppel, it is neither in the realm of contract nor
in the realm of estoppel. The basis of this doctrine is the inter
position of equity which has always, true to its form, stepped in
to mitigate the rigour of strict law. This doctrine, though of
ancient vintage, was rescued from obscurity by the decision of
H
u.o.I. V• GODFREY PHILIPS INDIA LTD. [ll!IAGWATI, C.J.] 141
A
Mr. Justice Denning as he then was, in his celebrated judgment in
Central 1oodon property Trust Limited v. High trees House
Liml.ted, (1956) 1 All E. R. 256~ The true principle of promissory
estoppel is that where one party has by his word or conduct made
to the other a clear and unequivocal promise or representation
which is intended to creat legal relations or affect a legal 1l
relationship to arise in the future, knowing or intending that it
would be acted upon by the other party to whom the promise or
representation is made and it is in fact so acted upon by the
other party, the promise or representation would be binding on
the party making it and he would not be entitled to go back upon
it, if it would be inequitable to allow him to do so, having c
regard to the dealings which have taken place between the
parties. It has often been said in England that the doctrine of
promissory estoppel cannot itself be the basis of an action: it
- can only be a shield and not a sword: but the law in India has
gone far ahead of the narrow position adopted in England and as a
result of the decision of this Court in Motilal Sugar M1l1s v.
State .;£ Uttar Pradesh, [1979] 2 s.c.R. 641, it is now
D
well-settled that the doctrine of promissory estoppel is not
limited in its application only to defence but it can also found
a cause of action. The decision of this Court in llot11al Sugar
Hills case (supra) contains an exhaustive .discussion of the
doctrine of promissory estoppel and we find ourselves wholly in E
agreement witr the various parameters of this doctrine outlined
in that decision.
More importantly, it is necessary to point out that the
decision in Motil.al Sugar Mills case (supra) marks a significant
development in the law relating to the doctrine of promissory
estoppel. The principal question debated in that case was as to F
whether and if so, to what exte~t, is the doctrine of promissory
estoppel applicable against the Government. It was contended on
behalf of the State of Uttar Pradesh that the plea of promissory
estoppel is not available against the exercise of executive
.functions of the State, for the State cannot bind itself, so as
to fetter its future executive action. This contention was sought G
to be supported by relying on the observations of Rowlatt J. in
an early decision in llederiakilebolaget: Amphit:rite v. 1be King
(1921) 3 K.B. 500. But this Court observed in Mot11al Sugar M1l1s
case (supra) that what Rowlatt J. said in that case did not
represent the correct law on the subject and pointed out that the
doctrine of executive necessity propounded by Rowlatt J, was
disapproved by Denning, J. as he then was, in Roberston v • H
lliDister of l'eDsions (1949) 1 K.Jl, 227. Denning, J, categorically
142 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
expressed the view in Roberston's case (supra) that the crown
A
cannot escape its obligation under the doctrine of promissory
estoppel "by praying in aid the doctrine of executi':e necessity".
This Court also in Union of India v. Indo Afgan Agencies [ 1968] 2
S.C.R. 366, exploded the doctrine of executive necessity. Shah,
J. speaking on behalf of the Court negative the argument urged on
behalf of the Government that "it is not competent for the
B
Government to fetter its future executive action which may
necessarily be determined by the needs of the connnunity when the
question arises and no promise or undertaking can be held to be
binding on the Government so as to hamper its freedom of
executive action" and observed at page 376 of the Report:
"We are unable to accede to the contention that the
c executive necessity releases the Government from
honouring its solemn promises relying on which
citizens have acted to their detriment. Under our
constitutional set-up no person may be depriv~d of his
right or liberty except in due course of and by
authority of law; if a member of the Executive seeks
to deprive a citizen of his right or liberty otherwise
D
than in exercise of power derived from the law common
or statute- the Courts will be competent to and indeed
would be bound to protect the rights of the aggrieved
citizens."
The learned judge also after examining the decisions cited before
E
him SUilJl1ed up the position in the following words:
"Under our jurisprudence the Government is not exempt
from liability to carry out the representation made by
it as to its future conduct and it cannot on some
undefined and undisclosed ground of necessity or
F
expediency fail to carry out the promise solemnly made
by it, nor claim to be the Judge of its own obligation
to the citizen on an ex parte appraisement of the
circumstances in which the obligation has arisen."
The defence of executive necessity was thus cleraly negatived by
G
this Court and it was pointed out that it did not release the
Govei::runent from its obligation to honour the promise made by it,
if the citizen, acting in reliance on the promise, had altered
his position. The doctrine of promissory estoppel was in such a
case applicable against the Government and it could not be
defeated by invoking the defence of executive necessity. This
H
u.o.I. v. GODFREY PHILIPS INDIA LTD. [BHAGWATI, c.J.) 143
Court in llotilal Sagar llills case (supra) also negatived the A
argument that if the Govermnent were held bound by every
representation made by it regarding its intention, the result
would be that the Govermnent would be bowld by a contractual.
obligation even though no formal contract in the manner required
by Article 299 of the Constitution was executed. It was held by
this Court that a party who has, acting in reliance on a promise B
or representation made by the Government, altered his position,
is entitled to enforce the promise or the representation against
the"Government, even though the promise or representation is not
in the form of a formal contract as required by Article 299 and
that Article does not militate against the applicability of the
doctrine of promissory estoppel against the Govel"nment. c
The resultant position summarised by this Court in Motilal
Sugar Mills case (supra) in the following words:
"The law may therefore now be taken to be settled as
a result of this decision that where the Government D
makes a promise knowing or intellding that it would be
acted on by the promises and, in fact, the promisee,
acting in reliance on it, alters his position the
Government would be held bound by the promise and the
promise would be enf orcesble against the Government at
the instance of the promises, notwithstanding that E
there is no consideration for the promise and the
promise is not recorded in the form of a formal
contract as required by Article 299 of the
Constitution. It is elementary that in Republic
governed by the rule of law, no one, howsoever high or
low, is above the law. Everyone is subject to the law
as fully and completely as any other and the F
Government is no exception. It is indeed the pride of
constitutional democracy and rule of law that the
government stands on the same footing as a private
individual so far as the obligation of the law is
concerned: the former is equally bound as the latter.
It is indeed difficult to see on what principle can a G
government, collllli t ted to the rule of law, claim
illllllUility from the doctrine of promissory estoppel.
Can the government say that it is under no obligatiion
to act in a manner i.e. fair and just or that it is
not bound by the considerations of "honesty and good
faith"? Why should the government not be held to a
high "standard of rectangula~ rectitude while dealing H
144 SUPREME COURT REPORTS [1985] SUPP.3 s.c.a.
A with its citizens"? There was a time when the doctrine
of executive necessity was regarded as sufficient
justification for the government to repudiate even its
contractual obligations, but let it be said to the
eternal glory of this court, this doctrine was
emphatically negatived in the Indo-Afgan agencies case
B and the supermacy of the rule of law was established.
It was laid down by this court thst the government
cannot claim to be illluune from the applicability of
the rule of promissory estoppel and repudiate a
promise made by it on the ground thst siich promise may
fetter its future executive action."
C The doctrine of promissory estoppel as explained above was also
held to be applicable against public authorities as pointed out
in Motilal Sugar Mills case. This court in Motilal Sugar Mills
case quoted with approval. the observations of Shah, J. in Century
Spinning and llanufactuqng Company Limited v. Ulbaauagar llunid.-
pal •nnncll [1970] 3 s.c.a. 854, where the learned Judge said:
D "Public bodies are as much bound as private
individuals to carry out representations of facts and
promises made by them, relying on which other persons
hsve altered their position to their prejudice.".
"If our nascent democracy is to thrive different
E standards of conduct for the people and the public
bodies cannot ordinarily be permitted. A public body
is, in our judgment, not exempt from liability to
carry out its obligation arising out of
representations made by it relying upon which a
citizen has altered his position to his prejudice."
F
The Court refused to make a distinction between a private
individual and a public body so far as the doctrine of promissory
estoppel is concerned.
There can therefore be no doubt that the doctrine of
G promissory estoppel is applicable against the Government in the
exercise of its governmental, public or executive functions and
the doctrine of executive necessity or freedom of future
executive action cannot be invoked to defeat the applicability of
the doctrine of promissory estoppel. We must concede that the
subsquent decision of this Court in Jeet Ram V• State of llaryana
H [1980] 3 s.c.R. 689, takes a slightly different view and holds
.. ,
u.0.1. V• GODFREY PHILIPS INDIA LTD. [BHAQ;ATI, c.J. J 145
A
that the doctrine of promissory estoppel is not available against
the exercise of executive functions of the State and the State
CSllllOt be prevented from exercising its functions under the law•
This decision also expresses its disagreement with the observa-
tions made in Motil.al Sugar llf.l.la CAse that the doctrine of
promissory estoppel cannot be defeated by invoking the defence of
B
executive necessity, suggesting by necessary implication that the
doctrine of executive necessity is available to the Government
to escape its obligation under the doctrine of promissory
estoppel. We find it difficult to understand how a Bench of two
Judges in Jeet Ram's case could possibly overturn or disagree
with what was said by another Bench· of two Judges in Motilal
Sugar Mills Case. lf the Bench of two Judges in Jeet: Ram's case
c
found themselves unable to agree with the law laid down in
Motil.al Sugar Mills case, they could have . referred Jeet Ram's
case to a larger Bench, but we do not think it was right on
their part to express their disagreement with the enunciation of
the law by a coordinate Bench of the same Court in Motil.al Sugar
D
llf.l.la case. We have carefully considered both the decision in
Motilal Sugar Mills and Jeet: Baa'e case and we are clearly of the
view that what has been laid down in Motil.al Sugar Mille case
represents the correct law in regard to the doctrine of
promissory estoppel and we express our disagreement with the
observations in Jeet Baa'e case to the extent that they conflict
E
with the statement of the law in Motil.al Sugar Mills case and
introduce reservations cutting down the full width and amplitude
of the prepositions of law laid down in that case. ·
Of course we must make !t clear, and that is also laid down
in Motil.al Sugar Hills case (supra), that there can be no
promissory estoppel against the legislature in the exercise of
its legislative functions nor can the Government or public F
authority be debarred by promissory estoppel from enforcing a
statutory prohibition. It is equally true that promissory
estoppel cannot be used to compel the Government or a public
authority to carry out a representation or promise which is
contr1<ry to law or which was outside the authority or power of
G
the officer of the Government or of the public authority to make.
We may also point . out that the doctrine of promissory estoppel
being an equitable doctrine, it must yield when the equity so
requires, if it can be shown by the Government or public
authority that having regard to the facts. as they have
transpired, it would be inequitable to hold the Government or
public authority to the promise or representation made by it, the
H
• Court would not ·raise an equity in favour of the person to whom
146 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A the promise or representation is made and enforce the promise or
representatiOn against the Govermnent or public authority. The
doctrine of promissory estoppel would be displaced in such a
case, because on the facts, equity would not require that the
Government or public authority should be ·held bound by the
promise or representation made by it. This aspect has been dealt
B with fully in Motil.al Sugar llills case (supra) and we find
ourselves wholly in agreement with what has been said in that
decision on this point.
We may now turn to examine the facts in the light of the lai;
discussed by us • Here a representation was undoubtedly made by
the Central Board of Excise and Customs and approved and accepted
c by the Central Government, that the cost of corrugated fibre
boards containers would not be includible in the value of the
cigarettes for the purpose of assessment to excise duty. Th"
respondents acted upon this represent11t1on and continued the use
of corrugated fibre board containers for packing the
cartons/outers of cigarettes and did not recover from the
wholesale dealers the amount of excise duty attributable to the
D cost of such corrugated fibre board containers during the period
24th May 1976 to 2nd November, 1982. It would be most inequitable
to allow the Excise Authorities to assess excise duty on the
basis that the value of the cigarettes manufactured by the
respondents should include the cost of corrugated fibre board
containers, when it was clearly represented by the Central Board
E of Excise and Customs in response to the submission made by the
Cigarette Manufacturers' Association - and this representation
was approved and accepted by the Central Government that the cost
of corrugated fibre board containers would not be includible in
the value of the cigarettes for the purpose of assessment of
excise duty. Of course, this representation could operate to
F create promissory estoppel only if it was within the competence
of the Central Board of Excise and Customs and the Central
Government to make good such representation and the exclusion of
the cost of corrugated fibre board containers from the value of
the cigarettes was not contrary to law. We think that the Central
Government had power under Rule 8 sub-rule (l) of the Rules to
G issue a notification excluding the cost of corrugated fibre board
containers from the value of the cigarettes and thereby exempting
the cigarettes from that part of the excise duty which would be
attributable to the cost of corrugated fibre board containers. So
also the Central Board of Excise and Customs had power under Rule
8 sub-rule (2) to make a special order in the case of each of the
H respondents granting the same exemption, because it could •
U.O.I. V• GODFREY PHILIPS INDIA LTD. [PATHAK, J.] 147
legitimately be said that, having regard to th~ representation A
made by the Cigarette Manufacturers' Association, there were
circumstances of an exceptional nature which required the
exercise of the power under sub-rule (2) of Rule 8. The Central
Govermnent and the Central Board of Excise and Customs were
therefore clearly bound by promissory estoppel to exclude the
cost of corrugated fibre board containers from the value of the B
goods for the purpose of assessment of excise duty for the period
24th May 1976 to 2nd November 1982.
The reapondents would therefore be entitled to exclusion of
the cost of corrugated fibre board containers from the value of
the cigarettes only during the period 24th May 1976 to 2nd C
November 1982. Save and except in reapect of this period, the
cost of the corrugated fibre board containers would be liable to
be included in the value of the cigarettes for the purpose of
assessment of excise duty. I would therefore paas an order in
these appeals in terms of the format order which has been evolved
by c.onsent of parties in the ,Bombay Tyre International case D
(supra) and I would direct that the Assessing Authorities shall
assess the excise duty under the format order in the light of the
observations contained in this Judgment. There will be no order
as to costs.
PATHAK, J • I have perused the judgment proposed by the E
learned Chief Justice in these appeals and while I find myself in
agreement with his views on the question of promissory estoppel,
I am unable, with regret, to subscribe to the view expressed by
him on the question of secondary packing. I propose, therefore,
to set down my own view in the matter~
In Union of India V• Bombay Tyre International Ud. [1984] 1 F
s.c.c. 467, while construing sub-cl. (i) of cl.(d) of sub-s. (4)
of s. 4 of the Central Excises and Salt Act, 1944, which provides
for including the cost of packing in the determination of "value"
for the purpose of excise duty, we observed that the cost of
primary packing as well as of secondary packing in the sense
explained in that case would be included within the meaning of G
the expression "value". In the present case the cigarettes are
manufactured and packed in cardboard packets, each containing 10
to 20 cigarettea. Those packets constitute primary packing. Those
packets are thereafter packed in cartons or "outers" for delivery
to the buyer. Finally, the cartons or outers are themselves
packed in corrugated fibre board containers, evidently to ensure
the cartons against injury or damage during transport. The H
148 SUPREME COURX REPORTS [1985] SUPP.3 s.c.R.
A question is whether the corrugated fibre board containers can be
regarded as secondary packing, the cost of which can permissibly
be included in the determination of "value" for the purpose of
excise duty.
Now it is apparent that under s. 3 of the Act the levy of
B excise duty is made on manufactured cigarettes, which after all
are the excisable goods • And s. 4 provides how the value of
manufactured cigarettes shall be determined. The expression
"value" has been extended to include the cost of packing. The
packing itself is not the subject of the levy of excise duty. The
manufactured cigarettes are the subject of the levy, because
excise duty is here charged on the manufactured cOlllllOdity, that
c is to say, cigarettes. For the purpose of computing the measure
of the levy, however, the statute has given an extended meaning
to the expression "value" in clause (d) of sub-s.4 of s. 4 of the
Act. Plainly, the extension must be strictly co11strued, for what
is being included in the value now is something beyond the value
of the manufactured conmodity itself. In Union of India v. llollbay
Tyre lntematioaal. Ltd. (supra), we observed :-
D
"It 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 mark.et at the factory gate is the degree of
packing whose cost can be included in the "value" of
E the article for the purpose of the excise levy • "
Is the packing in corrugated fibre board containers necessary for
putting the cigarettes in the condition in which they are
generally sold in the wholesale market at the factory gate? In my
opinion, it is not. The corrugate fibre board containers are
F employed only for the purpose of avoiding damage or injury during
transit. It is prefectly conceivable that the wholesale dealer
who takes delivery may have his depot a very short distance only
from the factory gate or may have such transport arrangements
available that damage or injury to the cigarretes can be avoided.
The corrugated fibre board containers are not necessary for
G selling the cigarettes in the wholesale mark.et at the factory
gate.
I think the position expressed by the Central Board of
Excise and Custom in its letter dated May 24, 1976 was prefectly
right when it declared that the Collector of the Central Excise
H has been instructed that "the cost of corrugated fibre board
containers in question does not form part of the value of
cigarettes for the purpose of excise duty."
u.o.I. v. GODFREY PHILIPS INDIA LTD. [A.N. SEN, J.] 149
A
The assessing authorities will now proceed to make an
assessment in accordance with the opinion exprtssed in this
judgment.
AllARENDRA NATH SEN, J, I have read the judgment proposed to
be delivered by the Learned Chief Justice in this appeal. After B
giving my anxious and careful consideration, l find with regret
that I cannot persuade myself to agree With the view expressed by
the Learned Chief Justice on the question of secondary packing.
On the other question, namely the question of promissory
estoppel, I am in entire agreement with his views.
c
The Learned Chief Jue tice in his judgment has set out all
the material facts and circumstances. He has noted the respective
contentions put forward on behalf of the parties. He has also
adverted to the earlier decision of this. Court in Union of IDd1a
v. ~y Tyre International Ltd; [1984] l s.c.c. 467. It does
not, therefore, become necessary for me to refer to the facts and D
circumstances of this case or to any of these aspect in my
judgment.
The cigarettes after manufacture are usually placed in
paper/card board packets, each packet containing 10 or 20
cigarettes. These packets before .delivery to the wholesale buyer E
·are packed together in paper/card board/cartons/outers, each of
such cartons containing a number of packets of cigarettes with 10
or 20 cigarettes in each packet. I agree with the Learned Chief
Justice that the cost of packing cigarettes in packets of 10 or
20 cigarettes each and thereafter in cartons/outers for delivery
to the buyer in the course of whole-sale trade at the factory
gate must necessarily 1/e included in the value for the purpose of F
levy of excise duty. I however, find it difficult to agree with
the view expressed by the learned Chief Justice that when a
number of these cartons are put" l.n corrugated fibre .board
containers for delivery, the cost of the further packing incurred
for putting cartons/outers in the corrugated fibre board
containers must also be included in the value for the purpose of G
assessment of excise duty.
When tobacco is rolled up in paper following the appropriate
process of manufacturing cigarettes, cigarettes come into
existence. The paper in which cigarettes are rolled is indeed a
part of the manufactured product itself. The paper in which a
cigarette is rolled forms no part of the packing and is indeed a H
part of the cigarette itself. When the cigarettes, after their
150 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R.
A
manufacture, are put in packets, each packet usually containing
lO or 20 cigarettes, the packets in which the cigarettes are
packed indeed constitute the primary packing for the purpose of
delivery and there can be no question thst the cost of this
packing orust necesserily be included in the value for the purpose
B of assessment of excise duty. A nwnber of packets, containing
cigarettes either 10 or 20 in number in each packet are then put
in larger cartons according to the requirements of the buyer in
the whole-sale trade. Packing a number of packets of cigarettes
in a larger carton for deli very to the buyer in the whole-sale
trade according to his requirement constitutes secondary packing
but the cost of this packing on a true construction of s. 4( 4)
c (d)(i) of the Act read with t<Xplanstion to the clause Dnlt also ~
included in the value for the purpose of levy of excise duty.
Packets of cigarettes in the larger cartons are to be delivered
to the buyer in the whole-sale trade to enable the buyers in the
whole-sale trade to sell to the retail sellers in the same
condition or by removing the packets from the cartons. Packets of ,
cigarettes so packed in cartons can easily be delivered to the
D buyers in the course of whole-sale trade at the factory gate
without any further packing. If the buyer who is to take delivery
in the course of the whole-sale trade at the factory gate,
carries on business within a reasonable distance from the factory
premises, the whole-sale buyer will very likely not want to hsve
cartons of cigarettes further packed in corrugated fibre board
E containers. Cartons of cigarettes are usually further packed in
corrugated fibre containers for facilitating transport in the
course of delivery to buyers in the whole-sale trade where there
is any possibility of the cartons becoming otherwise damaged in
course of transit. Naturally in such cases, delivery of the
cigarettes in those cartons is effected to the buyer at the
F factory gate after further packing these cartons in corrugated
fibre board containers • The further packing of cartons in which
the packets of cigarettes have been packed in the corrugated
fibre board containers is not, :ndeed, in the course of delivery
to the buyer in the whole-sale trade at the factory gate but is
only for the purpose of facilitating the smooth transport of the
G cartons containing the packets of cigarettes to the buyer in the
whole-sale trade. On a proper construction of s. 4(4)(d)(i) of
the Act read with the explanation, I am of the opinion thst any
secondary packing done for the purpose of facilitating transport
and smooth transit of the goods to be delivered to the buyer in
the whole-sale trade cannot be included in the value for the
H purpose of assessment of excise duty. I, therefore, hold thst the
cost of corrugated fibre board containers which the cartons
U.Q.I, v. GODFREY PHILIPS INDIA LTD. [A.N. SEN, J.] 151
containing the packets of cigarettes is packed, cannot be
included in the value for the purpose of assessment of excise A
duty, It is to be borne in mind that the excise duty which is
levied on the goods is ultimately passed on to the consumers of
the goods and they have ul.timately to bear .the burden. So far as
the consumers are concerned they buy cigarettes, loose or iµ
packets or even in cartons. Cartons packed in corrugated fibre
board containers are not purchased by the consumers. So far as B
the retail sellers are concerned who may buy from whole-sellers,
they usually buy loose packets of cigarettes or packets of
cigarettes packed in cartons. So far as the buyers in the
whole-sale trade are concerned, they buy the cartons of
cigarettes in which the packets of cigarettes are packed in the
course of their whole-sale trade for selling the same to c
retailers or to their customers. It is only for the sake of
convenience in the matter of smooth delivery.of cartons in which
the packets of cigarettes are packed that the cartons may be
further packed in corrugated fibre board containers for facility
of transport and smooth transit of the cartons before delivery of
the same to the whole-sale buyer. D
The letter dated 4th May, 1976 addressed by the
Under Secretary, Central Board of Excise and Customs to the
Cigarette Manufacturers Association which has been referred to
and considered at length in the judgment of the Learned Chief
Justice, ·clearly supports, in my opinion, the view I have taken. E
For reasons briefly indicated above, I have to record my
dissent with the view expressed by the Learned Chief Justice on
this question of secondary packing.
On the other question, namely, the question of promissory
estoppel, I am in entire a!lreement with the views expressed by F
the learned Chief Justice for reasons recorded by him in his
judgment and I have nothing to add.
I accordingly hold that the cost of the further packing of
the cartons in which the packets of cigarettes are packed in the
corrugated fibre board containers cannot be included in the value G
for the purpose of assessment of excise duty.
I agree with the Learned Chief Justice that in the light of
the judgment and decision delivered by us, the Assessing
Authorities will now proceed to make the assessment.
H
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