Summary
The appellant company/assessee manufactures and sells fusel oil/ styrene Monomer falling under Tariff Item No. 68 of the 1st Schedule to the Central Excises and Salt Act, 1944. The said fusel oil/styrene Monomer is sold in bulk and generally delivered to the customers at the appellant's factory in road tankers. Some times it is supplied in drums brought by the customers who are not charged anything for those drums. In the case of Styrene Monomer, the finding is that the supply was in tankers to the extent of 90% and only 10% of the sales were made in drums.
Two notices were issued to the appellant to show cause as to why the value of the drums should not be included in the assessable value of the goods. In reply, the appellant contended that as the drums were supplied by the buyer the value thereof could not be included in the assessable value.The Assistant Collector however included the value of the drums in the assessable value of the said fusel oil/Styrene Monomer. The Collector (Appeals) allowed the appellant's appeal and held that it was not open to the Assistant Col- lector to inflate the assessable value without establishing the receipt of the additional consideration by the appellant apart from what had been shown in the invoice. The Customs, Excise and Gold (Control) Appellate Tribunal allowed the further appeal filed by the Revenue and held that at the time of removal the goods were delivered from the factory in packed condition and the containers were not returnable by the buyer, therefore, the value had to be included in the assessable value.Before this Court it was contended on behalf of the appellant that it was not all packing that was liable to be included under s. 4(4)(d)(i) of the Customs and Central Excises Act, it was only that degree of secon- 975dary packing which was necessary for the assessable article to be placed in the condition in which it was sold in the wholesale market at the factory. gate which could be includ- ed in the assessable value of the article; fusel oil/Styrene Monomer was sold in bulk and was capable of being so sold, hence it was not necessary for the said fusel oil/Styrene Monomer to be supplied to the customer in drums; the duty of excise was payable on manufactured goods and no duty of excise could be collected from the appellant on such drums which were neither manufactured nor purchased by the appel- lant; the duty being on the activity of manufacture whatever was necessary to bring the goods into existence alone could be taken into account for duty purposes; and the sub-section did not contemplate the inclusion of the cost of packing in the value of goods when the packing was supplied by a cus- tomer to a manufacturer on its own cost.On behalf of the Revenue the learned Attorney General contended that the value of drums/containers would also have to be included on a correct interpretation of charging sections, namely, sections 3 and 4 of the Act; the terms of section 4(4)(d)(i) were very clear and specific; it was a well settled principle of construction that in taxing stat- utes one had only to look at what was clearly stated, and there was no room for any intendment; percentages of sales did not in any manner affect determination of the assessable value of the excisable goods; though "manufacture" was the taxable event, the measure of the levy need not be and was not to be restricted to the cost of manufacture; it is open to Parliament to prescribe any measure by reference to which the charge was to be levied and this is what was done under section 4; and in construing s. 4(4)(d)(i). all that had to be seen was whether the goods were delivered in packed conditions and if this question was answerable in the af- firmative, then, in respect of the goods so sold, the cost of packing, whether incurred by the manufacturer or by the supplier, had to be automatically included in the assessable value, if necessary, by addition to the sale price, except only where the packing was of durable nature and returnable to the manufacturer.Allowing the appeals, this Court,HELD: (1) The correct position must be found out bearing in mind the essential nature of excise duty. Excise duty is a duty on the act of manufacture. Manufacture under the excise law is the process of activity which brings into being articles which are known in the market as goods and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then only that 976manufacture takes place attracting duty. [986B](2) Section 2(f) of the Central Excises & Salt Act provides the definition of the term "manufacture". It states, inter alia, that manufacture includes any process incidental or ancillary to the completion of manufactured product. In the instant case, the drums even though these were ancillary or incidental to the supply of fusel oil and styrene monomer, these were not necessary to complete the manufacture of fusel oil or styrene monomer. [983B-C, 987D](3) In order to be 'manufacture', there must be activity which brings transformation to the article in such a manner that different and distinct article comes into being which is known as such in the market. 'If in order to be able to put it on the market, a certain amount of packing or user of containers or wrappers or putting them either in drums or containers, are required, then the value or the cost of such wrapper or container or drum must be included in the assess- able value and if the price at which the goods are sold does not include that value then it must be so included by the very force of the terms of the section. [986C-E](4) The clear implication of the use of the word "cost"in relation to packing in the clause (i) of section 4(4)(d) of the Act is that only packing cost of which is incurred by the assessee, i.e. the seller, is to be included. The use of the expression "cost" could not obviously be by way of reference to packing for which the cost is incurred by the buyer. [988B]Union of India & Ors. v. Bombay Tyre International Ltd.,[1984] 1 SCR 347; Collector of Central Excise v. Indian Oxygen Ltd., [1986] 36 ELT 730; K. Radha Krishaiah v. In- spector of Central Excise, Gooty & Ors., [1987] 27 ELT 598;Govind Pay Oxygen Ltd. v. Asstt. Collector of Central Ex- cise, Panaji & Ors., [1986] 23 ELT 394; Alembic Glass Indus- tries Ltd. v. Union of India & Ors., [1986] 24 ELT 23; Gur Sahai Sehgal v. Commissioner of Income Tax, Punjab, [1963] 3SCR 893; A.K. Roy v. Voltas Ltd., [1973] 2 SCR 1088; Atic Industries Ltd. v. H.H. Dave Assistant Collector of Central Excise, [1975] 3 SCR 583; Union of India v. Godfrey Phillips India Ltd., [1985] Supp. 3 SCR 123; Union of India v. Delhi Cloth & General Mills Ltd., [1963] Supp. 1 SCR 586; South Bihar Sugar Mills Ltd., etc. v. Union of India & Ors.,[1968] 3 SCR 21; Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay, [1989] 1 SCC 602 and Union of India v. Godfrey Phillips Ltd., [1985] 3 SCC 369, referred to.977 (5) On the facts of this case, it is clear that the goods were not sold in drums generally in the course of the wholesale trade. There was no evidence that there was any necessity of packing or putting these in drums prior to their sale, or to be able to generally to enter the stream of wholesale trade or to be marketable. On the other hand, there was evidence that in the wholesale trade, these goods were delivered directly in tankers and deliverable as such.But as a matter of fact, delivery in drums was only to facilitate their transport in small quantities. The manufac- ture of the goods was complete before these were placed in drums. The completely manufactured product was stored in tanks. From these tanks the goods were removed directly and placed in vehicles for their movement for 90% of the sales, the vehicle of removal was tankers and for 10% of the sales, the vehicle or removal was drums. In the premises, the value of the drums with regard to the fusel oil/ styrene monomer irrespective of whether these were supplied by the assessee or not. are not includible in the assessable value of the Styrene Monomer. [992A-D]Per S. Ranganathan, J. (agreeing with the conclusion but resting it entirely on the language of section 4(4)(d)(i) of the Central Excises & Salt Act) (1) There is ample internal indication in the statute to show that the cost of packing referred to in s. 4(4)(d)(i) of the Central Excises & Salt Act, 1944 is the cost of packing incurred by the manufacturer and recovered by him from the purchaser whether as part of the said price or separately. [994D](2) While generally the normal price for which the goods are sold at the factory gate is to be taken as assessable value, an addition thereto has to be made where, in addition to the price, the manufacturer levies a charge for the packing which is intrinsically and inevitably incidental to placing the manufactured goods on the market. [994F](3) The answer to the question whether the cost of the container should be included in the assessable value or not would depend upon whether the goods in question are supplied in a packed condition or not. If the answer is yes, three kinds of situation may arise. Where the manufacturer sup- plies his own container or drum but does not charge the customer therefore, then the price of the goods will also include the cost of the' container. There will be no ques- tion of separate addition to the sale price nor can the assessee claim a deduction of the cost of packing from the sale price except where the container is a durable one 978and is returnable to the manufacturer. If the manufacturer supplies the drums and charges the customer separately therefore, then, under section 4(4)(d)(i), the cost of the drums to the buyer has to be added to the price except where the packing is of durable nature and is to be returned to the manufacturer. If on the other hand, the manufacturer asks the customer to bring his own container and does not charge anything therefore then the cost (or value) of the packing cannot be "notionally" added to, or subtracted from, the price at which the goods have been sold by the manufac- turer. [995B-D]Per J.S. Verma, J. (agreeing with Ranganathan, J. that the conclusion reached on the language of section 4(4)(d)(i) of the Act is sufficient to allow these appeals).(1) The cost of packing envisaged in section 4(4)(d)(i) of the Act for determining the "value" in relation to any excisable goods is only the "cost of such packing" incurred by the manufacturer and recovered from the buyer except where the packing is of a durable nature and is returnable by the buyer to the manufacturer. [995G](2) The "cost of such packing" referred to in section 4(4)(d)(i) does not include within its ambit the cost of packing not incurred by the manufacturer when the packing is supplied by the buyer and not the manufacturer. [995H]See the full content of this document
Extract
Hindustan Polymers Etc. Etc. VS. Collector Of Central Excise, Etc. Etc.
PETITIONER: HINDUSTAN POLYMERS ETC. ETC.Vs.RESPONDENT: COLLECTOR OF CENTRAL EXCISE, ETC. ETC.DATE OF JUDGMENT23/08/1989BENCH: RANGNATHAN, S.BENCH: RANGNATHAN, S.SAIKIA, K.N. (J)CITATION: 1990 AIR 731 1990 SCC (1) 59JT 1989 Supl. 283 1989 SCALE (2)838ACT: Central Excises and Salt Act, 1944: Sections 2(f),3, 4(4)(d), 35(L)(b) & First Schedule Tariff Item No.68---Fusel oil/Styrene Monomer--Drums supplied by buyer--Value of drums--Whether to be excluded from 'assessa- ble value'.JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4339- 41/86 & 4176-77 of 1984.From the Judgment and Order dated 4.7.85 & 21.6.84 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal Nos. ED(SB)(T) A. Nos. 513-514, & 544 of 1985(A) & ED(SB) 329 & 324/84-A in Order Nos. 450-452/85-A, 473 & 474/84-A.Harish Salve, Ravinder Narain, P.K. Ram and D.N. Mishra for the Appellant.K. Parasaran, Attorney General, A.K. Ganguli, and P.Parmeshwaran for the Respondents.The Judgment of the Court was delivered bySABYASACHI MUKHARJI, J. These appeals under Section 35L(b) of the Central Excises & Salt Act, 1944 (hereinafter called 'the 979Act') are against the order Nos. 450-452 of 1985A dated 4th July, 1985, 473/184A and 474/84A both dated 21st June, 1984 passed by the Customs, Excise & Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Tribunal').The appellant is a division of McDowell & Co. Ltd. It has its factory at, inter alia, Visakhapatnam. There it manufactures and sells fusel oil/Styrene Monomer falling under Tariff Item No. 68 of the Ist Schedule to the Act. The case of the appellant is that the said fusel oil is a com- pletely manufactured article and after completion of its manufacture, it is stored in storage tanks duly approved for this purpose. It is at this stage that the quantity of fusel oil/Styrene Monomer manufactured, according to the appel- lant, is entered in the RG- 1 Register maintained for goods manufactured by the appellant. It is also the case of the appellant that the said fusel oil/Styrene Monomer manufac- tured by it is sold in bulk and delivered to the customers at the appellant's factory. The fusel oil/Styrene Monomer is also capable of being supplied in road-tankers to customers.The appellant had filed its price-lists in respect of the same. In the said price-lists, which were duly approved by the Asstt. Collector, the appellant had shown ...
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