1. The short point falling for determination in this appeal, which was originally a Revision Petition before the Central Government, is as to whether the claim of the appellants for exclusion of cost of packing, as detailed in their refund application, is tenable or not.
2. The facts of the case, as indicated from the impugned order, and the grounds of appeal, are that the appellants are manufacturers of biscuits of different varieties and after this item came under excise control by Finance Act, 1970, the appellants submitted a price list.
This price list effective from 26-3-1970, contained details and particulars of different types of biscuits manufactured by the appellant company. The quantity, as well as kind and size of the packages, and the cost of the packages as also that of the tins, cartons or wooden cases, inclusive of excise duty and other particulars of rebate, discount etc. were also indicated. This list, as submitted by the party, was approved by Range Superintendent on 28-3-1970, and thereafter the appellants went on paying excise duty on the total value of goods as per this price list, which covered the cost of the packings also. It seems, however, that at some stage the party agitated against the inclusion of the cost of packing material in the assessable value of the goods manufactured by them which matter was adjudicated by the Deputy Collector of Central Excise by order dated 14-12-1971 passed in appeal, holding that :- " 'Biscuit' is such a commodity that its sale in packed condition is essential for hygenic and other reasons. The usual and most common form of packing is with paper, covered with cellophane paper. As such, the assessable value of biscuits should include such packing.
Some time, Biscuits are sold in card-board containers as well as tin containers, which are non-returnable. In such cases also, the cost of packing viz. card-board cartons and Tin containers, shall be included in the assessable value.
Cost of returnable tin containers as well as cost of wooden boxes which are used to protect the goods from the damage/deterioration in transit by rail etc. shall not be included in the assessable value.
3. As a sequel to this order of the Deputy Collector, a refund claim was filed on 19-6-1972 by the appellants for the period March 1970 to February 1972, intimating that this claim had arisen out of Deputy Collector's order in appeal quoted by them, and that the necessary material by way of gate passes and the quantity of containers showed in each gate pass, cost thereof, value charged and the duty paid were all available with the Department, and the appellants would also be willing to give an inspection of the said records, if so desired.
4. Since the Deputy Collector, on whose order the appellants had placed reliance while lodging the refund claim, had rejected the main contention of the party for exclusion of every type of packing cost, from the total assessable value, and had observed that only "cost of returnable tin containers as well as cost of wooden boxes used to protect the goods from damage/deterioration during transit by rail, etc., shall not be included in the assessable value", the concerned Superintendent, on receipt of the refund claim, by letter dated 12-1-1973 (Annexure D-I) called upon the party to confirm that the tin containers and wooden boxes which formed the subject-matter of refund claim, had been actually returned, and that proof of the fact, for scrutiny of the said Superintendent, and report to higher authorities, may be supplied to him.
5. Rather than complying with this order, the appellants, by means of letter dated 23-2-1973 (Annexure D-II) took up the position that the Deputy Collector having decided the principle that cost of "returnable" packing material whether tin containers or card-board cartons or wooden cases, was to be excluded, it was not necessary for them in order to successfully claim refund of the duty already charged and paid, to prove the factum of return of such material and that the determining factor would be that they should be, by their nature, "returnable".
They contended that in this view of the matter, it was irrelevant and unwarranted to call for the information required in the Superintendent's letter, further pleading that they were not in a position to furnish the same for want of necessary accounts, in this regard and added that in some cases, the packages under reference, may not be actually returned, and the buyers may dispose them of having paid extra for them, at their own end, in order to have immediate realisation of their investment in this regard.
6. The refund claim was eventually decided by the Assistant Collector by his order dated 24-4-1973 (Annexure: E) disallowing the refund claim on the view that sole basis of the party's claim was the, order in appeal passed by the Deputy Collector dated 14-12-1971, but said order postulated that the packing material should be "returnable", which implied that they ought to have been actually returned, whereas the party had failed to satisfy the Superintendent in spite of having been called upon to do so, and had impliedly stated that the containers had not been returned to the factory as it was not economical from the business point of view to do so. He thus held that the price of the containers which had not been returned to the manufacturers, had to be included in the assessable value and as such the refund claim of M/s.
Lucky Biscuit Co. (appellants herein) was not justified and the same was rejected.
7. On appeal being taken up against this order to the Appellate Collector of Central Excise, the same view was reiterated and appeal dismissed by order dated 24-3-1977, holding that appellants' contention that the expression 'returnable' meant only what was 'capable of being returned', and 'not actually returned', was not sustainable. The Appellate Collector further referred to the averment made during personal hearing to the effect that it was not possible to market their product; namely, biscuits in cellophane paper packing alone unless it is packed in air-tight tin containers or wooden boxes to preserve the quality of biscuits, observing that this showed that the product of the appellants could not be marketed or sold, without further or additional packing and thus the same has been rightly included in the assessable value of the goods, and refund claim was held to have been rightly rejected.
8. Feeling aggrieved by this rejection of the appeal, the party had filed revision petition to the Government of India contending that the matter stood concluded by order of the Deputy Collector passed in 1971, which order the Assistant Collector subsequently, as a subordinate quasi-judicial authority, could not question, and that the lower authorities have thus erred in rejecting the refund claim which arose as a consequence of the order in appeal, passed by the Deputy Collector, and which had remained unchallenged. They reiterated their contention that "returnable" implied only "what was capable of being returned" and the factum of actual return was not required to be proved, and that lower authorities had taken an erroneous stand in this regard. They pleaded that what was primary packing; namely, cellophane paper wrapping or small decorative tins, was not being brought under controversy by the appellants themselves, and had already been included in the assessable value and the appellants had not raised any dispute in respect thereto, and what they agitated was the cost of the large containers or wooden cases or cartons only, which were used only for the protection of the goods from damage during transit by rail or road etc. and that this was in the nature of secondary packing which could not be included in the assessable value of the goods, as it was not an essential part of the manufacturing process. They also asserted to have paid the duty, right from the beginning qua this part of the cost, under protest and denied having conceded during personal hearing before the Appellate Collector that their products; namely, biscuits, required packing in air-tight tin containers or wooden boxes to preserve the quality of biscuits after the primary packing in cellophane or polythene papers or small decorative tins. It was thus denied that appellants' products were not capable of being marketed or sold in simple cellophane, polythene or paper packing. They reiterated their plea that only cost of manufacturing of the product as well as the essential primary packing could be included in the assessable value, and that whatever duty was paid on the price of the packing which they called to be secondary packing, was refundable.
9. It is this revision petition, which on being received by transfer by virtue of provisions of Section 35P(2) of the Central Excises and Salt Act, 1944, is being treated and disposed of as an appeal.
10. During hearing, Shri Gopal Prasad, Consultant, appeared for the appellants whereas respondent was represented by Shri Mahesh Kumar, SDR. At the outset, Shri Gopal Prasad wanted to file a copy of some note dated 29-3-1970 purported to have been sent by the appellants to the Superintendent, Central Excise with reference to the approval of the price list, on 28-3-1970 but on Shri Mahesh Kumar's objection that this constituted fresh evidence for which there was no justification, the same was not taken on record, for even at that stage no application for permission to file fresh material was forthcoming. We feel, however, that nothing turns on this because the refund claim of the appellants has been rejected on merits, and not as being barred by time, though on face of it, it could be so. So, no prejudice is being caused to the appellants, for not being allowed to place that communication now on record, because we would also be considering the claim on merits, and not on the issue of time-bar which the lower authorities have not adverted to.
11. On being called upon to address the Bench on merits, Shri Gopal Prasad contended that what the appellants were contesting was the inclusion of the cost of large size tin containers, cartons or wooden cases, which is described to be a secondary packing material, adding that so far as the primary packing in the nature of cellophane paper or small decorative tins was concerned, it was never disputed. He drew our attention to the price list which was approved on 28-3-1970 but on being pointed out to him that this price list indicated that a number of varieties of biscuits; particularly indicated at S. Nos. 2, 4, 7, 9, 10, 14 and 15 were described as "loose", and straightaway packed in tin containers described as new, and that this belied the party's contention that all their products were initially put in small packets of cellophane or polythene paper or tin boxes and that large size tin containers were used only for purposes of transportation, he had no comments to offer and conceded that for the quantity of biscuits, shown as loose; tin containers could be considered as primary packing. It is manifest that biscuits even of small packings of 10, 14 or 16 as shown in the price list, much less in loose form, cannot be sent out to market, and they have to be placed in some tins, cartons or boxes which, in the nature of things, would constitute essential packing. The party themselves had shown the cost of such packing material in the assessable value in the price list filed by them and it is not indicated as to what occasioned their protest, resulting in the order in appeal passed in the first instance by the Deputy Collector on 14-10-1971. Nevertheless, that order did not ipso facto grant them refund nor gave any scope for the interpretation that cost of such containers or boxes being cartons was not to be included in the assessable value.
12. We have given our careful thought to this contention of the appellant but we do not find it tenable. Shri Gopal Prasad, no doubt, introduced the concept of "returnable" packings but, as rightly pointed out by Shri Mahesh Kumar placing reliance on a Full Bench authority of Gujarat High Court that the term "returnable" implied even though not "actually returned" but at least the existence of an agreement between the buyer and the seller that the packing, which is considered "durable", would be returned and in that event the cost as indicated in the price list turns out only a sort of security for the return of packing. This authority : 1982 E.L.T. 821 (Guj.) in the case of Ahmedabad Mfg. & Calico Prtg. Ltd. and Ors. v. Union of India, obviously is a later authority as compared to the Division Bench Judgment of Madhya Pradesh High Court at Jabalpur, in the case of Birla Jute Manufacturing Company Ltd. v. Union of India and Ors. (1980 E.L.T.593), and Single Bench authority of Karnataka High Court reported as 1980 E.L.T. 687 in case: T.T. Private limited v. The Appellate Collector of Central Excise, Madras and Anr., on which Shri Gopal Prasad placed reliance. With great respect to these High Courts, we go by the view expressed by the Full Bench of Gujarat High Court in the case cited above, and hold that "returnable" in this context would pre-suppose atleast the existence of an agreement between the parties for the return of such packing material. The appellants herein have not only not placed any such agreements before us but have not even pleaded existence of any, and as such, we presume that none existed.
13. We are also of our considered view that in the nature of goods manufactured by the appellants, namely; biscuits, such type of packing is to be considered as essential packing and we also find that the price list does not indicate any such head as "Transportation charges" and it is thus to be assumed that the sale was at factory gate. The plea of the party that the disputed packing was by way of protection from deterioration or damage during transit, thus remains unsubstantiated.
14. The controversy as to the type of, packing, deduction whereof is permissible, has been set at rest by the judgment of Hon'ble Supreme Court in latest case, covering the whole range of post-manufacturing expenses, reported as 1983 E.L.T. 1896 (Union of India and Ors. etc., etc. v. Bombay Tyre International Ltd. etc., etc.) where it has been held that :- "so far as the cost of packing is concerned, no deduction is permissible in respect of such cost from the wholesale cash price of the excisable articles at the factory gate, whether the packing be primary packing or secondary packing, or whether its cost was shown separately or as included in the wholesale cash price. Whatever packing is necessary for the purpose of putting the excisable article in a condition in which it is generally sold in the wholesale market at the factory gate, the cost of such packing cannot be deducted from the wholesale cash price of excisable article at the factory gate." 15. There is thus a specific and direct authority for inclusion of cost of such type of packing material, which, as discussed above, is in the nature of essential packing for this type of commodity, like the biscuits, prepared in loose form or in small packets, which, without the help of this secondary packing, like large size tin containers, cannot obviously be marketed or despatched from the factory gate.
16. We thus feel satisfied that the view taken by the lower authorities was the right view, and in the absence of any evidence that by an agreement between the appellants and their buyers, these containers were "returnable" or were actually returned, and in the nature of things as outlined above, to the effect that this type of packing constitutes necessary or essential packing, refund claim has been rightly rejected. We, therefore, do not find any merit jn the appeal.
The same is accordingly dismissed.