1. One show cause notice No. 198/14/198/81-CX/V dated 16-2-1982 was issued by the Ministry of Finance, Department of Revenue, Govt. of India to the respondents M/s. Shankar Novelties Glass Industries, Firozabad, U.P. under Section 36(2) of the Central Excises & Salt Act, 1944 as it then existed. The show cause notice was issued on review of the order-in-appeal No. 61-66/KNP/CE/81 dated 17-8-1981 passed by the Appellate Collector of Central Excise, New Delhi. The Appellate Collector disposed of six appeals filed before him by the aforesaid common order-in-appeal. The review proceedings started by issue of the above show cause notice stood transferred to this Tribunal for being disposed of as an appeal after the Tribunal was set up w.e.f.
11-10-1982. As the Appellate Collector disposed of six appeals by one order, according to the practice prevailing in this Tribunal, the appellant filed five Supplementary Appeals alongwith the COD applications. The COD applications were heard and the delay in filing the Supplementary Appeals was condoned by us. Thereafter, the main appeal alongwith the Supplementary Appeals was heard and the order was reserved.
2. The brief facts leading to the issue of the review show cause notice under Section 36(2) of the Central Excises & Salt Act, 1944 as it then existed are as follows.
3. The respondents are manufacturer of glass and glasswares. They cleared glass and glasswares on payment of central excise duty. They filed the following six refund claims on account of duty paid on the cost of packing materials :-Sl. Date of receipt of the Period for which claim was AmountNo. refund claim in Assis- preferred The refund claims were rejected by the Assistant Collector of Central Excise, Agra without issuing any show cause notice and without giving any personal hearing to the respondents herein. The orders of the Assistant Collector were challenged by the respondents by filing appeal before the Appellate Collector of Central Excise, New Delhi, By his order-in-appeal No. 3107 to 3112/-CE/76 dated 17-1-1977, a copy of which has been placed at pages 77 to 78 of the respondents' main paper-book. the Appellate Collector set aside the six orders-in-original dated 3-6-1976, 31-5-1976, 9-6-1976, 9-6-1976, 9-6-1976 and 9-6-1976 and remanded the matters for de novo decision after observing the principles of natural justice. In the said order-in-appeal, the Appellate Collector observed that the Assistant Collector had rejected all the six claims because the appellants (respondents herein) had included the packing charges in the assessable value themselves and had shown them in Column 15 of the price-list in question. Neither any show cause notice was issued to the appellants (now respondents) nor any personal hearing was granted to them before rejecting the refund claims on account of the above reason. In paragraph-2 of his order, the Appellate Collector has observed as follows :- "2. I observed that there has been a serious breach of principles of natural justice in all these cases because no show cause notice was issued to the appellants telling them the proposed ground for the rejection of the refund claims and not giving them an opportunity of personal hearing. I further observe that under rule 11 read with rule 173-J of the C. Excise Rules, duty or charge which have been paid through inadvertance or error or mis-construction have to be refunded within three months/one year from the date of payment or adjustment as the case may be. The mere fact that the assessee included the packing charges in the assessable value earlier on their own cannot be held out to be an adequate ground for rejection the refund claims unless it is shown that the packing charges were not added in the assessable value through inadvertance, error or mis-construction, This is a point which has to be examined by the Asstt. Collector. In view of the above infirmities in the impugned orders, 1 refer the matter back to the Assistant Collector for a de novo decision after observing principles of natural justice.
Thereafter the Assistant Collector should pass a fresh speaking order." 4. Thereafter six show cause notices were issued by the Assistant Collector of Central Excise, Agra. The language of the show cause noticeswas more or less similar to the earlier one. It was alleged in the show cause notices that the respondents herein did not avail of the clearances of excisable goods under protest and the prices were declared by them of their own accord and that their refund claims were not received within the time-limit prescribed in the Rule 11 of the Central Excise Rules, 1944. They were asked to show cause to the Assistant Collector of Central Excise, Agra as to why their refund claims should not be rejected. The respondents submitted replies to the show cause notices. They also appeared for personal hearing before the Assistant Collector of Central Excise, Agra. In the written replies to the show cause notices as well as during the personal hearing before the Assistant Collector of Central Excise, Agra on 16-10-1974 they contended that the duty was paid by them under protest. They specifically referred to their protest letter No. SNG/FZD/938/73-74 dated 20-12-1973 addressed to the Supdt. of Central Excise, MOR 1, Ferozabad which reads as follows :- "In accordance with the decision of Mysore High Court and also as per case of M/s. Alembic Glass Works, Baroda, packing material should not be the part of assessable value.
Hence we are also referring the matter to the higher authorities and till their decision we are paying Excise duty on packing charge "UNDER PROTEST" and we are at liberty to claim for its refund, which please note." In the written reply to the show cause notices, it was further stated by the respondents that they had persued their protest and again wrote to the Supdt. of Central Excise vide their letter No.SNG/FZD/2566/74-75 dated 5-4-1975 and also met the Central Excise Officers. They stated that there was exchange of correspondence with the Supdt. and the Assistant Collector of Central Excise, Agra for settling the dispute. They contended that the excess duty was paid by them after including the packing charges in the assessable value under the instructions given by the Supdt. of Central Excise. It could not, therefore, be held that the duty was paid through inadvertance, error or mis-construction etc. and as such the provisions of Rule 11 read with Rule 173-J would not apply to the facts and circumstances of these cases. They pleaded that from the very beginning they contended that packing charges were not includible in the assessable value of their glass and glasswares. The Department forced them to include the packing charges in the assessable value and pay duty thereon.
5. After considering the respndents' written reply and also the submissions made during the personal hearing, the Assistant Collector of Central Excise, Agra rejected their claims by the following six orders-in-original :- The language used in these orders-in-original is more or less similar.
The Assistant Collector has stated that the respondents' claim that duty was paid by them under protest was not acceptable. But the Assistant Collector did not discuss anything about the protest letter dated 20-12-1973, although the show cause notices were issued to the respondents proposing to reject their refund claims on the ground of time-bar. Instead, the Assistant Collr. stated that the present cases being identical in nature to their refund case of Rs. 20,744.44, decided vide Assistant Collector, Agra's adjudication order No. C.No.V(18)(23A)41-Ref/77/6345-46 dated 12-6-1979, which was pending before the Appellate Collector, Central Excise, New Delhi, the claims were rejected on the same pleas.
6. By the adjudication Order No. C.No. V(18)(23A)41-Ref/77/6345-46 dated 12-6-1979, the Asstt. Collr. rejected another refund claim of Rs. 20,744.44 filed by the M/s. Shanker Novelties Glass Industries on 26-12-76 for the period from 1-7-76 to 30-9-76, which was received in the Office of the Assistant Collector of Central Excise, Agra on 31-12-76. In reply to the show cause notice and during the personal hearing in that case, M/s. Shanker Novelties Glass Industries stated that from the very beginning they protested against recovery of central excise duty on the packing charges of their glass and glasswares. They paid duty under protest. At point No. (v) of the points raised in their defence statement dated 7-12-78 as enumerated by the Assistant Collector in the said order-in-original dated 12-6-79, they referred to their protest letter dated 17-5-76 on which also no action was taken.
They contended before the Assistant Collector that their goods were generally sold in the market in wrapped condition and not in packed condition. They also stated that the goods were sent in packed condition to those customers, who wanted to purchase the goods in packed condition and in those cases packing charges were separately shown in the invoices. In the case of returnable packings used at the instance of the customers, the packing charges were refunded. They, therefore, contended that the cost of those special packings was not includible in the assessable value of their glass and glasswares. The Asstt. Collr. observed in that case that in Column 11 of the price-list the respondents herein declared the assessable value and the same was approved and the question of payment of duty under protest should then hardly arise. Since true account of packings returned to them by the customers could not be produced by them to the Asstt. Collr., he held that no packings had been returned to them by the wholesale dealers.
The Asstt. Collr., therefore, held that price-list submitted by them in terms of new Section 4 of Central Excises & Salt Act, 1944 were rightly approved by the Assistant Collector by loading the cost of packing with the assessable value and their claim that they paid duty under protest was not acceptable. In the concluding paragraph of the said order dated 12-6-1979, the Assistant Collector held as follows :- "The claim is accordingly rejected in terms of Section 4(4)(d)(i) as it is not maintainable in terms of Rule 11(4) ibid." 7. The respondents filed six appeals against the six orders-in-original in dispute in the present cases. As already stated, the Appellate Collector disposed of those six appeals by the impugned order, similar arguments as indicated earlier, were raised by them before the Asstt.
Collr. They stated that the duty was paid by them under protest. The protest having been lodged in their letter dated 20-12-73 to the Supdt.
of Central Excise, MOR I, Ferozabad, after considering the judgments of High Courts and the Supreme Court cited before him, the Appellate Collector held that secondary or special packings did not form part and the process of manufacture nor could they be considered as incidental or ancillary to the process of manufacture. He, therefore, held that the secondary packing charges could not be included in the assessable value under Section 4 of the Central Excises & Salt Act. He allowed all the six appeals and set aside the Assistant Collector's orders, directing the latter to sanction the refund claims, if otherwise in order.
8. The impugned order-in-appeal of the Appellate Collector was reviewed by the Central Govt. under Section 36 of the Central Excises & Salt Act as it then existed and issued a show cause notice dated 6-2-1982 proposing to set aside the impugned order and restoring the orders-in-original of the Assistant Collector of Central Excise. The grounds taken by the Central Govt. in issuing the said review show cause notice is that all the six refund claims were time-barred under Rule 11 read with Rule 173-J of the Central Excise Rules and that there was no evidence that they filed a letter of protest dated 20-12-1973 as claimed by them. The second ground of the show cause notice is that generally in almost all clearances, packing charges were charged by them from the customers for delivery at the factory gate and hence the assessable value of the glass and glasswares should include the cost of those packing charges.
9. We have gone through the records of these appeals and have heard Shri J.S. Kapil for the respondents and Smt. Baliga for the appellants.
In reply to a query from the Bench, Smt. Baliga has stated that the secondary packings were gunny cover, wooden cases and cartons, the cost of which has been included in the assessable value. Shri Kapil has argued that 50% of the sales of the respondents are in loose condition packed in paper and straw only, and in the remaining 50% of the sales the goods were packed in wooden cases, cartons and gunny bags as required by the customers. For these special packings, charges were separately shown in the invoices. He has argued that the respondents' products were marketable without packing, in loose condition.
Therefore, the cost of secondary packing could not be included in the assessable value of the glass and glasswares. He has relied on the Supreme Court judgments, reported in 1985 (22) ELT 306 in the case of Union of India and Ors. v. Godfrey Philips India Ltd. and 1989 (43) ELT 165 (S.C.) in the case of Hindustan Polymers v. Collector of Central Excise.
10. Regarding the first ground of limitation under Rule 11 read with Rule 173-J taken by the Govt. of India in the review show cause notice, we observe that in paragraph-3 of the show cause notice, it is alleged that the Assistant Collector rejected all the six refund claims as barred by limitation under the aforesaid rule vide his six orders-in-original mentioned in that paragraph. This allegation is not correct in view of what has been stated in the relevant orders-in-original dated 24-4-1980, 24-4-1980, 24-4-1980,11-1-1980, 29-12-1979 and 24-4-1980 and in view of what has been recorded by us earlier in this order. The orders-in-original are almost similarly worded and one of these orders of the Assistant Collector is reproduced below :- Subject:- Refund Claim of M/s. Shanker Novelties Glass Industries, Firozabad for Rs. 24,763.22 paise in respect of packing charges - O/R M/s. Shanker Novelties Glass Industries, Firozabad submitted a refund claim for Rs. 24,763.22 paise pertaining to the period from 1-6-1974 to 30-9-1974. It was rejected by the Asstt. Collector of Central Excise, Agra vide his C.No. V(23A)(18)-1-Ref/76/10724 dated 9-6-1976. The parly filed an appeal against the said order to the Appellate Collr. of C. Excise, New Delhi, who referred back the matter to Asstt. Collector, Central Excise, Agra for a de novo decision after observing principles of natural justice.
Consequent upon the aforesaid orders of the Appellate Collector, Central Excise, New Delhi a show cause notice C.No. V(18) (23-A) l-Ref/824 dated 17-1-1978 was issued to the party asking them as to why their refund claim be not rejected under the provisions of Rule 11 of Central Excise Rules, 1944. The party in reply to the show cause notice submitted their defence statement dated 25th Jan. 1978 advancing the same arguments which they did in other cases of similar nature and further sought personal hearing. During the course of personal hearing on 16-10-1979 the counsel of the party Shri J.S. Kapil, Advocate argued that the cost of packings involved in these particular cases should not be included in the assessable value. Finally the party claimed that since duty was paid by them under protest, the limitation under Rule 11 was not applicable and requested for the sanction of the claim.
I have carefully gone through the facts of the case and the defence reply of the party read with their arguments advanced at the time of personal hearing. The case being identical in nature to their refund case of Rs. 20,744.44 decided vide this office adjudication order C.No. V(18)(23A) 41-Ref/77/6345-46 dated 12-6-1979 which is pending before the Appellate Collector, Central Excise, New Delhi, it is rejected on the same principle.
Nowhere in the orders-in-original, the Asstt. Collr. has stated that the refund claims are rejected as time-barred. In rejecting these six refund claims he has followed his earlier adjudication Order No. V(18)(23A)41-Ref-77/6345-46 dated 12-6-1979. The ground on which the refund claim for Rs. 20,744.44 was rejected vide order dated 12-6-79 have already been discussed by us in paragraph - 6 ante. The said refund claim was rejected by the Asstt. Collr. on merits. In paragraph - 5 of the review show cause notice, it has been alleged that there appears to be no evidence indicating that the respondents had filed a letter of protest dated 20-12-73 as claimed by them. The respondents' advocate Shri J.S. Kapil filed one additional paper-book on 13-3-90, which was received in the Tribunal on 15-3-1990. At page 35 of the said additional paper-book, they filed a copy of their letter No. SNG/FZD/938/73-74 dated 20-12-1973 addressed to Supdt. of C. Excise, MOR I, Ferozabad, whose contents have been extracted in paragraph-4 of this order. In the copy of the letter placed by them in the paper-book there is an endorsement to the effect: That they sent this letter of protest to the Supdt. of Central Excise and it was pursued with the Supdt. and the Assistant Collector and also it was contended by the respondents before the Assistant Collector, Agra, who rejected their refund claims. In the relevant orders-in-original, the Assistant Collector has not stated that the said protest letter dated 20-12-1973 was not received by the Department. The Asstt. Collector has not rebutted the respondents' claim that the duty had been paid under protest. Further, in the impugned order, the Appellate Collector has given a categorical finding that the appellants before him paid duty from 20-12-1973 onwards under protest on the packing charges. In the face of these materials, we are unable to accept the allegation that there is no evidence indicating that the respondents had filed a letter of protest dated 20-12-1973.
11. So far as the question of including the cost of secondary packing in the assessable value of the respondents' glass and glasswares is concerned, the issue is now well settled by Supreme Court judgment in the case of Hindustan Polymers (supra). It was held by the Hon'ble Supreme Court that the cost of packing is not includible in the assessable value if the goods were marketable without being packed. In the case of Godfrey Philips (supra), the Hon'ble Supreme Court held that the cost of secondary packing which are for protection of excisable goods during the transportation was not includible in the assessable value and that the cost of packing which was necessary for selling the excisable goods in the wholesale market at the factory gate was includible. Again, in the case of Collr. of C. Ex. v. Pond's India Ltd., reported in 1989 (44) ELT 185 (S.C.), it has been held by the Hon'ble Supreme Court that the cost of packing done for making the goods marketable is includible in the assessable value of the excisable goods and that the real test is not the packing in which the goods are capable of being sold in wholesale trade, but the packing in which they are generally sold. It was the contention of the respondents before the lower authorities that normally they sold their glass and glasswares in naked condition without packing, but if any customer wanted special packing in wooden cases, cartons or gunny bag packing, then only those packings were used and the cost of such packings was separately shown in the invoices. This contention has been raised before us also by the learned advocate and it has not been rebutted by the learned DR. In view of the ratio of the aforesaid judgments of Supreme Court, the cost of special packings in wooden cases, cartons and gunny bags/cloth at the instance of the customers is not includible in the assessable value of the respondents' glass and glasswares.
12. In the circumstances, we do not find any infirmity in the impugned order of the Appellate Collector. Consequently, the same is upheld and the appeals filed by the Revenue are dismissed.