1. The issue for determination in this appeal is the eligibility of the appellants for the benefit of concessional assessment in terms of Notification 35/79-CE.2. The appellants manufacture branded chewing tobacco and filed a price list showing the gross price of tobacco as packed (including the cost of the packing material) and claimed the benefit of concessional assessment at the rate of 15% in terms of Notification 35/79 on the plea that the value of the branded chewing tobacco did not exceed Rs. 10 per kg. The said Notification is reproduced below:- "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules 1944, read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Govt. hereby exempts chewing tobacco of the description specified in column (1) of the Table hereto annexed and falling under sub-item 11 (5) of Item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon both under the Central Excises and Salt Act, 1944 (1 of 1944) and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), as is in excess of the duty specified in the corresponding entry in column (2) thereof.
Description Rate of Duty (1) (2)(i) does not exceed rupees ten Fifteen per cent ad valorem(ii) exceeds rupees ten Twenty-five per cent ad valorem 3. Against the letter of the Supdt. regarding approved price list stating that net weight of tobacco alone would be taken into account for determining the rate of duty and against the D D2 issued for Rs. 31,907.30 for the period 1-10-1975 to 10-3-1976, the appellants filed an appeal and by order dated 29-5-1976, the Collector (Appeals) held that the weight of packing has to be accepted as necessary for inclusion in order to arrive at the value of chewing tobacco. The matter was remanded to the Asstt. Collector for fixing the rate of duty accordingly. On 12-7-1976, a fresh show cause notice was issued by the Supdt. which proceedings culminated in the order dated 21-2-1977 of the Asstt. Collector, confirming a demand of Rs. 22,726.23 for the period 10-12-1975 to 10-3-1976. The Asstt. Collector held that certain post-manufacturing expenses were to be included in the assessable value and regarding the issue of net or gross weight, he held as follows :- "As regards the point as to whether gross weight or net weight is to be taken for the purpose of determining the value of jarda per kg. I find that this question is now insignificant in view of the fact that it has been decided to include post manufacturing charges in the declared assessable value, as a result of which, the jarda becomes assessable at higher rate of 10% irrespective of the fact whether the gross weight is taken into consideration or net weight, because the ..., whether its gross weight is taken or net weight taken for ascertaining the assessable value." 4. On appeal, the Appellate Collector held that post-manufacturing charges were not includible when charges are optional and only actual charges are recovered when factory price has been approved. The Govt.
of India issued a review show cause notice on 6-9-1978, proposing inclusion of post-manufacturing expenses in the assessable value and by order dated 2-8-1980, the Govt. of India held that such expenses were includible. The appellants preferred W.P. 2447/81 before the Bombay High Court on this issue which was dismissed on 5-12-1981. On 4-1-1982, the appellants represented to the Asstt. Collector regarding the method of determination of rate of duty under Notification 35/79 and the case was rejected on 10-10-1982, holding that net weight of chewing tobacco alone has to be taken for the purpose of the Notification. This was upheld by the lower appellate authority and hence the present appeal.
5. We have heard Shri V. Sridharan, learned counsel for the appellants and Smt. S. Baliga, learned SDR for the respondents.
6. On merits, the issue stands settled in favour of the appellants by the decision of this Tribunal reported in 1989 (43) ELT 382 (CCE v.Ganesh Tobacco Co.) in which it was held that value of primary packing in which tobacco reaches the ultimate consumer is to be included. The Tribunal held as under:- "We observe that the stage at which the duty gets fastened on to the chewing tobacco is when it is put in the primary packing which bears the brand name and the packing in which tobacco reaches the ultimate consumer. If the value of the product at that stage is taken it will reflect the value of the tobacco and there will be a nexus between the value taken at that stage and the excisable product. It is possible at that stage to arrive at the value per kg. of the product with certainty without any anomalous results. Therefore, in the circumstances of this case, following the ratio of the judgment of the Hon'ble Supreme Court, we hold that taking the value of the package as it moves in the market stream as the basis, the value of the tobacco should be arrived at for notification purposes after abating therefrom the value of the polythene, gunny bags, cartons so that the value of the chewing tobacco in the primary packing bearing the brand is obtained. This value should be divided by the total weight of all the branded packets in which the tobacco is packed and value so arrived at should be taken as the value per kg. for the purposes of the notification." "We clarify that after the rate of duty has been fixed depending upon the value per kg. of the branded chewing tobacco on the basis above, the assessable value of the goods will be the value including the cost of the packaging material, etc. and other charges as above subject to the deductions allowable under Section 4." Calculated on this basis, since the value of chewing tobacco per kg. is less than Rs. 10/-, the appellants are entitled to pay at the concessional rate of 15% ad valorem as per the notification.
7. The objection of the learned SDR is that this issue is no longer open for determination as the judgment of the Bombay High Court in W.P.2447/81 (reported in 1982 (10) ELT 114) operates as res judicata against the appellants. We have gone through that judgment and find that the issue of gross or net weight was not raised before the High Court nor was it decided. The prayer in the writ petition was for the issue of a writ of certiorari to quash the order of the Asstt.
Collector dated 21-2-1977 and the order in revision of the Govt. of India dated 2-8-1980 and for the issue of a writ of mandamus directing the respondents to cancel the abovementioned orders, forbear from including post- manufacturing expenses in the assessable value of the tobacco and to refund the sum of Rs. 21,907.30. The High Court could not and did not decide the issue of weight (whether gross or net) which was not raised before it and only upheld the orders relating to inclusion of PME in the assessable value. At this stage it is pertinent to point out that para 4 of the review show cause notice reads as- "Since merely by addition of these charges which were recovered over and above the price printed on the packets, the assessable value of the Jarda per Kg. exceeded Rs.10/- for the purpose of exemption under notification No. 20/75, the Asstt. Collector did not go into the question whether the weight of the paper wrapper was to be excluded for the purpose of computing the value per Kg. of the Jarda" which clarifies and amplifies the stand of the appellants that the question of weight was not the subject-matter of the dispute before the Bombay High Court. In view of this position, the reliance of the learned SDR on the reference to Bombay High Court judgment in the Asstt. Collector's order dated 10-10-1982 is of no significance and nothing turns on this, and it is immaterial that this point has not been raised before the Collector (Appeals), who has gone into the question of interpretation of Notification 35/79.
8. In the light of the above discussion we hold that the judgment of the Bombay High Court in 1982 ELT 112 does not operate as res judicata against the appellants. The issue in dispute being already settled in favour of the assessee by virtue of the order of this Tribunal reported in 1983 (43) ELT 382, we set aside the impugned order and allow the appeal.