1. These are two appeals involving a common issue and thus, are being disposed of by this common order.
2. The dispute relates to the includibility of the cost of 'Metal tin containers' in the assessable value of the 'Vanaspati'.
3. The appellants manufacture Vanaspati. At the time of selling their Vanaspati, the appellants in their invoices separately indicated the price of the 'Metal tin containers'. An express condition is also incorporated in the invoices that the 'Metal tin containers' are returnable and durable and that on return of the 'Metal tin container', the appellants would return to the buyer amounts collected on account of metal tin. Prior to May 1980, they have included the value of metal tins/containers in the assessable value of Vanaspati. However, after the judgment of the Supreme Court in Bombay Tyre International [1983 (14) ELT 1896 (SC)], they have stopped paying excise duty on metal containers. Therefore, a show cause notice was issued on 5-11-1980 proposing to recover duty of Rs. 1,03,304.30 for the period May, 1980 to August, 1980 payable on metal containers. The department also issued 13 show cause notices for the period commencing from September, 1980 to December, 1984. Another show cause notice was issued on 22-5-1985 for the period January, 1985 to April, 1985. On receipt of the reply and after hearing the appellants, the Asstt. Collector confirmed the demand. On appeal, the Collector rejected the same and hence, the appeal before us.
4. The main question for consideration is whether the value of the metal containers/tins which are durable and returnable is to be included in the assessable value of vanaspati.
5. Section 4 which provides for the valuation of the excisable goods reads as follows : "Section 4 : Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be- (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale;" (i) 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." Interpreting the above provision, the Supreme Court in Radhakrishaiya v. Inspector of Central Excise, [1987 (27) ELT 598] held that "if the packing is returnable and durable, then its cost is liable to be excluded in computation of the assessable value of the goods for the purpose of excise duty. So far as the question of durability is concerned, there cannot be such controversy about it, but a question has been raised as to what is the meaning and connotation of the word 'returnable'. Does it mean physically capable of being returned or does it postulate an arrangement under which the packing is returnable.
While interpreting this word, we must bear in mind that what Section 4(4)(d)(i) excludes from computation is cost of packing which is of a durable nature and is 'returnable' by the buyer to the assessee. "The packing must be one which is returnable by the buyer to the assessee and obviously, that must be under an arrangement between the buyer and the assessee. What is required for the purpose of attracting the applicability of the exclusion clause in Section 4(4)(d)(i) is that the packing must be returnable by the buyer to the assessee. If the packing is returned by the buyer to the assessee, it cannot be said to have been returned by the buyer to the assessee unless there is an arrangement between them that it shall be returned." 6. From the above, it follows that as long as there is an arrangement between the seller and the buyer indicating that the packing is returnable, the packing is excluded.Mahalaxmi Glass Works (P) Ltd. v. C.C.E. [1988 (36) ELT 727 (SC)] considered the scope of Section 4(4)(d)(i) of the Act.
The Supreme Court while reiterating the ratio laid down in Radhakrishaiya observed as follows: "actual return or extent of the return is not relevant. What is necessary is that if the buyer chooses to return the packing, the seller should be obliged to accept it and refund the stipulated amount." In other words, according to the Supreme Court, there should be an arrangement between the buyer and seller indicating the returnability of the packing. Secondly, actual return or extent of return of the durable and returnable containers is not relevant. If the buyer chooses to return the packing, the seller should be obliged to act and refund the stipulated amount.
8. The Tribunal in C.C.E. v. E.I.D. Party (India) Ltd. [1989 (40) ELT139 (Tri.)] laid down the following tests after considering the judgments of the Supreme Court in K. Radhakrishaiya v. Inspector of Central Excise :- "It would be worthwhile summarising the norms relevant to returnability of durable containers. We list the norms as under :- (1) Though the word 'returnable' used in Section 4(4)(d)(i) is distinguishable from 'returned', mere capability of being returned is not enough. Returnability should be a term of sale either by contract between the buyer and the seller or by statute. It cannot be said that the packing is returnable by the buyer to the asses-see unless there is an arrangement between them that it shall be returned.
(2) Actual return is not relevant. What is necessary is that if the buyer chooses to return the packing, the seller should be obliged to accept it and refund the stipulated amount.
(4) The mode of return is a matter of mutual convenience. Whether the packing is returned direct to the seller or through his collection agent, makes no difference." From the above, it follows that there should be an arrangement or a contract between the seller and the buyer for the return of the durable container. The actual return is also not relevant. What is necessary is if the buyer chooses to return the durable container, the seller should be obliged to accept it and refund the stipulated amount.
9. Let ns examine the facts of this case in the light of the principles laid down by the various judgments referred to above.
One of the invoice example A contains the following stamped endorsement : "Container should be returned to the factory in good and sound condition at buyer's cost whereupon the cost of the container will be returned to the buyer".
The appellants submitted that this is the pattern of invoice adopted by them in respect of the entire sales. The department has not disputed this fact. The endorsement on the invoice indicates the arrangement between the manufacturer and the buyer and it also indicates that the buyer is under an obligation to return the container and if the buyer returns the container, the manufacturer is under an obligation to return the cost of the container. From the above, it follows that the facts of this case satisfy the test of durability and returnability of the containers under Section 4(4)(d)(i) and the principles laid down by the Hon'ble Supreme Court and this Tribunal in the various decisions and orders referred to above.
10. In the light of the above, we allow the appeals and set aside the orders of the Collector.
While I agree with the conclusions arrived at by my learned Sister, Ms.
S.V. Maruthi, I would like to add the following :- 10.1 Learned SDR Shri B.S. Ganu for the Revenue had submitted that there is no contract or agreement the appellants and their customers regarding the arrangement for returnability of the metal containers in which the vegetable product is packed. He stated that an endorsement on the invoice, as extracted in the order, proposed by my learned sister, cannot be taken as an agreement or contract in the sense in which it was contemplated in the Supreme Court's judgment referred to earlier namely, Radhakrishaiya 's case. He had also submitted that the facts of E.I.D. Parry's case, mentioned supra, are not on all fours with the facts of this case. In addition to the endorsement on invoices regarding returnability of the containers, as in this case, there was also an additional document in the Parry's case in the form of various circulars to various dealers regarding returnability of the containers or packing. The circular and the endorsement could in view of the learned SDR make a good agreement but the endorsement by itself on the invoices would not be so and hence he submitted that it could not be said that the containers in this case were returnable. He had also submitted that the endorsement on the invoice is vague in itself. It speaks of the packing cost and not of the container cost. Learned advocate, on the other hand, had relied upon para 14 of Parry's case, mentioned supra. He had stated that endorsement by itself makes it very clear that the customers of the appellants could return the containers if they so liked and on return they would reimburse the cost of the container.
10.2 Apart from the aforesaid, I notice that packing cost has been shown separately at the rate of Rs. 13.50 in the invoice, mentioned in the order proposed by my learned sister. The endorsement and the separate packing cost shown in the invoice taken together makes it very clear that the containers were returnable to the appellants in good and sound condition at the customers' cost whereupon the cost of the container i.e. the packing cost would be returned. The cost of packing has been shown separately, as mentioned above. Therefore, I do not feel that there is any vagueness in the arrangement or agreement between the appellants and their customers. Reliance placed by the learned advocate for the appellants on para 14 of the Parry's case is very apt. Yet another plea of the learned SDR was that the tin container was the primary packing of the goods and primary packing in any case, according to him, was chargeable to duty. The question of durability and returnability for primary packing should not normally arise because the goods, namely, Vegetable Product in this case could not be delivered without being packed in the tin containers. This plea is not tenable in view of the definition of 'value' in Section 4(4) (d) (i) which specifically excludes the cost of packing which is of a durable nature and is returnable by the buyer to the assessce. This exclusion clause does not make a distinction whether the durable and returnable packing is primary or other than primary.