Full Judgment
2. The demands against the Respondents were raised on the ground that the Respondents were the manufacturers of various types of Glass and glassware and the documents showed that during the period 27-7-1987 to 11-8-1987, the entire items manufactured by them were supplied to one Darshak Ltd. having premises situated in the same compound adjacent to the factory of production of the Respondents and that such clearances were only through Plastic durable and returnable containers in loose and unpacked condition and that Darshak Ltd. had packed the material and had sold them by despatch to various places in India. It was, therefore, felt that the assessable value ought to be the price charged by Darshak Ltd. from their customers and not the one charged by the Respondents from Darshak Ltd. Show Cause Notices were therefore issued and on adjudication, conclusion was drawn that Darshak Ltd. were the favoured buyers as 90% of the manufactured goods were supplied to them and that there was a mutuality of interest and as such the assessable value should be the price charged by Darshak Ltd. In the appeal before the Collector (Appeals), he vide impugned order held that favoured customer could be the one, when he and the principals had mutuality of interest and one was financing the other one. He found the said essential element missing and hence dropped the demand.
3. Mr. S.V. Singh, the ld. JDR has submitted that, around 90% of the product is supplied to Darshak Ltd. and that too in loose condition at the premises within the factory compound of the Respondents which by itself is sufficient to establish Darshak Ltd. as favoured buyer. He has also submitted that Glass and glasswares are not marketable in such loose conditions and packing thereof is absolutely essential which activity was undertaken only by Darshak Ltd. and thus, there was a clever device to evade the duty.
4. Mr. Kamal Trivedi, the ld. Advocate for the Respondent has referred to the letter from C.B.E.C., dated 10-8-1975 to all the Collector of Central Excise, instructing them that Glass and Glasswares are the products capable of being sold without packing and packing in such cases need not be held as process incidental or ancillary to the process of manufacture and inclusion of packing charges may not be insisted upon for inclusion in assessable value. He has further pleaded that the similar issue had arisen earlier in their own case by issuance of Show Cause Notice in 1977 and the Gujarat High Court have in Alembic Glass Industries Ltd. v. Union of India -1979 (4) E.L.T. J 444 held that it is not necessary that Glass and glasswares could be sold only in packed condition and packing charges need not be included in the assessable value. He also pleads that the Supreme Court have, in Civil Appeal No. 2808/79 filed against the said order, also refused to interfere with the basic concept laid down by the High Court. Reading the Show Cause Notice, the ld. Advocate has pleaded that this is the only issue raised and the same having been duly determined by judicial pronouncement, there is no cause for interferences. He has further pleaded that 10% sale is to other parties and there is no price differentiation and that there is no evidence of flow of finances between the two.
5. Considering the submissions, the Department has challenged the order basically on the ground that sale to M/s. Darshak is to a related person. The Show Cause Notice however alleges them to be only favoured buyer. Though about 90% of the sale is to them, there is also sale of about 10% to the outsiders where also same price is charged. To put a party under the category of favoured buyer, it ought to be proved that some discriminatory and favourable treatment is given to such buyers.
That element however is missing. Supply in Bulk in unpacked/semi-packed condition has been accepted by the Board in their letter as also by the High Court and the Supreme Court in case of the present Appellants themselves.
6. In that case, there appears no justifiable ground to interfere with the findings arrived at by the Collector (Appeals). Only such of the contentions which flow from the Show Cause Notice can be entertained and considering the order appealed against, from that angle, the appeal from the Department does not merit consideration and is therefore, rejected.