Karnataka High Court
Alembic Glass Industries Ltd vs Union Of India And Ors. on 1 January, 1800
Equivalent citations: 1979(4)ELT461(KAR)
JUDGMENT
1. These are two writ petitions under Article 226 of the Constitution,preferred by the common petitioner Alembic Glass Industries Ltd. (with wewill coll "The Company"), challenging the levy and collection of exciseduty on the value of the material used for packing the glass andglassware manufactured and sold by the Company.
2. Shortly, stated, the facts are these :-
The Company which is incorporated under the Companies Act, having itsregistered office at Alembic Road, Baroda, carries on the business ofmanufacture and sale of glassware in its factory at whitefield, Banglore.Glass and Glassware are chargeable with and valorem duty of fifteen percent as specified under Item 23A of the First Schedule to the CentralExcises and Salt Act, 1944 (hereinafter referred to as "the Act"). theduty is paid at the said rate on the wholesale price of the articles, asper its price list approved in advance by the excise authorities. Forthe period 1-3-1968, the Company paid duty on the articles manufacturedby it as and when they were released for sale under permits issued bythe authorities under the Act. On 31-1-1968, the Assistant Collector ofCentral Excise demanded a sum of Rs. 19,889.93 of which according to himrepresents fifteen per cent duty payable by the company for the period1-3-1966 to 31-1-1968, on the packing charges of the bottles sold to itscustomers.
The Company objected to the said demand on the ground that the packingcharges incurred by it do not from part of the price of the excisablearticles sold any no duty is levaible on `packing charges'. TheAssistant Collector by his order dated 26-6-1968 confirmed the saiddemand which was also affirmed by the Collector of Central Excise in anappeal preferred by the Company. Aggrieved by the decision of theauthorities, the company has preferred Writ Petition No. 548 of 1970,praying for an order quashing the demand for payment of Rs. 19,889.93.
3. To understand the controversy in question, we must explain what theCompany does. The Company manufactures glass containers and bottles ofvarious sizes as per the needs of its customers who are mostlymanufacturers of liquors, pharmaceuticals, toilets, oils, chemicals andmilk products. These containers are sometimes purchased in unpackedcondition but more often, the buyers require them to be packed anddespatched to them. In one, the bottles are packed in grass and gunny;and in the other, cardboard or grey board cartons are used for packing. The type of packing depends on the customer's instructions. Usually, thepharmaceutical manufacturers want the bottles in cartons packing. TheCompany does not manufacture the packing materials but buyers them fromother dealers. The customers who buy the bottles in grass and gunnypacking, are not charged anything extra for packing but those who insiston cartons packing, are charged the actual cost of the packing materials.Even this is not charged if the buyers themselves supply the cartons forpacking. In paragraph (8) of the affidavit, in support of Writ PetitionNo. 3436 of 1970, it is stated that Messrs. Orient Pharma (p) Ltd., andMessrs. Sri Balaji and Sons, Bombay, supply the cartons packing at theircost and all that the Company does is to put the bottles in those cartonspacking. The said buyers are not charged anything extra towards thepacking as the Company does not incur any expenditure on that packing. But the authorities under the Art. are insisting that even in such cases,the company should notionally work out the packing charges on the basisthat the said packing materials had been purchased and used by thecompany at its cost. The excise duty is levied and collected on thewholesale price of the bottles and the packing charges. Up to June,1968, the approved price list did not mention the packing charges it wasseparately shown in the invoices. From June, 1968, the Company wasforced to include the packing charges in the price list of its articles. A specimen copy of such price list approved by the excise authorities inAnnexure (1) to Writ Petition No. 3436 of 1970 wherein the packing chargeis separately shown as Rs. 32 per thousand bottles. The same is alsoseparately shown in the invoice prepared by the Company as seen fromAnnexure (3) to the said Writ petition.
4. The real question that falls to be determined is whether the demandand collection of excise duty on packing charges of glass and glasswareis authorised under the Act.
5. The impugned levy is sought to be supported on behalf of therespondeats on the following two grounds :-
(i) packing is process incidental or ancillary to the completion ofmanufactured glass containers : and
(ii) the assessable value of the glass containers must include theirpacking charges under Section 4 of the Act.
6. The first ground need not trouble us much. The assessing authoritieshave not dealt with this question specifically. All that the AssistantCollector has stated in his order dated 8-7-1968 is that the bottles inquestion are in a packed condition at the time of the removal from thebonded house and therefore the goods cannot be said to be completemanufactured products without packing. It is further stated that some ofthe pharmaceutical concer insist on the bottles being packed in cartonpacking. No other reason has been given either by the AssistantCollector of by the Collector of Central Excise. The mere fa ct that thebottles are released in a packed condition, does not indicate thatpacking is a process incidental to the completion of the manufacturedbottles.
7. The learned Advocate-General placed before us some samples of cartonpacked and ordinary bottles. In the case of carton packing, all that isdone is that the bottles are kept in cardboard boxes with cardboardpartitions which act as cushions preventing breakage. Reference was alsomade to books on glass technology to show that packing is neither a partnor incidental to manufacture of bottles. No material is placed beforeus by the learned Central Government Pleader to support his contentionthat carton packing froms part of the process of manufacture of bottles. The orders of the Assistant collector and the collector of Central Excisegive no reason for coming to the conclusion that packing is a processincidental or ancillary to the manufacture of bottles. Their conclusion,therefore, is wholly arbuitrary and cannot be supported. In ourjudgment, packing is not incidental ancillary to the process ofmanufacture of bottles.
8. In order to appreciate the second contention, it is necessary to bearin mind that the Act by Section 3 levies duties of excise on allexcisable goods which are produced or manufactured in India, at the ratesset forth in the first Schedule. The expression `excisable goods' hasbeen defined in section 2(d) to mean goods specified in the FirstSchedule as being subject to a duty of excise. The rate of duty is oftwo kinds :-
(a) specific or
(b) ad valorem.
9. Where a duty is ad valorem, Section 4 provides for determination of thevalue of the excisable article for the purpose of computation of duty. "Glass and Glassware" which we are concerned are excisable goodschargeable with duty at a rate depending upon the value of the articels. According to Section 4, such value shall be deemed to be the wholesalecash price for which an article of the like kind and quality is sold oris capable of being sold at the time of the removal of the articvleschargeable with duty from the factory or any other premises ofmanufacture. The value of the excisable article, therefore, is thewholesale cash price for which an article of a like kind and quality issold or is capable of being sold at the time of the removal of thearticle chargeable with duty from the factory or any other premises ofmanufacture. From the material placed before us, it is clear thatbottles are capable of being sold at the time of removal from the factorywithout cardboard or carton packing and that in fact that company sellsthe bottles in such condition. For the purpose of determination of valueunder Section 4, the authorities under the Act are entitled to take intoconsideration only the wholesale cash price for which the bottles aresold or are capable of being sold at the time of the removal from thefactory or any other premises of manufacture and they cannot take intoaccount the value of packing material which are not excisable articlesand on which no duty is levied under the Act. Therefore, the inclusionof the value of packing material in the valuation of the excisablearticles is clearly illegal and without jurisdiction. We have earlierheld that the wholesale price of the bottles whether sold to one or theother customer, remains the same and the extra charges collected by thecompany is only towards the expenses incurred by it for packing thebottles and that depends upon the instructions of the particularcustomer.
10. The price list of the article approved by the authorities, does not showthat its wholesale price is inclusive of the packigng charges. That isseparately shown during the disputed period at the insistence of theauthorities as they refused to clear that articles from the bonded house. It is always shown separately in the invloves of the company. IN ourjudgment, the demand and collection of duty of excise on the packingcharges of the bottles is wholly unathorised.
11. In the result, we allow both the petition No. 548 of 1970, we issue awrit in the nature of certiorari quashing the orders dated 24- 1-1970(Annexure I) and 26-6-1968 (Annexure II) made by the respondents 2 and 3further issue an order directing them not to enforce the demand againstthe petitioner for payment of Rs. 19,889.93 P. by way of differentialduty for the period from 1-2-1966 to 31-1-1968.
12. In writ petition No. 3436 of 1970, we thing it is not appropriate togrant the relief prayed for in the petition. The assessing authorityunder the Act has to re-assess the value of the glass containers releasedfrom the bonded house in light of this order for the period in questionand then refund the excess amount already collected from the petitioner. We, therefore, issue on order directing the second respondent to causethe reassessment of the duty payable on the excisable articles inquestion made for the period covered by this writ petition in the lightof this order without taking into account the packing charges and refundthe excess amount, if any, collected from the petitioner.
13. The petitioner is entitled to its costs. Advocates fee Rs. 250 oneset.