Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Himachal Pradesh Horticulture Produce ... on 27 July, 1987
Equivalent citations: 1987(14)ECC112, 1988(34)ELT160(TRI-DEL)
ORDER K. Prakash Anand, Member (T)
1. These are two appeals. Since the issue involved is the same, therefore, these are being disposed of by this single order.
2. In these cases show cause notices were issued to the appellants alleging that the appellants cleared goods, classifiable under Item No. IB of Central Excise Tariff, packed in plastic barrels, but the value of the barrels was not included in the assessable value of the goods. As per the wordings of the show cause notice "Since unit container is an integral part of an item to be classified as prepared or preserved foods put up in unit container, its value has to be taken for account in the assessable value of the goods and chargeable to Central Excise duty".
3. In their reply to the show cause notice appellants submitted that the goods in question viz. apple juice concentrate was in fact sold loose in durable PVC carboys, that the carboys were not filled with pre-determined quantity, and finally the carboys were not sold to the consumers but returned and duly accounted for. It was urged that the price charged was per Kg. of contents, and not per carboys. For these reasons it was claimed that the product was not in fact sold in unit containers as such and therefore was classifiable under Tariff Item 68 and not under Tariff Item 1B of Central Excise Tariff.
4. Since the carboys were returnable, it was also claimed that, as per Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, the cost of the containers were not required to be included in assessable value. It was also claimed on behalf of the appellants that the demand for differential duty was barred by limitation as the goods were being cleared in accordance with duly approved price lists.
5. In the Order-in-Appeal passed by the Appellate Collector of Central Excise it was held that since the unit container in this case was of a durable and returnable nature therefore the price thereof could not form a part of assessable value, in view of the provisions of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944. He also held that considering the manner in which it was packed and cleared, the apple juice concentrate was not classifiable under Tariff Item 1B of Central Excise Tariff. Finally, it was held also that the appellants plea of limitation was also valid as they had duly filed the price lists in which they had declared that the products was being sold loose in durable PVC containers.
6. Heard Smt. D. Saxena, SDR for the department and Shri A.K.S. Bedi, Advocate for the respondent.
7. The department now submits before us that in the present matter since the goods are put in unit containers for sale, classification elsewhere than under Tariff Item 1B of Central Excise Tariff is to be ruled out. In view of the wording of Tariff Item 1B, it is urged, the packing is a part of the manufactured goods and it is immaterial that the containers were received back by the party on account of their being durable and returnable nature. For this reason the price of packing is to be included in assessable value.
8. As regards limitation the department urged that since respondents had failed to declare the containers separately either in the invoices or in the price lists they had suppressed material information and therefore the extended period would be available to the department for raising demand of duty.
9. The learned Advocate reiterates the stand taken before the lower authorities which has been discussed supra. As regards the meaning of term 'Unit Container' he also relies on instructions issued by the Board's letter M.F.(D.R.I.) No. B/5/1/69-CX-I, dated 3-4-1969 (appearing on page 170 of R.K. Jain's Central Excise Tariff 1985-86, 12th Edition).
10. The learned Advocate makes the further point that in view of the wording of Central Excise Tariff Item 1B, it is necessary that the prepared of preserved foods should be sold alongwith unit containers. In other words if the containers are returnable then the product would not satisfy the description of the tariff item and the goods would be classifiable under Item 68 of the Central Excise Tariff. It is emphasized that sale in unit containers also posits the sale of pre-determined quantity in such containers, whereas in the present case the carbouys are not containing any pre-determined quantity. The product is sold in varying quantities, and in the facts of the case it can be considered that the sale is being undertaken in loose and not in packed form.
11. The facts of the case and the submissions made before us have been carefully considered. For facility of reference Item No. 1B of the Central Excise Tariff is reproduced below :
"1B Prepared or preserved foods put up in unit containers and ordinarily intended for sale, including preparations of vegetables, fruit, milk, cereals, flour, starch, birds, eggs, meat offals, animal blood, fish, crustaceans or molluscs, not elsewhere specified."
12. It seems to us that there has been some confusion as regards the issue on which decision is required to be taken. As per the show cause notice it was alleged that appellants had cleared their apple juice concentrate in plastic barrels without including the value of such barrels in the assessable value of the PP Foods. So the issue, as per show cause notice, basically, was not of classification but valuation, that is, whether the price of returnable plastic barrels was or was not liable to be included in the assessable value of apple juice concentrate cleared. The Assistant Collector dismissed without any examination the plea of the appellants which questioned the classification of the goods itself. It was claimed that the goods were not classifiable under Item 1B Central Excise Tariff as the apple juice concentrate could be considered as being sold in loose condition for the reason (a) that the carbouys were returnable and (b) that such carbouys did not contain any fixed or pre-determined quantity of the product. All that the Assistant Collector stated in respect of this argument was that this was an 'extraneous' issue.
13. So far as the meaning of the wording "Prepared or Preserved Foods put up in unit containers and ordinarily intended for sale" figuring in the relevant tariff item are concerned, we may turn to the instructions issued by the Ministry dated 3-4-1969. These instructions are reproduced below :
"Meaning of Unit Containers. The expression 'unit container' used in Tariff Item 1B means a container in which prepared or preserved food is intended to be sold by the manufacturer. It may be a small container like tin, can, box, jar, bottle or bag in which the product is sold by retail, or it may be a large container like drum, barrel or cannister in which the product is packed for sale . to other manufacturers or dealers. In short 'unit container' means a container, whether large or small, designed to hold a pre-determined quantity or number which the manufacturer wishes to sell whether to a wholesale or retail dealer or to another manufacturer."
14. We may also refer to the view taken by this Bench expressed in the case of Foremost Dairies Ltd. v. Collector of Central Excise, Meerut [1986 ECC T 148] that there is no warrant for the interpretation that the benefit of classification under 1B would be restricted to those cases where removals from the factory are by way of sale to the consumers of the smaller containers.
15. We are fully in agreement with the view contained in the Ministry's letter that unit container would mean a , container, large or small, which is meant for holding a pre-determined quantity which the manufacturer wishes to sell, whether to a wholesale or retail dealer, or to another manufacturer. In the orders of this Bench in the case of Collector of Central Excise, Calcutta v. H.M.M. Ltd., Calcutta [1985 ECR 2021], it was rightly held that Item 1B that is, "prepared and preserved foods, in unit containers, ordinarily presented for sale," shuts out from the coverage of this heading, only those foods which are not meant for sale, such as those transported for further industrial uses or transported from one place to another. It is well known that products like preserved foods or canned meat, canned fish or milk, or vegetables are always sold commercially in containers of certain sizes; it is the goods described and packed in these containers that the law wanted to tax under this heading. It is the last stage of the prepared and preserved foods before their sale commercially that the law wanted to tax and not the earlier stage when the foods are in large cans or containers that are not for sale, or when not yet packed.
16. It cannot be said that in this case the carbouys are not unit containers merely because they hold large quantity of the product or that the carbouys are returnable. Nor are we persuaded to agree that merely because, as claimed, the contents of such carbouys can vary, therefore it has to be held that the product is sold loose, thus taking it out of classification under Item 1B of Central Excise Tariff. For classification under 1B Central Excise Tariff all that is required is that the prepared or preserved foods should be put in unit container and ordinarily intended for sale. There is no doubt that the carbouys in which apple juice concentrate is being sold are unit containers. Nor is there any doubt that such concentrate in carbouys is intended for sale. In order to take a veiw on the appellants claim that they are selling the concentrate juice in carbouys loose one has to taken into account inter alia the entire system of packing and sale of the manufacture. It is admitted that appellants are also selling their products in other unit containers. Carbouys obviously are one form of packing offered to the customers and in view of its very nature it has been made returnable. In this background it would be anomalous to hold that apple juice concentrate sold in carbouys would be classifiable under Item 68 of Central Excise Tariff while those in other packings would be classifiable under Central Excise Tariff Item 1B. Accordingly, we don't agree with the Collector of Central Excise (Appeals) in regard to the view taken by him on the issue of classification and we hold that the product in question is covered by Central Excise Tariff Item No. 1B.
17. We would like here to deal with the interesting point of view expressed to the effect that in order to classify under Central Excise Tariff Item 1B it is necessary that the containers should be sold alongwith the contents. This interpretation is contrary to the wordings of the Tariff. The wordings are "Prepared or preserved foods put up in unit containers and ordinarily intended for sale". It would be mis-reading the description of the Tariff Item if a meaning was sought to be given that prepared or preserved foods falling under the Item should be intended for sale alongwith the containers. Clearly, the intention is that such prepared or preserved foods should foods should be ordinarily intended for sale in unit containers and not that the unit containers also should be ordinarily intended for sale.
18. Having disposed of the issue of classification we come to the issue of valuation. In the appeal before us it is submitted that the view taken by the Collector (Appeals) that since plastic carbouys/barrels in which apple juice concentrate has been packed are durable and returnable nature, the value of such carbouys/barrels cannot form part of assessable value is not correct in view of the fact that under Tariff Item 1B containers are an essential part of the goods because of the very description of the Tariff Item. In other words because the Tariff description of Item 1B of the Central Excise refers to PP Foods put up in unit containers therefore, it is submitted that the price of such unit containers should constitute a part of the assessable value of PP Foods, even if such containers are returnable. This logic is not acceptable. Classification is to be determined as per the Tariff description; valuation of the goods presented for clearance has to be undertaken as per Section 4 of the Central Excises and Salt Act, 1944. The two issues have not to be mixed up. In this case, for reasons already discussed supra, classification of apple juice concentrate sold in carbouys is appropriate under Item 1B of Central Excise Tariff. However, in undertaking valuation due regard must be had of Section 4(4)(d)(i) according to which, where the goods are delivered at the time of removal in a packed condition, value is to include the cost of such packing except the cost of packing which is of a durable nature and is returnable by the buyer to the assessee. The benefit of this provision goes to the assessee.
19. Accordingly, the order of the Collector (Appeals) holding that the price of returnable carbouys is to be excluded from the assessable value of apple juice concentrate is upheld. However, the orders of the Collector (Appeals) classifying the goods under Item 68 of the Central Excise Tariff are set aside. The correct classification is Central Excise Tariff Item 1B.
20. The appeals are partly allowed in these terms.
21. [per : V.T. Raghavachari, Member (J)]. - I have carefully perused the order dictated by brother Shri K. Prakash Anand. The two appeals relate to two demands issued to the respondents for payment of differential duty. The notices are dated 21-12-1983 and 7-6-1984. Under orders dated 22-6-1984 and 18-1-1985, the respective Assistant Collectors confirmed the said demands. On appeal the said orders were set aside by the Collector (Appeals) under his orders dated 30-3-1985 and 7-11-1985. Under the order dictated by Shri K. Prakash Anand, he had accepted that the Collector (Appeals) was correct in holding that the price of the returnable carboys is to be excluded from the assessable value of the apple juice concentrate manufactured and removed by the respondents. Since the two demands were based only on the allegation that the value of these carboys was liable to be included in the assessable value of the juice concentrate, the result of the finding above was that the demands were not valid. That would, therefore, mean that the orders of the Collector (Appeals), setting aside the demands, were correct. Therefore, in effect the result of the finding as recorded by brother Shri K. Prakash Anand would be that these two appeals are liable to be dismissed. I am in agreement with that conclusion, though my reasons therefore are different from and, in fact, opposed to the conclusions arrived at by brother Anand on the question of classification of the product as well as the liability for inclusion of the value of the carboys if the classification upheld by brother Anand is correct. It has therefore become necessary for me to write this separate order, though I concur with brother Anand that the appeals are to be dismissed.
22. Under the orders dated 30-3-1983 and 7-11-1985 the Collector (Appeals) held :
(i) The apple juice concentrate was not classifiable under Item 1B Central Excise Tariff; and
(ii) The value of the carboys in which the apple juice concentrate was being supplied to the customers was not liable to be included in the assessable value of the juice concentrate since these carboys were durable and returnable and were being returned.
These two orders were passed on appeal against the orders dated 22-6-1984 and 18-1-1985 of the Assistant Collector concerned. In passing his order dated 30-3-1985, the Collector (Appeals) relied on his earlier order (No. 896-CE/CHG/84, dated 30-10-1984) wherein he had held that the juice concentrate was not classifiable under Tariff Item 1B of Central Excise Tariff. This order dated 30-3-1985 is order No. 269/CE/CHG/85. The Collector (Appeals) had, in passing his order dated 7-11-1985, relied on . order No. 896 as well as order No. 269 mentioned supra. Thus in effect the two orders of the Collector (Appeals) now under consideration in these two appeals were based on his order No. 896, dated 30-10-1984. That order was in an appeal against an order dated 10-8-1983 passed by another Assistant Collector on a refund claim dated 4-12-1979 of the respondents. That refund claim had been initially rejected on 23-4-1980 as time barred and the said rejection had been set aside under order dated 28-8-1981 resulting in a remand for readjudication. Following the same a show cause notice had been issued to the respondents requiring them to give details as to the manner of removal of the manufactured product. This had been furnished under the letter of the respondents dated 14-10-1982. They had mentioned therein that they removed the juice concentrate by packing the same in returnable plastic carboys or in stainless steel tanks and drums. They had further mentioned that the containers were not unit containers and were not packed with fixed quantities of apple juice concentrate and that the apple juice concentrate was being sold loose, the quantity required by the respective customers being packed in the carboys or the tanks or drums, the containers not being sealed or airtight also. Thus their contention had been that though the carboys may be of uniform size they were not packed fully in all cases. During the adjudication following that notice they had further pleaded that the cost was also being recovered for only the quantity of the juice concentrate supplied, without including the cost of the carboys since the carboys were returnable. Their contention that, therefore, the product was not classifiable under Tariff Item 1B had been rejected by the Assistant Collector in his order dated 10-8-1983. It is this order that had been set aside by the Collector (Appeals) under his order No. 896. It is following the said order that he had passed the two orders in appeal that are the subject matter of the proceedings before us. It would hence be necessary to look into the reasons given by the Assistant Collector in his order dated 10-8-1983 for his conclusion, for classifying the product under Tariff Item 1B. He had held there that the containers in which the juice concentrate was being packed were designed to hold a pre-determined quantity if the same is packed in full though it depended upon the manufacturer/supplier as to what exact quantity was actually filled up in each container. He therefore, held that since the concentrate was being packed in containers of uniform size the product would be classifiable under Tariff Item 1B, though the actual packing may not be of uniform volume and may differ from customer to customer. The Collector (Appeals) in his order dated 30-10-1984 rejected this conclusion and pointed out that after all the juice concentrate had to be supplied in some container and that the view taken by the Assistant collector was not correct. He observed, "if the view taken by the Assistant Collector were to be correct, I wonder if there would be any case which would not be covered under Item 1B" since juice concentrate must necessarily be removed in some container or other.
23. I am satisfied that this view of the Collector (Appeals) in his order No. 896 was correct. The assertion of the respondents that though the carboys in which juice concentrate was being supplied to the customers were of uniform size they were not always completely filled up and that such quantity as was required by the customer was alone to be filled in each carboy for supply to customer has not been denied or disproved by the Department. Item 1B relates to sales in unit containers in which alone the goods were ordinarily intended to be sold though the unit containers may be of any particular but uniform size. The primary requirement (for classification under Tariff Item 1B) would be that the sales should be of such unit quantities (of whatever size) packed in unit containers of that size. In the present appeals we are concerned only with the sales in carboys, since the demands related to the inclusion of the value of the carboys in the assessable value of the juice concentrate- In view of the earlier discussion I hold that the sales in these carboys (which were not being filled completely but with varying quantities depending upon the order of the customer) would not be sales in unit containers and would not therefore, be of products classifiable under Item 1B of Central Excise Tariff.
24. There can be no doubt that if the product was not classifiable under Item IB the value of the durable and returnable containers (carboys) was not liable to be included in the assessable value of the product. Both demands dated 21-12-1983 and 7-6-1984 related to the differential duty payable by reason of the fact that the value of the carboys were liable to, but were not, included in the assessable value of the juice concentrate. In view of my earlier conclusion it would follow that the demands were therefore, not sustainable. That should suffice for a disposal of these two appeals by way of dismissal.
25. Shri Anand has further held that though the product was classifiable under Item 1B the value of the carboy was not liable to be included in the assessable value of the juice concentrate. Though any finding on this would not, in view of my earlier conclusion, be required to be recorded by me, I would only observe that I am unable to agree with the said conclusion. In my opinion the minority order in the case of Collector of Central Excise v. H.M.M. Ltd., (1985 ECR 2021) laid down the correct law when it held that the excisable product became complete only after being packed in the unit container and hence the unit container was also a component part of the excisable product. In that view the value of the carboy would be liable to be included in the assessable value if the item fall under Item 1B.
26. But in view of my finding recorded earlier I agree that these two appeals are to be dismissed and I accordingly order their dismissal.
27. I had mentioned earlier that the result of the findings in the order of Shri K. Prakash Anand would also only be that the demands raised were not supportable. But since Shri Anand has felt that the appeals are to be allowed to the extent of holding, contrary to the findings of the Collector (Appeals), that the goods in issue were classifiable under Item 1B Central Excise Tariff, it has become necessary to make a reference to the President in terms of Section 129C(5) of the Customs Act as made applicable to proceedings under the Central Excises and Salt Act.
29. The points of difference to be referred to the President, therefore, are -
(i) Is the product of the respondents classifiable under Item 1B Central Excise Tariff ?;
(ii) If so, is the value of the carboys liable to be included for arriving at the assesable value of the product ?; and
(iii) Are the appeals to be dismissed or allowed in part?
30. [per : K. Prakash Anand, Member (T)]. - I agree with the points formulated above.
31. [Order per : S. Venkatesan, President]. - I have heard the learned representatives of both sides on the points of difference, which are the following :-
(i) Is the product of the respondents classifiable under Item 1B Central Excise Tariff ?;
(ii) If so, is the value of the carboys liable to be included for arriving at the assessable value of the product ?; and
(iii) Are the appeals to be dismissed or allowed in part?
32. For the Appellant Collector, Smt. Dolly Saxena briefly referred to the facts of the case and the points made by the two learned Members. As regards the first point, relating to the classification of the product, she referred to the instructions dated 3-4-1969 of the Finance Ministry (reproduced in para 13 of the learned Technical Member's order). She submitted that the product of the respondents, apple juice concentrate cleared in carboys, clearly confirmed to the tariff definition and the Finance Ministry's instructions.
33. Smt. Saxena's attention was drawn to the last sentence of the instructions, explaining that a "unit container" was one designed to hold a pre-determined quantity or number of the goods. In the present case the respondents had claimed, without being controverted, that the contents of the carboys varied according to the order placed by the customers. She was asked whether in these circumstances the carboys could be called "unit containers". Smt. Saxena replied that the tariff description did not lay down that the container should hold a fixed quantity of the product. Further, though the actual contents might vary, it could be said that the container itself was designed to hold a predetermined quantity of the product, namely the apple juice concentrate. Therefore the goods fell squarely within the description of Tariff Item No. 18.
34. As regards the inclusion or exclusion of the value of the containers, Smt. Saxena submitted that the wording of Item 1B made it very clear that it referred to the product while in the container. Therefore the container should be considered as a part of the goods, and its value could not be excluded, irrespective of whether or not the container was durable and returnable. She referred to the judgment of the Hon'ble Supreme Court in the case of K. Radha Krishnaiah v. Inspector of Central Excise [1987 (27) ELT 598 S.C.], wherein it was held that the term "returnable" in Section 4(4)(d)(i), Central Excises and Salt Act, referred to goods which were returnable under an arrangment between the buyer and the assessee. She however fairly added that this decision might not support the case of the Department, since she was not contesting the facts of the case or the claim of the respondents that the carboys were returnable by virtue of arrangements between the respondents and their customers.
35. Smt. Saxena submitted that in the light of the replies to be given to the first two questions, as advocated by her, the reply to the third question followed. She did not explain how the Department would benefit by this Bench upholding the view of the learned Technical Member, because as regards the question of inclusion or exclusion of the value of the carboys, both Members had agreed - though for different reasons -that it should be excluded. However, from what was said later by Shri Bedi, it appears that if classification was held to be under Item 68, the respondents would be entitled to exemption as a small scale unit on the basis of the quantum of their clearances, whereas if it was under Item IB they would be liable to duty.
36. For the respondents, Shri Bedi submitted that the dispute was not centred on the size of the container, but on what was meant by a "unit container". He stated that the product, namely apple juice concentrate, was sold on the basis of weight. On the one hand it was sold in bottles containing 1/2 kg and 1 kg of the concentrate. These fulfilled the requirements under the F.P. Order. The bottles were labelled and they showed the net quantity of the contents and the maximum price. The concentrate was also sold "loose" in big plastic containers or carboys. These were in two sizes, of which one could hold 62 kg of the concentrate and the other 49 kg. In actual fact the carboy contained whatever quantity by weight the customer wished to buy. The carboys did not have to be labelled in accordance with the F.P. Order. Among other things the price was not printed or otherwise shown on the carboy, nor would this be practicable, since there was no fixed price per carboy but the price varied with the quantity supplied.
37. Shri Bedi submitted that the product fell outside the scope of Item IB for three reasons. These were the following :-
(a) The Tariff Item referred to goods "ordinarily intended for sale". This had reference to the intention of the manufacturer. Where the manufacturer sold a fixed and predetermined quantity, such an intention could be deduced but where he supplied the concentrate "loose", according to the customer's requirements, the intention was that of the buyer and not that of the manufacturer;
(b) Apple juice concentrate intended for sale as such had to comply with the provisions of the F.P. Order. As already explained by him, the concentrate supplied in carboys did not comply with these provisions;
(c) Again, the condition "ordinarily intended for sale" implied that the container should be sold alongwith its contents. This in fact was the general practice when selling food products. But this circumstance did not exist in the case of concentrate sold in the carboys.
Shri Bedi therefore submitted that the goods would not come within the scope of Item 1B, but would fall under Item 68. In this connection he added that if Item 68 was held as applicable, the dispute regarding inclusion or exclusion of the value of the containers would become academic, because the respondents would be entitled to the benefit of the exemption for small units.
38. Coming to the second question, Shri Bedi submitted that even if the classification was held to be under Item 1B, the statutory provisions of Section 4-(4)(d)(i) would prevail. Packing was not automatically liable to inclusion in the assessable value. It came in only because of the above-mentioned provision, and the same provision excluded the cost of packing which was durable and returnable. There was no dispute that the carboys were durable and returnable and therefore their value could not be included in the assessable value. Shri Bedi submitted that the provisions of Section 4(4)(d)(i) were quite general, and did not admit of variation in respect of any particular tariff item.
39. Shri Bedi cited the decision of the Government of India in the case of Malabar Coast Products (1982 ELT 5.12). That case related to the inclusion of the cost of glass containers for food products. It had been held that since the glass containers were not returnable, their cost could not be excluded from the assessable value. It followed by implication that if they had been returnable, their cost would have had to be excluded.
40. In reply, Smt. Saxena submitted that all the concentrate made by the respondents was intended for sale. The mere fact that in some cases they supplied in carboys the particular quantity wanted by their consumer did not mean that the concentrate so supplied was not intended for sale.
41. I have carefully considered the orders recorded by the two learned Members, and the arguments advanced at the hearing before me. The first, and indeed the main question to be decided is whether the product of the respondents is classifiable under Item 1B Central Excise Tariff. The wording of the item has been reproduced in para 11 of the learned Technical Member's order. The instructions issued by the Finance Ministry in 1969 explaining the expression "unit containers" have been reproduced in para 13 ibid. Obviously these instructions can only have persuasive value. However, since they were issued at the time Tariff Item 1B was introduced, they can be considered as in the nature of contemporanea expositio. In fact, the explanation given is a useful one, conveying what one would normally understand by the expression "unit containers" in the context in which it is used.
42. The respondents have argued that the concentrate sold in the carboys was not "put up in unit containers". The reasons given are briefly that -
(a) they did not contain a predetermined quantity;
(b) they were not labelled as required under the Fruit Products Order; and
(c) the containers were not sold alongwith the goods but were durable and returnable.
43. As against these arguments it has been argued on behalf of the Revenue that it is not necessary for the purposes of Item 1B that the container must be sold alongwith the goods. It has also been argued that the use of the expression "unit container" does not require that the containers should be full, or (what comes to the same thing) that the contents should be uniform.
44. The expression "unit containers" has been used with reference to prepared or preserved foods ordinarily intended for sale. As seen from the notification issued under this item, it is intended to cover articles such as sausages, meat extracts and meat juices, prepared or preserved fish, soups and brothes, bottled or canned fruits and vegetables, sauces, jams, fruit syrups and juices, corn flakes, dehydrated peas and dehydrated vegetables, skimmed milk powder, condensed milk, preparations with a basis of flour, starch, or malt extract, and milk foods. It is a matter of everyday experience that these are the kinds of goods which are sold in provision stores, chemists' shops, general stores, departmental stores and so on. They are literally sold "off the shelf". Normally the customer knows the article that he wants: and often he has a preference for a particular brand. Normally also the goods are in standard packs (it may be bottles, cans, carboard cartons etc.), and are prominently labelled to show the nature of the contents, the quantity, the date of manufacture and date of expiry (where applicable), the maker's name, the recommended maximum retail price, and so on. There are often two or three different sizes of packs for the same product. For instance, in the case of instant coffee it could be 50 gms, 200 gms and 500 gms. The standardised nature of the packing greatly facilitates and speeds up the choice and purchase of the products by the ordinary customer. He may be guided by his previous experience, or by the advice of the shopkeeper, or even by his inspection of the goods. But usually he has little difficulty in making up his mind as to what product to buy. As regards the size of the pack also, depending on his needs and the nature of the product, it is easy for him to decide whether he needs a 50 gms pack or a 1.00 gms pack or a 500 gms pack. Once having decided, the further advantage of the "unit container" comes in. He does not have to wait while the product is laboriously (and perhaps incorrectly) weighed out and packed. Nor does he have to worry whether this is done in a hygienic manner; nor yet whether the contents will get damaged by moisture, ants etc., if he keeps in on his own shelf for a few days or for a few weeks. The method of retail packing and marketing adopted in respect of the vast majority of consumer products (not only food products but also toilest preparations, medicines etc.) carries the immense advantages of immediate identification, easy choice, convenience of transport and preservation.
45. At the basis of this entire system of marketing and consumer satisfaction is the method of packing in "unit containers". In most cases (if not all) the container is not returnable; in many cases it is not durable, particularly if it is of cardboard or aluminium foil. For obvious reasons the container has to be just large enough to hold the predetermined quantity of the contents. To pack half a litre of fruit syrup in a bottle which can hold one litre would not only be wasteful but would also subject the contents unnecessary movement, perhaps with a loss of quality. Further, it would arouse doubts in the customer that he is being cheated. It can therefore be very well understood that no intelligent manufacturer would pack prepared or preserved foods (or indeed any similar product of common consumer use) in a container which is not full or practically so. Nor would a prudent customer readily buy a product in a container which does not appear to be full.
46. The above observations on the methods of marketing of common consumer products, do not require any special knowledge because they are a matter of common experience. The tariff item and the Finance Ministry's instructions are consistent with the general experience and practice as mentioned above. General experience would certainly show that prepared and preserved foods and the like, as they are ordinarily sold in the market, are packed in containers which contain a specific and clearly marked quantity of the goods. The quantity may vary according to the product and the manufacturer, but even then there are many standard quantities common to different manufacturers, such as 100 gms, 500 gms, 1 kg, 100 ml, 200 ml and 500 ml. Such products are sold in what may appropriately be called "unit containers" which can conveniently contain that particular quantity. It is also a matter of common knowledge and experience that in such cases the container is normally nor returnable, and in many cases not durable.
47. In the light of the above discussion, it would be clear that the apple juice concentrate sold by the respondents in carboys containing varying quantities as required by the buyers in each particular case cannot be considered as "prepared or preserved foods put up in unit containers" within the meaning of Tariff Item 1B. They would therefore fall under Item 68.
48. A word may be said about the argument that it is sufficient for the purposes of Item 1B that the containers should be uniform, even if the contents vary. As explained in para 15 above, the situation of variable contents in uniform containers is not to be expected in the type of goods sought to be taxed, as seen from the examples in para 14. Further, as pointed out by the Appellate Collector, such an interpretation would render the word "unit" in "unit containers" superfluous and therefore, in accordance with well-known principles of construction, should be avoided.
49. Reference has been made by the learned Technical Member to the decisions of the Tribunal in the cases of Foremost Dairies Ltd. [(1986) 10 ECC T 148] and H.M.M. Ltd., Calcutta (1985 ECR 2021). These cases do not deal with the point covered by the preceding discussion. In my view the decisions in these cases are not in conflict with the view 1 have taken on the first point of difference.
50. Coming to the second question, once it is held that the goods were classifiable under Item 68, there could be no doubt that the value of the durable and returnable containers would have to be excluded in terms of the provisions of Section 4(4)(d)(i), Central Excises and Salt Act. In fact, I would go further and hold, agreeing with the learned Member (Technical), that the exclusion would apply even if the goods were held as falling under Item 1B. No doubt Item 1B refers to foods "put up in unit containers". Nevertheless it is basically the foods which are the excisable goods. It has been argued, with some apparent force, that because the item contemplates foods in containers, these should be treated as part of the goods. But to take this view would be to go directly contrary to the provisions of Section 4(4)(d)(i), Central Excises and Salt Act. It should be noted that it is this clause which justifies the inclusion of the cost of packing in the value of the excisable goods: and that this very clause specifically directs the exclusion of durable and returnable packing. In my view the direct interdiction in Section 4 would override the indirect inclusion suggested by Item 1B. However, in the form in which question No. (ii) has been framed, no answer to it is necessary, in view of the answer given to question No. (i).
51. The answer to question No. (iii) follows from what has been said above.
52. Accordingly my answers to the three questions are as under :-
(i) No. It would be classifiable under Item 68 Central Excise Tariff.
(ii) Does not arise.
(iii) The appeals have to be dismissed.
53, The cases should now go back to the Members of the original Bench for passing final orders in accordance with the above decision.
Dated : 27-8-1987. Sd/-
(S. Venkatesan) President.
FINAL ORDER Following the decision of the President on the points of difference as recorded in the order dated 27-7-1987 and in accordance with the said decision these two appeals are dismissed.
Dated : 01-09-1987 Sd/-
(V.T. Raghavachari)
Member.
Sd/-
(K. Prakash Anand)
Member.