Customs, Excise and Gold Tribunal - Delhi
Parle Products (P) Ltd. vs Collector Of Central Excise on 2 February, 1995
Equivalent citations: 1995(80)ELT182(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an appeal filed by M/s. Parle Products (P) Ltd., being aggrieved with the Order-in-appeal No. PAH-390/131-134, dated 3-7-1987, passed by the Collector of Central Excise (Appeals), Bombay. The matter relates to the inclusion of the cost of the capsul, fitted over the lid on the metal container, popularly known as KOT (Kerosin oil tin) container, in which the biscuits were packed. The appellants were availing exemption under Notification No. 34/83-C.E., dated 1-3-1983, which exempted among others, the biscuits from so much of the duty of excise leviable thereon as was equivalent to the duty of excise leviable on said biscuits, with reference to that part of the value of the said biscuits which represented the cost of metal containers, in which the said biscuits were packed, at the time of their removal from the factory. The contention of the Revenue is that the capsul was fitted on the KOT containers over the lid as an additional fitment, and did not form part of the metal containers, and that its cost was includible in the assessable value of the biscuits. On the other hand, the assessee had pleaded that the capsul was part of the KOT containers, and that its cost could not be added to the assessable value of the biscuits.
2. The appellants had taken up the matter with the Hon'ble Bombay High Court who under their order dated 16-6-1994 had directed the Tribunal to dispose of the appeal within six months from that date. It appears that the appellants did not inform the Tribunal of this decision of the Hon'ble High Court. The revenue had written on the matter but had initially given a wrong appeal number, and it was only on 12-8-1994 that the correct appeal number was known by the Tribunal alongwith the observations of the Hon'ble High Court with regard to the present matter. In their memo of appeal as per Form No. EA 3 under Rule 216(1) of the Central Excise Rules, 1944, the appellants have stated against Column 8 of the said form of appeal that the question involved was rate of duty, while the matter in fact related to the Valuation'. They had not mentioned that the matter involved Valuation'. The matter was accordingly placed before the Special Bench 'D'. As the matter involved valuation, it had to be transferred to 'A' Bench, and was fixed for hearing on 8-11-1994, on which date a fire broke out in the Tribunal building; it was only on 9-11-1994 that the matter could be heard when Shri D.B. Shroff, Advocate appeared for the appellant. Shri B.K. Singh, SDR represented the Respondents.
3. Shri D.B. Shroff, the Ld. Advocate stated that the capsul was a part of the KOT containers, and its value was includible in the assessable value of the tin. Consequently when there is an exemption with regard to the value of such a tin, the value of the capsul could not be excluded from the value of the tin, and included in the value of the biscuits. Relying upon the Supreme Court decision in the case of Star Paper Mills v. CCE, 1989 (43) E.L.T. 178 (SC), the Ld. Advocate stated that the capsul was a part of KOT container. Reliance was also placed on Tribunal's decision in the case of Asea Brown Bovri Ltd. v. CC, Bangalore, 1994 (73) E.L.T. 219 (Tri.). The Ld. Advocate referred to the ISI specification for 18 Lt. Sq. tins ISI 916-1975, and submitted that under Item No. 27 of the Old Central Excise Tariff, the term 'container' was defined, and that even as per that definition, the capsul was a part of the tin.
4. Shri B.K. Singh, the Ld. SDR stated that while lid was a constituent part of the tin, the capsule was an additional fitment. The metal container was complete without the capsule, and was cleared by the manufacturers of tin - containers without capsule. The capsule was a bought out item. It was only an accessory and not an essential part of the metal container. The two items -capsul and the tin - were produced and sold separately. Relying upon the Bombay High Court decision, in the case of T.I. Miller Ltd. v. Union of India, 1987 (31) E.L.T. 344 (Bom.) the Ld. SDR submitted that the KOT container was complete without the capsule. It could only be considered as an accessory, and was not covered by the exemption Notification No. 34/83-C.E. He pleaded that the cost of the capsule was not includible in the cost of the tin, but was includible in the value of the biscuits. He also referred to the Tribunal's decision in the case of Col Tubes v. CCE, 1994 (72) E.L.T. 342 in which the Tribunal had held that the value of the cap was not includible in the value of the collapsible tube.
5. In rejoinder the Ld. Advocate stated that the notification was for exclusion of the cost of the metal container in which the goods were packed at the time of removal. The capsule is fitted on the tin at the time of removal of the biscuits. He relied upon the Supreme Court's decision in the case of HMM Ltd. v. CCE, 1994 (74) E.L.T. 19 (S.C.), and pleaded for the acceptance of the appeal.
6. We have carefully considered the matter. The appellants are engaged in the manufacture of biscuits, falling under Item No. IC of the erstwhile First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Tariff). The biscuits were delivered at the time of removal in a packed condition; a number of packets were kept in the KOT container. Under Section 4(4)(d) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'), 'Value' in relation to any excisable goods 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. Tacking' has been explained to mean the wrapper, container, bobbin, pirn, spool, reel or warpbeam or any other thing in which or on which the excisable goods are wrapped, contained or wound. Under Notification No. 34/83-C.E., dated 1-3-1983, among others, Biscuits were exempted from so much of the duty of excise leviable thereon on such biscuits, as was equivalent to the duty of excise leviable on such biscuits with reference to that part of the value thereof which represented the cost of metal containers in which the biscuits were packed at the time of their removal from the factory. The exemption is with reference to the cost of the metal container, the cost which otherwise forms part of the value of the biscuits.
7. The biscuits were packed in the metal container which was in the form of KOT container. The contention of the Revenue is that the capsule was fitted to the metal container over the lid as an additional fitment which did not form part of the metal container and that the cost of the capsule was includible in the assessable value of the biscuits. The assessee on the other hand had pleaded that the capsule was part of the KOT container; they were put on the lids of the tin in which the biscuits were packed and that the KOT container with lid and the capsule was a composite metal container, and the cost of the capsule could not be added to the assessable value of the biscuits. The KOT container is a large container in which a number of rolls and packets of biscuits could be kept. A lid is fitted on the top of the tin. This lid fitted on the tin is 'depressed'. Another cover which is called capsule is the form of a raised lid. It has been explained that the first lid which is in the 'depressed' form needs protection so that it is not teared or pressed in transit or in handling, thus damaging the rolls or the packets of the biscuits kept inside the tin. We are dealing with a commodity which is a food product and which is brittle. While dealing with the packing, the product which is packed and the normal/accepted trade practice with regard to the packing of that product may also have to be kept in view. For the food products kept in a big capacity metal container like KOT container, a capsule could not be considered as an additional fitment.
8. The biscuits were ordinarily sold by the assessee to the buyers in the course of wholesale trade and delivered at the time of removal from the factory, packed in the metal container i.e. KOT container, duly fitted with the capsul. In the case of Star Paper Mills Ltd. v. CCE, 1989 (43) E.L.T. 178 (S.C.) the Hon'ble Supreme Court had observed in para 12 of their judgment as under :-
"12. In view of the foregoing discussion, we are of the opinion that use of paper core is necessary for rewinding of paper if it is delivered to the customer in rolls and would come within the purview of the expression "any process incidental or ancillary to the completion of a manufactured product" used in the definition of the term "manufacture" in Section 2(f) of the Act and for the same reason paper core would also be constituent part of paper and would thus fall within the term "component parts" used in the Notification insofar as manufacture of paper in rolls is concerned. Paper core, however, cannot be said to be used in the manufacture of paper in sheets as component part. We are conscious that the relevant tariff item uses the word "paper" but since paper in rolls and paper in sheets are nothing but different forms of paper, both of them would be excisable goods as paper under the relevant tariff item."
For the purpose of Section 4 of the Act, the cost of such capsul will be includible in the cost of the container if KOT container is cleared with the capsul fitted thereon, and the cost of such a KOT container will be includible in the value of the biscuits. Of course the cost has to be the genuine cost, and not the inflated cost. What is the cost of the capsul is the question of fact to be decided by the Revenue on the facts on record and such inquiries as are considered necessary. The assessee has shown the varying cost of the tin and the capsul (the cost of the tin has been shown in some cases more than Rs. 14 per piece). As this issue is not before us, any observations with regard to the cost of the tin/capsul may not be proper. We may however mention that the expenses incurred on account of the several factors which contribute to the value of an article may not form part of the cost (refer paras 13, 21, 33 and 49 of the Supreme Court decision in the case of Union of India v. Bombay Tyre International, 1983 (14) E.L.T. 1896 (S.C.), and para 12 of the Supreme Court decision in the case of Hindustan Polymers v. CCE, 1989 (43) E.L.T. 165 (S.C.).
9. In the case before us, the assessment of the container as such is not an issue. It appears that the capsul is purchased separately. That may be relevant for arriving at the correct cost of the tin as a whole, but for the purpose of assessment of biscuits, and for the purpose of exemption Notification No. 34/83-C.E., it appears to us that the cost of the capsul could not be excluded from the cost of the tin, and added to the value of the Biscuits.
10. Of course the exemption notifications had to be construed strictly, but once the exemption provision is found applicable to an assessee, full effect has to be given to it, as observed by the Supreme Court in the case of Novopan India Ltd., Hyderabad v. CCE, Hyderabad, 1994 (4) RLT 323 (SC) Para 17. The Supreme Court in the case of Union of India v. Wood Papers Ltd., 1990 (47) E.L.T. 500 (S.C.) in para 2 of their judgment have held as under :-
Entitlement of exemption depends on construction of the expression "any factory commencing production" used in the Table extracted above. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment state revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. Therefore, the first exercise that has to be undertaken is if the production of packing and wrapping material in the factory as it existed prior to 1964 is covered in the notification.
In the case of Hans Raj Gordhan Das v. H.H. Dave, 1969 (2) SCR 253, the Supreme Court had held that an exemption notification had to be interpreted in the light of the words employed by it and not on any other basis. In the case before us the expression used is 'metal container'. The term metal container has not been defined in the notification. There was a definition of 'metal container' for the purpose of Item No. 27 of the old Central Excise Tariff which was as under :-
"Container" means containers ordinarily intended for packing of goods for sale, including collapsible tubes, casks, drums, cans, boxes, gas cylinders and pressure containers whether in assembled or unassembled condition and containers known commercially as flattened or folded containers.
It appears to be wide enough to cover the capsul in addition to the lid placed on the tin. The containers not only in assembled but also unassembled condition are covered, as well as containers, commercially known as flattened or folded containers. The expression 'container' has been defined in the dictionaries of Packing Terms as under :-
"Container : One that contains; a receptacle or flexible covering for shipment of goods."
(Abstract from Webster's new Collegiate Dictionary, 1975) "Container : that which contains that in which goods are enclosed for transport."
(Abstract from Chambers' 20th Century Dictionary) "Container - Any receptacle which holds, restrains or encloses any article or commodity or articles or commodities to be stored or transported."
(Abstract from Indian Standard Glossary of Terms : I.S. 4261 -1967) "Container.(1) In general, any receptacle or enclosure used in packaging and shipping. (2) Relatively large, reusable enclosures to be filled with smaller packages and discrete objects, to consolidate shipments and allow transport on railway flat cars, flatbed trailers, aircraft, in ships' holds or as deckloads, etc. (See CARGO TRANSPORTER : CON-TAINERIZATION) 3. Any receptacle for holding a product."
(Abstract from Glossary of Packaging Terms (USA) "Container. A large box for intermodal transport, containing many smaller boxes of different shapes and sizes as well as individual articles."
(Abstract from Glossary of Packaging Terms (Australia) [taken from Supreme Court decision at 1991 (52) E.L.T. 341 (SC) Para 8]
11. In the case of Kosan Metal Products Pvt. Ltd. v. Union of India, 1981 (8) E.L.T. 725 (Bombay), the goods involved were Gas cylinders, and the issue concerned the inclusion of the price of the valve in the assessable value of the gas cylinders. The facts in that case were different. Similarly, in the case of Asea Brown Boveri v. CC, Bangalore, 1994 (73) E.L.T. 219 (Tri.), the matter related to the capacitance bridge which was an independent testing instrument. The facts before us are entirely different, and we do not consider that the ratio of that decision is applicable to the facts of this case.
12. Taking all the relevant considerations into account, we are of the view that the cost of the capsul forms parts of the cost of the KOT container, and that the cost of the KOT container (inclusive of the cost of the capsul), is eligible for exclusion from the value of the biscuits, in terms of Notification No. 34/83-C.E., dated 1-3-1983 (of course we have not gone into the quantum of inclusion/exclusion). Accordingly the appeal is allowed.