Bombay High Court
Ogale Glass Works Ltd vs Union Of India And Ors. on 1 January, 1800
Equivalent citations: 1979(4)ELT461(BOM)
JUDGMENT
1. This Writ Petition raises an importat question of law as to whetherthe cost of packing of excisable goods can be included for the purpose ofdetermining the value thereof under Section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Act").
2. Now, we should have thought that this question has already beendetermined and concluded by a Division Bench Judgment of this Court in First Appeal No. 257 of 1972 delivered on the 16th of September,1974-1979 E.L.T. (J 158) by one of us (Mukhi, J).
3. It required to be noticed that in that judgment reference is made toa judgment of the Supreme Court in Voltas case , in which the scope and content of Section 4 ofthe Act was considered.
4. The Learned Counsel for the respondents has, however, contended thatthese decisions did not conclude the questions which arise in thepetition before us. He added that there were certain contentions whichdid not arise in previous cases.
5. It will, therefore, be necessary to examine the ratio of thesejudgments in relation to the facts of this case.
6. Before we discuss the contentions raised before us in this petition,it is necessary to set out the relevant facts, which fortunately are notmany and largely undisputed.
7. The petitioners, Messrs. Ogale Glass Works Ltd., manufacture atOgalewadi as well as at Pimpri among other things glass and glassware. In particular, they manufacture tumblers, jars and pressed- ware bottlesof different kinds as well as bricks and tiles.
8. These products are charged to excise duty ad valorem under the Act andthe relevant Item in the First Schedule is Item 21A, which reads asfollows :-
9. The petitioners say that as from 1962 they have benn paying exciseduty on glass and glassware under the said Item 23A, as demanded by theExcise authorities on price lists furnished by the petitioners andapproved by the Excise authorities.
10. The excisable goods under Item 23A, viz., glass and glassware, aresold by the petitioners to different buyers and they are packed anddespactched to such buyers according to their requirements. In so far aspacking is concerned, the glass and glassware is either packed in cartonsor corrugated paper or conrrugated box or in bamboo baskets. Sometimesthe buyers are satisfied with packing which may consists of hay or strawpadding. There is no dispute that the packing materials are notmanufactured by the petitioners themselves at their factories but areprocured by them from the open market. The excisable goods manufacturedat the factories are them packed with such packing materials according tothe requirements of the buyers.
11. It requires to be noticed that the cost of packing is borne by thebuyers and the record shows that the packing costs are recovered from thepetitioners' buyers and are calculated within terms of rupees and paisesor on the basis of a percentage of the price of the product concerned. For instance, in respect of jars and tumblers, the packing charges areindicated in terms of rupees and paises, whereas in the case of chimneys,and globes the packing charges are charged extra at a percentage of thebasic rate, which may be 18 per cent in the case of bamboo baskets or 22per cent for corrugated board cartons. When packing is desired in woodencrates, the packing charges are higher and calculated at the rate of 28per cent. of the excisable to be so packed and despatched.
12. It would appear that the Excise authorities have been demanding adthe petitioners have been paying right from 1962 onwards the excise dutynot only on the value of the excisable goods, viz. glass and glassware,but also on packing charges. Thus, the Excise authorities have beencharging to the petitioners and collecting from them not only excise dutyon the value of the glassware but moneys have been claimed and recoveredpurporting to be excise duty on the value of packing materials andcharges.
13. It is significant that there appears to have been no dispute betweenthe parties that the extra amounts so claimed by the Excise authoritiesand paid by the petitioners were moneys said to be due to the Exciseauthorities and payable by the petitioners.
14. It is appropriate at this stage to notice that the procedure adoptedin this behalf under the relevant Excise Rules is that the petitionersfiled price lists of the manufactured goods assessable to Excise duty advalorem for the purpose of determining the value in accordance withSection 4 of the Act. These price list are then approved by the Exciseauthorities from time to time and the excisable goods are then permittedto be removed from the factory where they are manufactured.
15. In order to facilitate such removal, a procedure is followed by whicha current accourt is maintained and relevant entries made therin fromtime to time as the goods are removed from the factory and cash deposits are made into the current accourt by the petitioners. This facility ismade available by the Excise authorities in order to ensure thatexcisable goods are removed from the factory without any delay.
16. It was in these circumstances that the Excise authorities collectedfrom the petitioners moneys said to represxent excise duties on theexcisable goods produced by the petitioners at their factories atOgalewadi and Pimpri.
17. It is the petitioner's case that as no excise duties could be leviedand collected on packing charges and materials, such moneys were beingcollected by the Excise authorities and paid by the petitioners under acommon mistake of law.
34. Apart from the preliminary objection, the points that arise forconsideration in this Writ Petition may be summarised as follows :-
1. Can it be properly contended that the packing of glassware is aprocess incidental or ancillary to the completion of the manufacture ofglass and glassware ?
2. Can the cost of packing and packing materials be included in arrivingat the wholesale cash price under Section 4(a) of the Act (as it stoodbefore the amendment of 1973) or, in other words can the assessable valueof the glassware include the cost of packing and packing materials underSection 4 of the Act ?
3. Was there a mistake of law on the basis of which a claim could be madeby the petitioners for refund under Section 72 of the Contract Act? Andwhen can it be said that the mistake was discovered ?
4. Are the petitionmers entitled to refund of the amounts collected bythe respondents without the authority of law ?
5. In view of the circumstances of the case should the discretion of theCourt be exercised in favour of the petitioners in so far as the claimfor refund is concerned.
42. Now, in so far as the first and the second points are concerend,there is no difficulty in holding that it can never be contended with anyshow of reason that manufacture of glass and glassware is not completebefore it is or ca be packed for the purpose of delivery and transport.
43. There is also no difficulty in holding that the cost of packing andpacking materials cannot be legally included in arriving at the wholesalecash price of the excisable goods manufactured by the petitioner.
44. Both these points are covered by the judegment of Division Bench ofthis Court in First No. 257 of 1972 decided on the 16th of April, 19741979 E.L.T. (J 158). In that judgment this Court was considering thecontention of the Excise authorities that the article manufactured by therespondents therein, viz. vegetables oil, was such that it could not bepresented for sale in the market without a container. It was alsocontended in that case that the vegetable oil, as excisable goods, becamefully manufactured and assessable only after the same was packed in thisand that process of packing in tins was ancillary to the manufacture ofthe vegetables oil, without which, the vegetable oils could not be soldin the market. Both these contentions were rejected by this Court.
50. Now, in the Petition before us the relevant Item of the Firstschedule is Item 23A, which refers to glass and glassware and mentions nopacking at all. It is difficult to appreciate how it can possibly beconteded that the manufacture of glass and glassware is not completedbefore the necessity for packing it can arise, if the glass and glasswareis required to be transported and delivered. It has been noticed thatthe excisable goods produced by the petitioners are items such as glasstumblers, jars, bottles and glass bricks. The manufacture of thesearticles is complete as soon as the glass and glassware which may beproduced by the blow-process or mould process is cooled and, ifnecessary, polished. Packing such goods can never be considered to be anelement of manufacture.
51. The expression "manufacture" as used in Section 2(f) is to includeany process which is incidental or ancillary to the completion of amanufacturede product. There can be no doubt that before any process canbe regarded as incidental or ancillary to the completion of glass andglassware it must have some direct relation to the manufacture of thatproduct. To put it in pain language, something must happen to theproduct itself.
52. In Union of India v. Delhi Cloth and General Mills Co. Ltd., the Supreme Court quoted with approvala passage from the Permanent Edition of Words & Phrases, Vol. 26. to showthat manufacture implied a change, although every change was notmanufacture. Bit something more was necessary and there had to be sometransformation or the bringing into effect a new different article.
53. It is substantially clear that in order to become a processincidental or ancillary to the completion of manufacture of glass andglassware, what is done thereby must have its impact on the excisableproduct itself.
56. Even otherwise, in the present petition the packing of goods wasclearly done at the instance of the buyer who determined the nature ofthe packing and paid for it accordingly. this packing is clearly doen asa matter of convenience and to facilitate the delivery and removal of aproduct from the factory gate. As was observed by this Court in FirstAppeal No. 257 of 1972 in relation to vegetable oil, the glass andglassware manufactured by the petitioners in this petition could just aswell be taken delivery of in the buyer's own packing materials, likebaskets or boxes or even vehicles. There is nothing to suggest why theglass and glassware fully manufactured by the petitioners cannot be takenaway by a prospective buyer in his own truck or transport vehicle, whichmay be leyered may be layered with materials, such as, hay or grass toprotect it from brekage during transport.
57. In my view, the method or manner of marketing or delivery ortransporting excisable goods which have been fully manufactured can neverby itself determine the assessable value of such excisable goods underSection 4 of the Act. Once it can be said that the manufacture of theexcisable goods is complete, before they are packed then that would be end of the matter.
58. It may perhaps be possible to argue that in the case of a particualrkind of excrsaore goods and relevant attendant circumstances the packingor the necessity of a special container in relation to that product, issuch that the excisable goods do not become excisable goods as suchwithout such packing or placing them in a special container. That woulddepend on the nature of the goods and construction of the relevant entryin the First Schedule.
59. But in the case of glass and glassware and on a reading of Item 23Aof the First Schedule and other relevant provisions of the Act it isclear that the cost of packing of glassware for the purpose of itsprotection and transport in whatever manner can never be included in itsvalue in the absence of any specific statutory provisions, in thatbehalf.
60. There is, therefore, no substance in the contention of theirrepondents that packing of glass and glassware is a process incidental orancilliary to the completion of its manufacture.
61. It must also be held that the cost of packing and packing materialscannot be included in the value of the excisable goods for the purpose oflvey and collection of excise duty. In this view of the matter, theimpugned decision of the Assistant Collector dated the 6th January 1973and the 19th January 1973 are liable to be quashed.
82. When the State to collect money in the guise of excise duty, althoughsuch levy and collection is without the authority of law, then what issought to be collected is not what can be described as "excise duty underthe Act by an impost or moneys which are not authorised by law and whichare in any event outside the Act.
117. I now come to the last point and that the contention of Mr.Andhyarujina that justice does not lie on the side of the petitionersand, therefore, this Court shoud not in its jurisdiction assist thepetitioner.
118. Now, this arguments is based on the fact that as the bills andinvoices annexed to the petition show the petitioners have alreadycharged and collected from their customers the amounts now held to havebeen illegally collected from the petitioners by the respondents. Inother words, the argument is that the petitioners have really lostnothing and that what they are seeking (apart from the refund from the18th of December, 1972 which must be made) is to recover from therespondents moneys which the petitioners have not paid out of their ownpocket. Mr. Andhyarujina say that even though strictly, speaking, thelaw may be on the petitioners' side' and no question of estoppel arisesin this case, this Court must consider whether an appropriate ordershould issue requiring the respondents to refund to the petitionersmoneys as set out in Exh. "C" (Collectively) to the petition.
119. It requires to be noticed that the amount comes to nearly Rs. 12lakhs and the result of an order in their favour would be that thepetitioners would be enriched to that extent without any real claim thatmoney in so far as the record shows that the moneys were recovered by thepetitioners from their customer and then passed on to the repondents.
124. In the petition before us, I am unable to persuide myself thatjustice lies on the side of the petitioners and that this Court will bedoing justice in ordering the respondent to refund the amount of Rs. 12lakhs to the petitioners when, to begin with, that money never came fromthe petitioner's pockets. It is true that respondents may not have thelegal right to retain that money, but in the circumstances of the casejustice does not require that these moneys should be transferred from therespondents (who have no right to it) to the petitioner who also have noright to it.
125. In this view of the matter, the petitioners will not be entitled tothe relief claimed by them for refund of the moneys recovered from themduring the period from 1962 to the 18th of December, 1972.