Customs, Excise and Gold Tribunal - Delhi
Lacto Cosmetics (Vapi) (P.) Ltd. vs Collector Of C. Ex. on 12 December, 1995
Equivalent citations: 1996(82)ELT354(TRI-DEL)
ORDER G.P. Agarwal, Member (J)
1. These two appeals (A. No. E/1090/91-Aby the appellants company M/s. Lacto Cosmetics (Vapi) (P) Ltd. and the other A. No. E/1091/91-A by its Director Shri N.N.V. Prasad are directed against the impugned order-in-original passed by the Collector of Central Excise and Customs, Vadodara.
FACTUAL BACKDROP:
2. The appellants M/s. Lacto Cosmetics (Vapi) (P) Ltd. are engaged in the manufacture of "LACTO CALAMINE LOTION", under a brand name of 'CROOKES' LACTO CALAMINE' since January, 1985. The said brand name belongs to M/s. Duphar Interfran Ltd., Bombay. It was the case of the Revenue that on scrutiny of the record it was noticed that the appellants were found raising Debit Notes regularly in favour of M/s. Duphar Interfran Ltd. and used to recover the extra money (prises) under the heading 'Packing, Forwarding and Despatch Expenses' at the following uniform rate :- (i) Bottle of Lacto Calamine Lotion - 120 ml. @ 0.58 ps per bottle; (ii) bottle of Lacto Calamine Lotion - 60 ml. @ 0.38 ps. per bottle; and (iii) bottle of Lacto Calamine Lotion -30 ml. @ 0.29 ps, per bottle, over and above the approved prices declared by the appellants in their price list. It was the further case of the Revenue that if the said "Packing, Forwarding and Despatch Expenses" are taken into consideration by including it in the value then in that case the appellants would not be entitled to avail the benefit of Notification No. 140/83, dated 5-5-1983 in the financial years 1986-87 and 1987-88 as they had crossed the exemption limit of value of clearances worth Rs. 15 lakhs in the preceding financial year. It was also the case of the Revenue that since the appellants were using the brand name of "Duphar" they were not entitled to avail the benefit of said Notification from 1-10-1987 onwards. On these allegations a Show Cause Notice dated 29-3-1990 was issued to the appellants calling upon them to pay the differential duty for the period from 1984-85 to August, 1989 and also to show cause as to why the penalty be not imposed and land, building, plant and machinery, etc. be not confiscated invoking the larger period of 5 years. In reply the appellants inter alia submitted that they manufacture cosmetic products, namely, LACTO CALAMINE for Duphar-Interfran Ltd. according to the specifications provided by them. They further submitted they avail Modvat facility in respect of raw-materials used in the manufacture of the said cosmetic products; that for the manufacture of the said goods, they have entered into an agreement dated 10-7-1984 with M/s. Duphar Interfran Ltd.; that they also entered into a supplementary agreement with them (Duphar Interfran Ltd.) regarding packing of the goods and distribution of the goods on their behalf whereby M/s. Duphar Interfran Ltd. asked the appellants to supply Lacto Calamine Lotion in 30 ml. bottles, 60 ml. bottles and 120 ml. bottles in 3-Ply double faced corrugated boxes (D.F.C.) accommodating them as follows :-
(i) 120 ml. 10 bottles
(ii) 60 ml. 15 bottles
(iii) 30 ml. 20 bottles
and this 3-ply double faced corrugated boxes would be the normal packing for the bottles and the prices which they would be paying to them for the bottles would be inclusive of this normal packing; that in the prices which the appellants have been mentioning in their price lists submitted to the Department for their approval, the prices of the bottles are inclusive of the cost of this normal packing. It was also pleaded in the reply that the said M/s. Duphar Interfran Ltd. also asked the appellants to despatch the said product in different types of bottles to their various customers all over India according to the advice to be given to them from time to time in order to ensure that the goods do not suffer any damage in transit. The said M/s. Duphar Interfran Ltd. also asked to provide special packing in the form of 7-Ply double faced corrugated boxes, universal folding type for which they agreed to pay separately and asked the appellants to raise Debit Notes for the recovery of such payments and also agreed to reimburse the appellants for the handling and forwarding charges which were required to specially incurred for them for supply to different customers all over India and these charges were also recoverable through Debit Note. They also stated that the said M/s. Duphar Interfran Ltd. paid the normal prices of the product manufactured by them on the basis of the normal packing for the bottles which consist of 3-Ply double faced corrugated boxes and that it is this price which they have declared in their price lists which was duly approved from time to time. As regards the exemption under Notification No. 140/83-C.E., dated 5-5-1983 it was pleaded that the benefit was rightly availed by the appellants as the cost of special packing is not to be included in the value. As regards the demand raised for duty on the goods bearing the brand name of Duphar after amendment, the appellants submitted that after the amendment of the Notification with effect from 1-10-1987 they have been paying full duty on the branded goods and not the concessional rate of duty as alleged by the Department. Demand was also challenged on the ground that it was time barred. However, the Collector of Central Excise and Customs, Vadodara confirmed the demand and imposed different penalties and also confiscated land, building, plant and machinery, etc. with option to redeem the same as detailed out in the impugned order. Hence the present appeal by the appellants.
3. Appearing on behalf of the appellants Shri A.N. Haksar, Ld. Sr. Counsel contended that in the instant case cost of the special packing was not to be included while determining the value and that the demand was hopelessly time barred.
ON MERITS :
4. On behalf of the appellants it was contended by the Ld. Sr. Counsel, Shri A.N. Haksar, that the appellants are manufacturing 'LACTO CALAMINE LOTION' in their factory and the 'LACTO CALAMINE LOTION' so manufactured are packed initially in bottles of 30 ml., 60 ml. and 120 ml. and these packed bottles are then packed together in 3-Ply double faced corrugated boxes accommodating them as follows :
(i) 120 ml. 10 bottles
(ii) 60 ml. 15 bottles
(iii) 30 ml. 20 bottles
These cartons/outers are then placed in 7-Ply double faced corrugated boxes, universal folding type and it is these 7-Ply double faced corrugated boxes, universal folding type containers filled with carton/outer of 3-Ply corrugated boxes containing bottles which are delivered by the appellants to the wholesale dealer at the factory gate. He emphasised that so far as these two items of costs namely, cost of primary packing into bottles of 30 ml., 60 ml. and 120 ml. and the cost of secondary packing in cartons /outer that is to say 3-Ply corrugated boxes are concerned there is no dispute between the parties. These two items of cost must be included in determining the value of the subject lotion that is to say 'LACTO CALAMINE LOTION' for the purpose of assessment of excise duty since such packing would admittedly fall within the terms of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 read with Explanation to that proviso. Therefore, the question which is involved in the present appeal is as to whether the cost of special packing in 7-Ply double faced corrugated boxes, universal folding type is liable to be included in the value of the subject goods for the purpose of assessment. Continuing further he submitted that the adjudicating authority wrongly included the cost of the special packing that is to say 7-Ply double faced corrugated boxes, universal folding type. The Ld. Sr. Counsel vehemently contended that the adjudicating authority has included the cost of the subject packing that is to say 7-Ply double faced corrugated boxes, universal folding type on the finding that this special packing was provided by the factory of the appellants itself.
Challenging these findings he contended that for the purpose of determining the value under Section 4(4)(d)(i) of the Act it is immaterial whether the special packing is provided in the factory or outside the factory. Since the test is whether a particular kind of packing is done in order to put the goods in the condition in which they are generally sold in the wholesale market at the factory gate as laid down in the case of Union of India and Ors. v. Bombay Tyre International Ltd., 1983 (14) E.L.T. 1896 (SC) and as explained in Government of India and Ors. v. The Madras Rubber Factory Ltd. and Ors., 1995 (77) E.L.T. 433 (SC). Since the 7-Ply double faced corrugated boxes, universal folding type are employed only for the purpose of avoiding damage or injury during transit, these 7-Ply double faced corrugated boxes, universal folding type are not necessary for selling the subject goods in the wholesale market at the factory gate, their price is not includible in the value of the cost for the assessment of excise duty. To support his contention he cited the case of Union of India and Ors. v. Godfrey Philips India Ltd. and Ors., 1985 (22) E.L.T. 306 (SC) which according to the Ld. Counsel would apply on all fours. In reply Shri Satish Shah, Ld. JDR, submitted that the said packing of 3-Ply corrugated boxes into 7-Ply double faced corrugated boxes, universal folding type was necessary for putting the subject product in the condition in which it is generally sold in the wholesale market at the factory gate. Therefore, its cost was rightly included in the value of the subject goods for the purpose of excise duty and relied upon the observations made in paragraph 52 of the judgment rendered by the Apex Court in the case of Bombay Tyre Internationl Ltd., ibid. He also referred to Paragraph 37 of the judgment rendered by the Apex Court in the case of Government of India v. MRF Ltd., ibid, wherein it was held that differing conclusions arrived at by the majority or minority in the case of Godfrey Philips was not on account of their adopting a different test or principle but only on account of their differing perceptions of the factual situation. So far as the test applicable is concerned, all the three learned Judges were at one. It is, therefore, idle to contend that this decision had laid down a principle or a test different from the one in Bombay Tyre International. He also cited the case of Collector of Central Excise v. Pond's India Ltd., 1989 (44) E.L.T. 185 (SC) wherein, according to him, it was held that if the secondary packings was a must for delivery of the goods to the wholesale dealers its cost was includible in the value.
5. Considered. Recently, the Apex Court re-called its judgment dated December 20, 1986 rendered in the case of Assistant Collector of Central Excise and Ors. v. Madras Rubber Factory Ltd. and Ors., 1987 (27) E.L.T. 553 (SC) on the petition filed by the Revenue and after fresh consideration on the issue of packing charges passed its judgment dated 8-5-1995 reported in supra, laying down the following test -"The test is : whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further,....We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case. Applying the above test we proceed to decide whether in the facts and circumstances of the present case whether the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was -
(i) necessary for putting the subject product in the condition in which it is generally sold;
(ii) in the wholesale market at the factory gate;
(iii) to the wholesale buyer.
6. In the instant case it is not in dispute that the appellants are manufacturers of "LACTO CALAMINE LOTION" for M/s. Duphar Interfran Ltd. according to the specifications provided by them. In their factory and the "LACTO CALAMINE LOTION" so manufactured are packed initially in 30 ml. bottles, 60 ml. bottles and 120 ml. bottles and these bottles are then packed together in 3-Ply double faced corrugated boxes accommodating as follows :-
(i) 120 ml. 10 bottles
(ii) 60 ml. 15 bottles
(iii) 30 ml. 20 bottles
These 3-Ply double faced corrugated boxes are further placed in 7-Ply double faced corrugated boxes, universal folding type. The appellants had included the price of initial packing in the bottles as well as the cost of 3-Ply corrugated boxes. Therefore, the dispute in the instant case only is as to whether the value of this 7-Ply double faced corrugated boxes is to be included in the assessable value. It was contended before us that this special packing of 7-Ply double faced corrugated boxes, universal folding type is not necessary for putting the subject product in the condition in which it is generally sold in the wholesale market at the factory gate to the wholesale buyer as held by the Apex Court in the case of Union of India and Ors. v. Godfrey Philips India Ltd. and Ors., 1985 (22) E.L.T. 306 (SC) and in the case of Geep Industrial Syndicate Ltd. v. Union of India, 1992 (61) E.L.T. 328 (SC). From the reading of the said two judgments it is clear to us that these judgments sequarely supports the contention of the appellants. In the case of Union of India v. Godfrey Philips India Ltd., supra the relevant facts were that the assessee therein was engaged in the manufacture of cigarettes. The cigarettes were packed initially in paper/cardboard packets of 10 and 20. These packets were packed together in paper/cardboard cartons/outers. These cartons were then placed in corrugated fibre board containers (CFCs). It is these CFCs filled with cartons/outers containing the packets of cigarettes of 10 and 20 which were delivered by the assessee to the wholesale dealers at the factory gate. So far as the cost of initial packing was concerned, there is no dispute. Similarly there was no dispute with respect to the cost of the paper/cardboard cartons/outers. The dispute, however, centered round the cost of CFCs. The Hon'ble Chief Justice comprising the Bench evolved the test of "necessity or essentiality of such secondary packing" for sale of the excisable goods at the factory gate in the course of wholesale trade. By majority view it was held that the cost of CFCs was not includible in the value for the purpose of assessment of excise duty. Hon'ble Pathak, J. (as he then was) posed the question, "Is the packing in corrugated fibre board containers necessary for putting the cigarettes in the condition in which they are generallry sold in the wholesale market at the factory gate?" and answered in the negative observing that CFCs containers were not necessary for selling the cigarettes in the wholesale market at the factory gate. In the case of Geep Industrial Syndicate Ltd. v. Union of India, ibid, the relevant facts were that the assessee therein was the manufacturer of torches and batteries. The torches and batteries were manufactured by it were first packed in Polythene boxes and then these Polythene packets were placed in cardboard boxes. There was no dispute about the inclusion of the value of polythene boxes and cardboard boxes. The dispute was only with respect to the cost of wooden boxes in which the card board cartons were placed at the time of the delivery at the factory gate.
There was dispute between the parties whether the cardboard were packed in wooden boxes or not. It was suggested by the assessee that they were placed in wooden boxes at the time of delivery at the gate only where the delivery was taken by the wholesale dealers outside the city of Allahabad. The Bench was, however, of the opinion that it was unnecessary for them to go into the disputed question of facts on the ground that "even if the card board cartons are packed in wooden boxes in all cases, it is clear that the cost of such secondary packing in wooden boxes is not includible in determination of the value of batteries and torches. "As the packing in the wooden boxes was not necessary for putting the torches and batteries in the condition in which they are generally sold in the wholesale market at the factory gate. It is significant to note that these two decisions have not been over-ruled by the Apex Court while rendering the judgment in the case of MRF Ltd. and Others on review as reported in supra. On the other hand it is held therein that "The conclusion in these two later cases turn upon the findings as to factual position obtaining therein", (see paragraph 44). In the instant case, the Collector of Central Excise has not said in his impugned order that such packing that is to say special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was necessary for putting the subject products in the condition in which it is generally sold in the wholesale market at the factory gate nor there is any evidence on the record to that effect. On the other hand we find from paragraph 14.6 of the impugned order that in the statement dated 29-9-1989 Shri N.N.V. Prasad, Director of the appellant company, stated that they were filling bottles of 120 ml, 60 ml., and 30 ml. with Lacto Calamine Lotion and affixing labels on the bottles and they are putting these boxes in 3-Ply double faced corrugated boxes and storing these boxes containing bottles in Central Excise Bonded Store Rooms and larger packing that is to say special packing is done after paying duty while removing the goods from inside the factory and this special packing is done by them on the way to the transport company for onward despatch of the goods at the request of the wholesale buyer that is to say M/s. Duphar Interfran Ltd. as per the agreement between the appellants and the said M/s. Duphar Interfran Ltd. Further, that in the instant case it was not the case of the Department nor the Ld. Collector has said so in his impugned order that there was no likelihood of damage or injury to the 3-Ply double faced corrugated boxes containing the bottles, namely, Lacto Calamine Lotion employed as a primary packing even if the goods are transported without the special packing that is to say 7-Ply double faced corrugated boxes, universal. folding type. This is indicative of the fact that the goods are not so sold generally in the wholesale market at the factory gate. It is also not the case of the Department that the subject product, namely, Lacto Calamine Lotion are sold in special cartons even in wholesale trade. This is further indicative of the fact that the subject goods are not so sold ordinarily in the wholesale market at the factory gate. Further we find from the agreement entered into by the appellants and M/s. Duphar Interfran Ltd. (Exhibit 'B') on the record that the 3-Ply double faced corrugated boxes would be the normal packing for the bottles and the price for the subject product would be inclusive of this normal packing. This was reiterated by the appellants in their defence. The Department has not rebutted the said defence of the appellants by adducing any evidence on the record worth the salt. On the other hand it stands established on the record that the special packing of 7-Ply double faced corrugated boxes, universal folding type is provided by the appellants at the instance of the wholesale buyer that is to say M/s. Duphar Interfran Ltd. which is not generally provided as a normal feature of the wholesale trade. Thus, we hold that special packing in the form of 7-Ply double faced corrugated boxes, universal folding type in the instant case was not necessary for putting the subject product, namely, Lacto Calamine Lotion in the condition on which it is generally sold in the wholesale market at the factory gate to the wholesale buyer and, therefore, cost of such packing has to be excluded while arriving at the assessable value. The case of Collector of Central Excise v. Ponds India Ltd., 1989 (44) E.L.T. 185 does not improve the case of the Revenue as in that case the Bench agreed with the test laid down in the case of Bombay Tyre International but remanded the matter observing that the Tribunal erred in approaching the problem before it by looking to the question whether the goods packed in the smaller corrugated boxes could be sold in the wholesale market in the course of wholesale trade at the factory gate without the outer cartons in which the smaller carton is packed. The question is not whether these goods could be sold but the question is whether these goods are so sold usually and as such used to become marketable in such manner.
7. That apart, it was also argued before us that as per the agreement between the appellants and M/s. Duphar Interfran Ltd. contained in letter dated 14th August, 1984, the appellants were required to despatch the subject product in different types of bottles to the various customers of M/s. Duphar Interfran Ltd. all over India in a special packing in the form of 7-Ply double faced corrugated boxes, universal folding type which the appellants did and, therefore, its (special packing) cost is not includible in the assessable value.
8. The relevant portion of the said letter is reproduced below :-
"The bottles will be packed by you in 3-Ply d.f.c. boxes accommodating them as follows:-
(i) 120 ml.---10 bottles
(ii) 60 ml.---15 bottles
(iii) 30 ml.---20 bottles The 3-Ply d.f.c. boxes will be the normal packing for the bottles and our prices will be for the bottles, inclusive of this normal packing.
You will be required to despatch the lotion in different types of bottles to our various customers all over India according to the advice which we shall be sending to you from time to time. In order to ensure that the bottles do not suffer any damage in transit, we request you to provide special packing in the form of 7-Ply double faced corrugated boxes, universal folding type. For this special packing, we shall be prepared to pay you separately. You may raise Debit Notes for recovery of these charges from time to time.
We are interested in maintaining a uniform price for the lotion in different sizes of bottles for all the customers in India. Since we are casting the responsibility of despatching the goods to our customers, we are prepared to bear not only the special packing charges for the boxes as mentioned above but we feel shall also reimburse you for the handling and forwarding charges which you will have to specially incur. These too may be recovered from us separately."
9. From the above, it is clear that the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was provided by the appellants at the instance of the wholesale buyer i.e. M/s. Duphar Interfran Ltd. which is not generally provided as a normal feature of the wholesale trade and, therefore, the cost of such special packing is not includible in arriving at the assessable value. This has not been disputed by the Collector of Central Excise in his impugned order. The fact that there was an agreement between the appellant and M/s. Duphar Interfran Ltd. as extracted above was also not denied by the Revenue. In the case of Bombay Tyre International Ltd., 1983 (14) E.L.T. 1896, the Apex Court has held in paragraph 52 that "If any special secondary packing is provided by the assessee at the instance of the wholesale buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such packing shall be deducted from the wholesale cash price". This view was reiterated by the Apex Court in the case of Godfrey Philips India Ltd., ibid, (para 5) and quoted with approval in the case of Ponds India Limited, supra, (para 5).
10. In the case of Union of India and Ors. v. Duphar Interfran Ltd. themselves as reported in 1987 (27) E.L.T. 599 (SC) the question that arose before the Hon'ble Supreme Court of India related to 5% extra charges which was made by M/s. Duphar Interfran Ltd. to the wholesale dealers in respect of packing and distribution cost. This charge of 5% was held to not includible in the assessable value by the Hon'ble Supreme Court of India. While holding so it was observed that this charge of 5% does not represent the cost of unit packing but merely represent the cost of additional packing if it is so desired by the wholesale dealer. Thus, we hold that the cost of special packing was not includible in the assessable value.
11. In view of the above, it is also held that the appellants have rightly availed the benefit of Notification No. 140/83, dated 5-5-1983 during the financial years 1986-87 and 1987-88 as they never crossed the exemption limit of value of clearances worth Rs. 10 lakhs in the preceding financial year. For record it may also be stated that since it was stated by the appellants in the reply to the Show Cause Notice itself that from 1.10.1987 onwards they were not availing the benefit of the said Notification and paying the duty at the full rate, the demand raised on this count also cannot be sustained and, therefore, the demand if confirmed on this count also cannot be sustained.
ON LIMITATION
12. It was contended by the learned Counsel, Shri A.N. Haksar, that by agreement dated 10th July, 1984 (Exhibit 'A' on the record) entered into between the appellants and M/s Duphar Interfran Limited, the appellant was to manufacture Lacto Calamine Lotion, as per the specifications given by M/s. Duphar with the trade mark or trade name 'Crookes Lacto Calamine' and the price for the said product was to be mutually agreed upon from time to time and was to be inclusive of excise duty, but excluding freight, sales tax and other levies. By a letter dated 14th August, 1984 (Exhibit 'B' on the record), the said M/s. Duphar Interfran Limited requested the appellants to manufacture the said product in three different sizes strictly according to their specifications and requested that the said bottles should be packed by the appellants in three ply double faced corrugated boxes which would be the normal packing for the bottles.
The price for the said product would be inclusive of this normal packing. He highlighted that by this letter M/s Duphar Interfran Limited further requested the appellants to despatch the said product in different types of bottles to their various customers all over India according to their advice which they would send from time to time. In order to ensure that the bottles did not suffer any damage in transit, M/s. Duphar Interfran Limited requested for the special packing in the form of seven ply DFC boxes for which they undertook to pay the appellants separately and requested the appellants to raise debit notes for recovery of these charges from time to time and also agreed to reimburse the appellants for any handling and forwarding charges. He emphasised that M/s. Duphar lnterfran Ltd. paid the normal price of the said product manufactured for them on the basis of the normal packing for the bottles which consists of three ply double faced corrugated boxes. It is this price which the appellants have been declaring to the Department in their Price Lists; that the Price Lists have been duly approved from time to time; that the officers of the Department as well as the audit parties have been checking and verifying their products and records from time to time; that they have always been despatching the goods under the gate passes paying the proper Central Excise Duty leviable thereon; and that they have been regularly submitting RT-12 returns which were duly assessed and returned to them. He further submitted that since the cost of the special packing, that is to say, of 7-ply DFC boxes was not includible in the assessable value in view of the law laid down by the Apex Court in the case of Union of India v. Godfrey Philips India Ltd. 1985 (22) E.L.T. 306 (SC), the same was not required to be disclosed in the Price Lists. Likewise, the packing and distribution expenses incurred outside the factory gate were also not includible in the assessable value after the removal of the goods as is clear from the judgment rendered by the Apex Court in the case of Union of India v. Duphar lnterfran Ltd. 1987 (27) E.L.T. 599 (SC). In that case it was held by the Supreme Court that 5% extra charges made by M/s. Duphar lnterfran Ltd., respondent therein, to the wholesale dealer in respect of packing and distribution costs does not represent the cost of unit packing but merely represents the cost of additional packing, if it is so desired by the wholesale dealer, and therefore cannot be taken into account by the authorities for determining the assessable value. In this premises, he submitted that the Show Cause Notice dated 29-3-1990 raising the demand for the period from 1984-85 to August, 1989 was time barred being issued after the expiry of the period of six months as provided under Section 11A of the Act as there was no suppression of facts by the appellants with intent to evade payment of duty especially when all the facts were known to the Department since the Office of the Department as well as the audit party have been checking and verifying their documents and records from time to time. Drawing our attention to paragraph 18.2 of the impugned order wherein the Collector of Central Excise while deciding the issue framed by him, as to whether the appellants suppressed the facts of recovering such extra charges from M/s. Duphar lnterfran Ltd. turned down the plea of the appellants that there was no intention on the part of the appellants to evade payment of duty on the ground that in the case of Cosmic Dye Chem v. Collector of Central Excise, Bombay, 1984 (18) E.L.T. 6, it was held that, mere suppression of the fact or mis-statement in the information statutorily required to be supplied to the excise authorities attracts the larger period of limitation, regardless of intent to evade payment of duty. He highlighted that on appeal by the assesee therein, that is to say, M/s. Cosmic Dye Chem. the Supreme Court has not approved the said view of the Tribunal and held that the demand was time barred as misstatement or suppression of fact must be wilful with intent to evade payment of duty [see Cosmic Dye Chemical v. Collector of Central Excise, 1995 (75) E.L.T. 721 (SC)]. He also cited the case of Collector of Central Excise v. Chemphar Drugs & Liniments, 1989 (40) E.L.T. 276 (SC), wherein the Apex Court held that the extended period of five years is not applicable to a case where the value of clearances of other goods was not indicated in the declaration filed by the assessee under the belief that it was not required to be indicated.
13. In reply, Shri Satish Shah, learned JDR, submitted that the demand was not time barred as the appellants failed to indicate in the Price Lists the cost of special packing and transportation and forwarding charges.
14. We have considered the submissions. From the impugned order we find that the Collector of Central Excise has tacitly negatived the contention of the appellants to the effect that in view of the judgment rendered by the Apex Court in the case of Union of India v. Godfrey Philips India Ltd. 1985 (22) E.L.T. 306 (SC) the cost of the special packing was not includible in the assessable value, and in view of the decision rendered by the Supreme Court in the case of Union of India v. Duphar Interfran Ltd., supra, the extra charges in respect of packing and distribution costs, as desired by the wholesale dealers, was also not includible in the assessable value and, therefore, under this bona fide belief they did not declare the same in the Classification Lists, on the ground that intention to evade payment of duty is immaterial in view of the judgment rendered by this Tribunal in the case of Cosmic Dye Chem v. Collector of Central Excise, Bombay, 1984 (18) E.L.T. 6. But this view of the Tribunal was not approved by the Apex Court on appeal by the said assessee Cosmic Dye Chemicals v. Collector of Central Excise, Bombay, 1995 (75) E.L.T. 721 (SC). For ready reference, the relevant portion of the said order is reproduced as under :
"6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word 'wilful' preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11 A. Mis-statement or suppression of fact must be wilful.
7. Now coming to the facts of the case, the appellant's case is that he thought bona fide that he need not include the value of the Rapidogens in his declaration, for the reason that the said product was fully exempt from duty under Notification No. 180/61, dated November 23, 1961. Certain facts are brought to our notice in support of this plea. It is also brought to our notice that on the date of filing of his declaration, two High Courts had taken the view that the goods exempted from duty are not includible within the definition of 'excisable goods' as defined in clause (d) of Section 2. No doubt, two other High Courts had taken a contrary view. The appellant's factory is in the State of Maharashtra and the Bombay High Court had not taken a view one way or the other. In all the circumstances, the appellant says, he was under the bona fide impression that he need not mention the value of the Rapidogens manufactured by him in his declarations.
8. In the above circumstances and because the facts established that the mis-statement of facts in the declaration filed by the appellant - or the suppression of facts therein, as the case may be - cannot be called wilful, the appeal is allowed. No order as to costs."
15. In the case of Collector of Central Excise v. Chemphar Drugs & Liniments, 1989 (40) E.L.T. 276 (SC), the assessee did not include the value of the product other than those falling under Tariff Item 14-E manufactured by them in their declaration on the belief that the same was not required to be included. The Tribunal held that there is nothing on record to show that the assessee non-bona fidely held back the said information about the total value of the goods cleared by them with a view to evade payment of duty on the basis of their interpretation. This view was upheld by the Apex Court.
16. In the case of Padmini Products v. Collector of Central Excise, 1989 (43) E.L.T. 195 (SC), it was held by the Apex Court that mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt does not attract the extended limitation. In fact, extended period of limitation is invokable only in case of fraud, collusion or wilful mis-statement, suppression of facts or contravention of any provision of the Acts or Rules with intent to evade payment of duty. The Supreme Court further held that all the ingredients postulate a positive act, and mere failure to pay duty or take out excise licence is not always due to fraud, mis-statement, collusion, suppression of facts or contravention of Rules with intent to evade duty.
17. That apart, during the relevant period in the instant case from 1984-85 to August, 1989, the law was well settled that the cost of special packing was not required to be included while arriving at the assessable value by the two decisions of the Apex Court rendered in the case of M/s. Godfrey Philips India Ltd. judgment dated 30-9-1985, and followed in the case of Geep Industrial Syndicate Ltd. v. Union of India, judgment dated 2-4-1986. Even in the judgment rendered by the Apex Court in the case of M/s. Pond's India Ltd. (judgment dated 19-10-1989, reported in 1989 (44) E.L.T. 185 (SC)), the said two judgments were not over-ruled and the case was remanded to the Tribunal only to find out as to whether the excisable goods involved therein are so sold (that is to say, sold in wooden boxes called master cartons) usually and as such used to become marketable in such manner. Even the Apex Court in its recent judgment dated 8th May, 1995 rendered in the case of M/s. MRF, has reiterated the principle laid down in the case of M/s. Bombay Tyre International, 1983 (14) E.L.T. 1896, without disturbing the findings of facts and the conclusion arrived therein by the Apex Court in the case of M/s. Godfrey Philips India Ltd. supra, and M/s. Geep Industrial Syndicate Ltd. supra.
18. In the instant case, the Collector of Central Excise in his impugned Order has not denied the factual position which was contended before him, as detailed out in paragraph 10.2 of his impugned order :
(1) the normal price of the products, includes the cost of 3-Ply Corrugated Boxes which was declared in the price lists;
(2) that the price lists have been duly approved;
(3) that the officers of the Department as well as the audit party has been checking and verifying their documents and records from time to time;
(4) that they have always been despatching the goods under the gate passes paying the proper Central Excise Duty leviable thereon; and (5) that they have been regularly submitting RT-12 returns which were duly assessed and returned to them.
19. Further the learned Collector has not denied that there was no bona fide belief on the part of the appellants in not disclosing the price of the special packing and transportation charges in the price list. He has also not recorded a rinding that the alleged suppression or mis-statement was wilful.
20. On the other hand, he has brushed aside the said contention of the bona fide belief of the appellants which was based on the said two decisions of the Apex Court rendered in the case of M/s. Godfrey Philips India Ltd. supra, and M/s. Duphar Interfran Ltd., supra, on the ground that the intention is immaterial in view of the decision rendered by this Tribunal in the case of Cosmic Dye Chem., supra, which, as aforesaid, stands over-ruled by the Apex Court on appeal by the said assessee [see supra].
21. In the light of the above circumstances and the facts established in the instant case, and also in view of the said two decisions of the Apex Court rendered in the case of M/s. Godfrey Philips India Ltd. supra, and M/s. Duphar Interfran Ltd., supra, it is to be held the appellants were under the bona fide impression that they need not mention the value of the special packing and transportation and forwarding charges in the price list as the same was not includible while determining the assessable value. In this view of the matter, it cannot be said that the appellants suppressed the facts wilfully with intent to evade payment of duty. Thus we hold that the demand in the instant case being raised beyond six months was time barred.
22. In the result, the impugned Order is set aside and both the appeals are allowed with consequential relief to the appellants, if any, according to law.
Sd/-
(G.P. Agarwal)
Dated : 3-8-1995 Member (J)
P.K. Kapoor, Member (T)
23. I have gone through the order recorded by Learned Member Judicial Shri G.P. Agarwal but have not been able to persuade myself to agree with the findings therein. I am therefore recording this separate order.
24. Since the facts of the case have been recorded in the order passed by Member Judicial, it is not necessary for me to repeat the same. It is an admitted fact that the appellants Were engaged in the manufacture of "Lacto Calamine Lotion" on behalf of M/s. Duphar Interfran Ltd. Bombay according to the specifications provided by them. The "Lacto Calamine Lotion" manufactured by the appellants is initially filled in bottles of 30 ml., 60 ml. and 120 ml. capacity and thereafter such bottles are packed in 3-ply double faced corrugated boxes. The number of bottles of each type accommodated in a single 3-ply corrugated box was as under :
(i) 120 ml. 10 bottles
(ii) 60 ml. 15 bottles
(iii) 30 ml. 20 bottles The supplementary agreement regarding packing and distribution of goods between the appellants and M/s. Duphar Interfran Ltd. provides that in order to avoid damage to the bottles in transit the appellants are to provide special packing in the form of 7-ply double faced corrugated boxes universal folding type before despatching the product in different types of bottles to customers all over India directly from their factory according to the advice received from time to time from M/s. Duphar Interfran Ltd.
25. In view of the recent judgment of the Hon'ble Supreme Court in the case of Govt of India v. Madras Rubber Factory Ltd. reported in 1995 (77) E.L.T. 433, the ratio of judgments of the Hon'ble Supreme Court in the case of Union of India and Ors. v. Godfrey Philips India Ltd. and Ors. (supra) and Duphar Interfran Ltd. (supra) and Geep Industrial Syndicate Ltd. v. UOI (supra) which have been discussed in the order recorded by the Learned Member Judicial would not be directly applicable in the present case for deciding the question whether extra charge recovered by the appellants in the form of 7-ply double faced corrugated boxes would be includible in the assessable value of the "Lacto Calamine Lotion" manufactured and supplied directly by the appellants to different customers of M/s. Duphar Interfran Ltd. in different parts of the country since the present case will have to be decided having regard to the facts which have been disclosed and by applying to those facts the tests laid down by the Apex Court in the judgment in the case of Madras Rubber Factory Ltd. In this regard the test now laid down in para 43 of the said judgment by the Apex Court is as under :
"...The test laid down in Bombay Tyre International has never been departed from in any of the later decisions and must be treated as good and sound. We may as well stress the obvious : in a matter like this, certainly in law is essential. It may be that in applying the principle having regard to the facts of a given case, there may be some divergence in conclusion but so far as the principle - the relevant test to be applied - is concerned, there should be no uncertainty. The test is : whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further, even if the packing is "necessary" in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case..."
26. Learned Member Judicial has held that the judgment in the case of Collector of Central Excise v. Ponds India Ltd. (supra) also does not support the Department's case since the Collector of Central Excise has not said in the impugned order that the special packing in the form of 7-ply double faced corrugated boxes, universal folding type was necessary for putting the subject product in the condition in which it is generally sold in the wholesale market at the factory gate nor there is any evidence on record to that effect. In this regard reference has been made to the statement dated 29-9-1989 of the Director of the appellant company wherein he had claimed that special packing was done on way to the transport company for despatch of the goods at the request of the wholesale buyer, that is to say, M/s. Duphar Interfran Ltd. In this regard, it has been observed that according to the agreement entered into between the appellants and M/s. Duphar Interfran Ltd. 3-ply double faced corrugated boxes were to form the normal packing and the price of the subject product was to be inclusive of this normal packing and the special packing of 7-ply double faced corrugated boxes universal folding type which was being provided by the appellants at the instance of wholesale buyer, that is to say, M/s. Duphar Interfran Ltd. which was not generally provided as normal feature of wholesale trade. It has been held that special packing was not necessary for putting the subject product, namely, Lacto Calamine Lotion in a condition in which it is generally sold in the wholesale market at the factory gate to the wholesale buyer and, therefore, the cost of such packing has to be excluded while arriving at the assessable value. Reference in this regard has also been made to the judgment of the Hon'ble Supreme Court in the case of Union of India and Ors. v. Duphar Interfran Ltd. (supra) in which it was held that 5% extra charges which was made by Duphar Interfran Ltd. to wholesale dealers in respect of packing and distribution cost was not includible in the assessable value since such charge did not represent the cost of unit packing but merely represented the cost of additional packing if it was so desired by the wholesale dealer.
27. From the records of the case it is seen that the product "Lacto Calamine Lotion" is manufactured by the appellants as per agreement entered into with M/s. Duphar Interfran Ltd. Bombay for production as well as for sale/purchase of their product. In terms of this agreement the appellants are not only manufacturing the goods but are also despatching the fully finished goods to the customers of M/s. Duphar Interfran Ltd. as per their instructions. They receive purchase orders placed by various customers along with the sale invoice from M/s. Duphar Interfran Ltd. and they send finished goods directly from their factory to the customers of M/s. Duphar Interfran Ltd. with the sale invoices issued by Duphar Interfran Ltd. The appellants do not collect any sale proceeds from the parties to whom goods are despatched by them but they raise invoices on M/s. Duphar Interfran Ltd. on the basis of the price declared in the price list i.e., inclusive of the cost of 3-ply double faced corrugated boxes and they recover from M/s. Duphar Interfran Ltd. the cost of the outer 7-ply double faced corrugated boxes through separate debit notes under the heading "packing, forwarding and despatch expenses". From this arrangement for manufacture, invoicing and despatch of the goods to various wholesale buyers directly from the appellants factory, it is evident that the goods are invariably supplied with special packing in the form of 7-ply double faced corrugated boxes, universal folding type and there is no evidence on record that any goods were being sold in the wholesale market at the factory gate without such special 7-ply double faced corrugated boxes. There is also no evidence on record to show that the special packing in question was of durable nature and was returnable.
Since the product, namely, "Lacto Calamine Lotion" was marketed in glass bottle it cannot be denied that in respect of such goods in addition to the 3-ply double faced corrugated box packing, additional protection in the form of 7-ply double faced corrugated box packing was indispensable as in the absence of the same it could not have been possible to conveniently deliver the goods to the customers. For these reasons and having regard to the detailed and convincing reasons given by the Collector in paras 14.5 to 14.9 of the impugned order for rejecting the appellants claim that the packing of the goods cleared from their factory into special 7-ply double faced corrugated boxes was done on way to the transport company for onward despatch of the goods to the customers. I hold that the facts of the present case are identical to the facts in the case of Union of India v. Hindustan Lever since the goods are invariably delivered to the customers packed in 3-ply double faced corrugated box packing and special 7-ply double faced corrugated box packing and packing of the goods in such 3-ply and 7-ply double faced corrugated cardboard boxes is essential as in the absence of the same they cannot be conveniently delivered to the customers; (2) there is no evidence of any goods having been delivered to the customers without such double packing and (3) there is no claim by the appellants that the outer 7-ply packing is of a durable and returnable nature and was being received back by them. In para 44 of the judgment in the case of M.R.F, (supra), on the basis of the test laid down in para 43 of the said judgment, the Hon'ble Supreme Court has held that the cost of special outer packing in the form of cartons/cardboard boxes could not be excluded from the value of the goods. Relevant extracts from paras 43 and 44 of the said judgment are reproduced below :
"The test laid down in Bombay Tyre International has never been departed from in any of the later decisions and must be treated as good and sound. We may as well stress the obvious: in a matter like this, certainty in law is essential. It may be that in applying the principle having regard to the facts of a given case, there may be some divergence in conclusion but so far as the principle -the relevant test to be applied - is concerned, there should be no uncertainty. The test is: whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further, even if the packing is "necessary" in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case.
44. Keeping the above principle in mind, we shall now turn to the facts in Civil Appeal No. [5375] of 1995 arising out of S.L.P. (C) 4041 of 1981 (Union of India v. Hinduatan Lever) because it is in this case that the issue of cost of packing has been argued by Shri Harish Salve. The assessee claims deduction of the cost of 'outer packing'. The Assistant Collector who examined the claim pursuant to the 'format order' rejected the claim. He has stated in his order that in the first instance, the assessee claimed that the said packages are of a durable nature and have a ready resale value all over the country and that to avoid transportation cost, the trade (buyers), instead of sending the packages back to the company, resell the same. The assessee conceded that though it is possible to pack the produce for sale in the ordinary packings, they are also packed in special outer packings for the sake of uniformity. At a later stage of hearing, the assessee adopted a different stand. It contended that the cost of only the primary packing, viz., the packing which is in physical contact with the soap and is wrapped around the soap, is includible and that the cost of cartons and cardboard boxes in which the soaps are then packed in outer packing has to be excluded. The Assistant Collector rejected both the contentions on the following reasoning: (a) in the instant case, the company has not adduced any evidence to show that there are any agreements or contracts between it and its buyers for return of such packings; (b) as a matter of fact, the goods in question are invariably delivered to their customers packed in cartons / cardboard boxes; (c) the unit of sale for the said goods for which the company files its price lists from time to time is a wholesale package comprising of a dozen or gross pieces; (d) the packing of such goods in cartons/cardboard boxes is indispensable, as in the absence of the same, they cannot be conveniently delivered to the customers; (e) not a single instance could be shown where the assessee ever delivered the goods without the above packing and (f) the assessee conceded that its buyers are not returning such packages to it on account of the cost of transportation. We are of the opinion that on the above findings recorded by the Assistant Collector, the only conclusion that can follow is that the cost of the cartons / cardboard boxes cannot be excluded from the value of the goods. If, however, the assessee wishes to challenge the correctness of the findings of fact recorded by the Assistant Collector, the proper course is to file an appeal as provided by law."
28. On the ratio of the judgment of the Hon'ble Supreme Court extracted above, I hold that the cost of special 7-ply double faced corrugated box universal folding type was necessary for putting the subject product in the condition in which it was generally sold in the wholesale market at the factory gate to the wholesale buyer and accordingly except the element that may be attributable towards the cost of transportation of the goods from factory premises to the transport company the disputed "packing, forwarding and despatch expenses" recovered by the appellants from their sole buyer over and above the declared sale price, through separate debit notes, would form a part of the assessable value of the goods.
LIMITATION
29. As discussed earlier, the appellants were recovering the price of the 7-ply double faced corrugated boxes which was invariably provided by raising separate debit notes on M/s. Duphar Interfran Ltd., Bombay but in the price list filed by them, from time to time, the details regarding special additional packing and price realised in respect of such additional packing was not declared even though they were under obligation to declare such details in the relevant column of the Price List. In this regard, the findings of the Collector in Paras 18 to 18.2, being relevant, are reproduced below :-
"18. It is proved beyond doubt from the discussion in the preceding paragraph that the Noticee Firm collected extra money by issuing debit notes, under the guise of packing, forwarding and despatch and accordingly their submissions that they were not under the legal obligation to declare to the said facts to the Central Excise Departments is not tenable. Moreover, when the performa for price list specifically contains columns for different natures of deductions, it is certainly an obligation on the part of assessee to claim deduction in the relevant columns of the price list file by them from time to time, which they failed to do and, therefore, their plea for non-application of the extended period beyond six months laid down in proviso to Sub-section (1) of the Section 11A of the Central Excises & Salt Act, 1944 is not tenable.
18.1. Law requires the manufacturer to furnish complete and correct information in the documents such as declarations, price lists and classifications lists etc. to be filed with the proper officer and if he has suppressed some material facts in these documents, it is certainly a case of suppression of facts attracting extended time limit of five years.
18.2. In this connection, I also rely upon the CEGAT's decision in case of Mysore Rolling Mills Pvt. Ltd. v. Collector reported in 1985 (21) E.L.T. 875 wherein it has been held that if the assessee has not indicated the information in the price-list about the collection of money, debit notes, from large number of customers, such omission cannot be said to be bona fide and extended period of 5 years would be applicable.
In this connection, I also refer to the decision of Hon'ble CEGAT judgment in case of Cosmic Dye Chem. v. Collector, Bombay reported in 1984 (15) E.L.T. Tribunal wherein it has been held that regardless of the intent, mere suppression of fact or mis-statement in the information statutory required to be supplied to the ensure authorities attract a larger period of limitation. Intent is immaterial in so far as fraud, mis-statement or suppression of fact are concerned.
I further refer the case of Central India Machinery Co. v. Collector reported in 1989 (39) E.L.T. 306, wherein Hon'ble CEGAT hold that in case there is nonlevy arising due to the suppression of facts, extended period of Five years is applicable."
30. I am inclined to agree with the Collector that having regard to the prescribed proforma of the price list the appellants were under obligation to disclose the nature and details of different types of packing used for the goods and the total realisation made from the customers towards the sale of the goods including packing and thereafter claim deduction on account of packing the cost of which according to them was not includible in the assessable value in terms of Section 4 of the Central Excises & Salt Act. Failure on the part of the appellants to disclose to the Department the recoveries made through separate debit notes in respect of special packing of 7-ply double faced corrugated boxes, universal folding type, in my view, amounted to a deliberate suppression of fact with the intention of evading duty and cannot be attributed to any bona fide belief on their part that they were not required to disclose such additional recoveries on account of special packing in the price list. Hence the judgment in the case of Collector of Central Excise v. Chemphar Drugs & Linimants and Padmini Products v. Collector of Central Excise (supra) cannot be of any assistance to them.
31. In view of the foregoing, I confirm the findings of the Collector and hold that the amounts recovered on account of separate packing, forwarding and despatch expenses through debit note less the amount and can be attributed to the charge for transportation of the goods after clearance to the transporters premises would form part of assessable value of the goods.
Sd/-
(P.K. Kapoor)
Dated : 5-9-1995 Member (T)
POINTS OF DIFFERENCE
32. Since there is a difference of opinion between us, the following questions are referred to the Hon'ble President in terms of Sub-section (1) of Section 35D of the Central Excises & Salt Act, 1944 :-
"1. Whether in the facts and circumstances of the case, the cost of special packing, that is to say, 7-Ply Double Faced Corrugated Boxes is not includible in the assessable value as held by the Judicial Member or to be included to the extent indicated by the Technical Member?
2. Whether the demand was time barred as held by the Judicial Member or not as held by the Technical Member?"
Sd/- Sd/-
(P.K. Kapoor) (G.P. Agarwal)
Member (T) Member (J)
S.L. Peeran, Member (J)
33. The difference of opinion which has arisen between the two Members and the points of difference have already been stated in para 32 at page 43 of the order.
34. I have heard ld. Sr. Advocate Shri A.N. Haksar for the appellants and Shri Vipin Handa, Ld. SDR for the department. Both of them have reiterated the arguments as had been made by them before the original members which has already been recorded in the respective opinions. Therefore, I would like to proceed straightaway to deliver my opinion in this matter. Ld. Member (J) after going through the letter dated 14th April, 1984 of M/s. Duphar Interfran Ltd. and the agreement entered into with the appellant, and examining the case law on the subject, has held that the 7-Ply double faced corrugated boxes, universal folding type, are generally not used for goods sold in the wholesale market at the factory gate.
The ld. Member (J) has also examined the point of limitation and has held that the appellants were holding bona fide belief in view of several Supreme Court's judgments as cited, to hold that the cost of this special packing is not includible in the assessable value. On the other hand ld. Member (T) in Para 27 at page 37 of his opinion has clearly held that there is no evidence on record that any goods were being sold in the wholesale market at the factory gate with such special 7-Ply double faced corrugated boxes. Ld. Member (T) has further held that there is also no evidence on record to show that the special packing in question was of durable nature and was returnable. He has, however, held that since the product, namely, 'Lacto Calamine Lotion' was marketed in glass bottle it cannot be denied that in respect of such goods in addition to the 3-Ply double faced corrugated box packing, additional protection in the form of 7-Ply double faced corrugated box packing was indispensable, as in the absence of the same it could not have been possible to conveniently deliver the goods to the customers.
35. I have carefully considered the submissions made by both the sides and have perused the impugned order and the opinions expressed by the respective Members. The Hon'ble Supreme Court in the case of Madras Rubber Factory in para 43 has laid down the test regarding the includibility of packing charges. It has been held that whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Now in the absence of the evidence as has been recorded by ld. Member (T) can the revenue hold that the goods in question was required to have been sold in special packing of 7-Ply double faced corrugated boxes in the wholesale market at the factory gate? My answer to this question is that it was for the department to have shown by rebuttable evidence that the goods are sold in the wholesale market at the factory gate in special 7-ply double faced corrugated box in view of denial and evidence adduced by the assessee.
The Ld. Member (T) having noted that the evidence was not thereon record, yet has proceeded to presume that it could not have been possible to conveniently deliver the goods to the customers without the additional 7-ply double faced corrugated box packing. I am of the opinion that it is not possible to come to this conclusion in the absence of any evidence worth the name relied or produced by the revenue in this case. The ld. Member (J) on the other hand has relied on the letter dated 14th August,1986 and the agreement to come to the conclusion that 7-ply double faced corrugated box is not required for sale of the goods at factory gate in the wholesale market and the goods are generally sold in 3-ply double faced corrugated box packing in the wholesale market at the factory gate. I notice that the conclusion arrived at by ld. Member (J) is based on the facts of the case, pleadings, allegations in the show cause notice and assertions made by the assessee that similar goods are sold in the wholesale market at the factory gate in primary packing only and the assessee had also relied on the case law and therefore, the opinion expressed by the ld. Member (J) is well considered and requires acceptance. Further reason being that the appellants are manufacturing the goods for M/s. Duphar Interfran Ltd. The Hon'ble Supreme Court in M/s. Duphar Interfran Ltd.'s case had accepted this proposition in respect of the same goods and to that extent the judgment of Hon'ble Supreme Court stands confirmed and not modified by the later judgment rendered in the case of Madras Rubber Factory Ltd. The assessee had contended that this packing was being done outside the factory gate. However, the Collector had rejected the same on the basis of statements of those transporters who removed the goods from godown and the Ld. Collector had not considered any evidence of packer or transporter who removed the goods from the factory gate. The appellants had further contended that packing of these goods were not done inside the factory and generally the goods were being sold at the factory gate in wholesale trade with 3-ply double faced corrugated boxes. It is further seen that the appellants were generally packing and sending these goods under the cover of gate passes and the officials were visiting the factory every now and then and it is very strange on the part of the revenue to contend that they have not seen packings being done outside the factory gate or for that matter the goods being removed at the factory gate with secondary packing. The assessee has also contended that the goods packed in 3-ply packing had been kept in the bonded store rooms. This assertion has not been denied by the department. Therefore, it falls to reason that special packing could have been done outside the factory gate. However, in the absence of any evidence adduced by the revenue it will not be possible to come to the conclusion that 7-ply packing is a must for trading at the factory gate in the wholesale trade.
36. On the point of limitation also, although there are certain loopholes in the defence of the assessee inasmuch as they had not declared the details in the Proforma-I which is a proforma for determination of value under Section 4 of the Central Excises & Salt Act, 1944 and annexure of the price list; to various questions regarding the includible of packaging charges. They had replied in the negative to the questionnaire and they had also not brought to the notice of the department regarding the letter dated 14-8-1984 and also about the secondary packing Yet, I am inclined to agree with the Sr. Advocate about the belief held by them regarding non-includibility of secondary packing in view of the judgment of the Hon'ble Supreme Court in the case of M/s. Duphar Interfran Ltd. to whom the assessee are manufacturing the goods and belief held on the basis of various other judgments on this issue.
The judgments of Hon'ble Supreme Court rendered in the case of Godfrey Philips India., M/s. Geep Industrial Syndicate Ltd. and M/s. Cosmic Dye Chem. relied by ld. Member (J) are well founded as persons in the trade on going through these judgments would be under the impression in similar circumstances, not to include the cost of special packing. In that view of the matter despite the fact, the appellants had not declared and had not clearly indicated in the price list about the special packing, and also the manner in which they were collecting the charges by debit notes, yet I am inclined to give the benefit of doubt to the assessee in view of unsettled legal position regarding this point and more particularly regarding the revenue's failure to prove the manner in which these goods were sold in wholesale trade at factory gate. Further, I notice that the department had also not issued the show cause notice within six months from the date of collection of all the evidence in this matter. This shows the casual manner in which the revenue proceedings are initiated in these cases against the assessee and the casual manner in which they take their own time to issue the show cause notice after considerable lapse of time. The Tribunal has been emphasising time and again on these aspects of the matter and yet the revenue officials do not take interest to initiate proceedings well in time at the time of approval of classification/price list stage itself. The revenue should have granted provisional approval and after thorough enquiry and after personal scrutiny on visit to the factory, and after examining of the records, should have granted the approval. In this case the approval of Price List has been granted mechanically and despite several visits by the Revenue Officials to the factory. The department official's contention that they had not noticed these packings is little hard to believe. When goods are removed in such numbers and officials visiting the factory time and again, can it be said that no one had noticed these clearances in special packing. In the circumstance, I am constrained to agree with the views expressed by Member (J).
In the result, the impugned order is required to be set aside by allowing the appeal.
37. The appeal papers shall be placed before the original Bench by passing final orders.
Sd/-
(S.L. Peeran)
Dated : 12-12-1995 Member (J)
FINAL ORDER
G.P. Agarwal, Member (J)
38. As per maiority, it is held that in the facts and circumstances of the case the cost of special packing, that is to say, 7-ply Double Faced Corrugated Boxes is not in the assessable value and the demand was time barred.
39. In the result, the impugned order is set aside and both the appeals are allowed with consequential relief to the appellants, if any according to law.