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PETITIONER: GEEP INDUSTRIAL SYNDICATE LTD. ETC.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE,ALLAHABAD ETC.

DATE OF JUDGMENT:       04/02/1997

BENCH: B.P. JEEVAN REDDY, K.S. PARIPOORNAN

ACT:

HEADNOTE:

JUDGMENT:                THE 4TH DAY OF FEBRUARY, 1997 Present:             Hon’ble Mr. Justice B.P. Jeevan Reddy             Hon’ble Mr. Justice K.S. Paripoornan Soli   J.   Sorabjee,   Sr.   Adv.,   V.Lakshmikumaran,   V. Balachandran and  Ms. Nisha  Bagchi, Advs.  with him for the appellants in C.A.Nos. 4608-12 and 4960/96 and Respondent in C.A. No. 14407/96. M. Gaurishankar Murthi, G. Prakash and V.K. Verma, Advs. for the  Respondents   in  C.A.No.   4608-12/96,   4960/96   and Appellants in C.A. No. 14407/96                       J U D G M E N T      The following Judgment of the Court was delivered:                       J U D G M E N T B.P. JEEVAN REDDY, J.      These appeals  are  preferred  against  the  orders  of Central Excise  and Gold [Control] Appellate Tribunal. Civil Appeals  Nos.  4608-4612  of  1996  and  4960  of  1996  are preferred  by   the  assessee,   Geep  Industrial  Syndicate Limited, while Civil Appeal No.14407 of 1996 is preferred by the Revenue.  Though preferred against different orders, the issue is  one and  the same.  The assessee is engaged in the manufacture  of  batteries  and  torches.  These  goods  are initially packed  in small  boxes.  These  small  boxes  are packed in medium size cartons. The medium size carton are in turn packed  in larger  corrugated  cartons,  called  "7-ply corrugated cartons".  The assessee does not dispute that the value of small boxes and medium size cartons is liable to be included in  the value  of the  goods packed. The dispute is only with  respect to  the inclusion  of the  value of 7-ply corrugated cartons.  Differing views  have been expressed by different Benches  of the  Tribunal on  this question in the case of  this very  assessee, as  would be  evident from the fact that  while against some orders, the assessee has filed appeals, certain  other orders have been appealed against by the Revenue.      Sri Soli J. Sorabjee, learned counsel appearing for the assessee, submitted  that the factual and legal situation in the present  appeals is  the same  as was considered by this Court in Geep Industrial Syndicate Limited v. Union of India

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[(1992) 61  E.L.T. 328].  Learned counsel submitted that the said decision  rendered by  a three-Judge  Bench between the same parties  is binding  and conclusive  on the question at issue. Sri Sorabjee submitted further that even according to the principles  enunciated in  Union of India v. Bombay Tyre International [1984  (1) S.C.C.467]  and Government of India v. Madras  Rubber Factory  Limited [1995 (4) S.C.C.349], the assessee is  entitled to  succeed. Sri Gauri Shankar Murthy, learned  counsel   appearing  for   the  Revenue,   however, submitted that  according to the principles affirmed by this Court in Madras Rubber Factory after a full consideration of all the  earlier decisions,  the value  of 7-ply  corrugated cartons is  also liable  to be  included in the value of the goods packed.      Inasmuch as  differing interpretations  are placed upon the principles  affirmed in  Madras Rubber  Factory,  it  is necessary to  ascertain, in  the first instance, the precise principle enunciated  in the  said decision. After referring to the  definition of  "value" in  Section 4(4)(d)(i),  this court observed in Para-24:      "The provision in the sub-clause is      a plain  one and  does not admit of      any ambiguity. What it says is that      where the  goods are delivered in a      packed condition,  at the  time  of      removal, the  cost of  such packing      shall be  included  and  that  only      where such  packing is of a durable      nature and  is  returnable  by  the      buyer to  the assessee,  should the      cost  of   such  packing   be   not      included in the value of the goods.      The   concept    of   primary   and      secondary  packing   has,  however,      been urged  by  the  assessees  and      recognised to  some extent  in  the      decisions of  this Court  including      Bombay Tyre International. While it      may not  be possible for us to wish      away  the   said  distinction,   we      cannot but  remind  ourselves  that      this is  a refinement not borne out      by  the  express  language  of  the      enactment and  must, therefore,  be      resorted   to    with   care    and      circumspection."      In Para 25, the Court referred to the holding in Bombay Tyre International on this aspect to the effect: "(I)t seems to  us  that  the  degree  of  secondary  packing  which  is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate  is the  degree of  packing whose  cost can  be included in  the ‘value’  of the  article for the purpose of the excise levy." Reference was then made to the decision of this Court  in Union  of India  v.  Godfrey  Phillips  India Limited [1985  (4) S.C.C.  369]. It was pointed out that the said decision  was rendered  by the  very same  Bench  which decided Bombay  Tyre International.  It was also pointed out that the  test  evolved  by  the  majority  [R.S.Pathak  and A.N.Sen,JJ.] and  minority [P.N.Bhagwati, CJ.] was identical and that  the different  conclusions arrived  at by them was mainly attributable  to the  difference in perception of the factual situation  [see Para 30]. The Court then referred to the  decision  in  Geep  Industrial  Syndicate  Limited  and pointed out again that the factual position in this case too

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was perceived  to be  the same as in Godfrey Phillips, viz., that the  wooden boxes  were not  necessary for  putting the torches and  batteries in  the conditions  in which they are generally sold  in the wholesale market at the factory gate. It was  stressed that  so far  as  the  test  applicable  is concerned, there was no departure from the one enunciated in Bombay Tyre International.      The decision  in Madras Rubber Factory next referred to the opinions  of Sabyasachi Mukharji, J. and S. Ranganathan, J. in  C.C.E. v.  Ponds (India) Limited [1989 94) S.C.C.759] and expressed  its entire  and respectful agreement with the test evolved by Mukharji, J. which reads:      "The  question   is  not  for  what      purpose  a   particular   kind   of      packing is  done but  the  test  is      whether  a  particular  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 and if      they  are  generally  sold  in  the      wholesale  market  at  the  factory      gate in  certain packed  condition,      whatever may be the reason for such      packing, the  cost of  such packing      would be includible in the value of      the goods  for assessment to excise      duty........The  correct   position      seems to  be that  the cost of that      much of  packings, be  they primary      or secondary, which are required to      make the  articles marketable would      be includible  in  the  value.  How      much packing  is necessary  to make      the goods  marketable is a question      of  fact   to  be   determined   by      application    of    the    correct      approach."      The Bench  also expressed  its  respectful  concurrence with the  opinion of Ranganathan, J. where the learned Judge pointed out  that the words "which is necessary" in the test evolved in  Bombay Tyre  International has  led  to  certain further refinement  in Godfrey  Phillips and Geep industrial Syndicate and then observed:      ".......in judging the condition of      packing  whose   cost  is   to   be      included in  the assessable  value,      one should go by the conduct of the      parties  and   the  nature  of  the      packing   in    which   the   goods      generally  are  -  not,  can  be  -      placed     in     the     wholesale      market.......what is  to be  really      seen in this: What is the condition      of  packing   considered   by   the      manufacturers, having regard to the      nature of the business, the type of      goods concerned,  the unit  of sale      in the  wholesale market  and other      relevant  considerations,   to   be      generally necessary for placing the      goods for  sale  in  the  wholesale      market  at  the  factory  gate.  In      Godfrey  Phillips  and  Geep,  this      Court was  concerned with a special

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    type  of   packing   which   seemed      intended more to protect the packed      goods  against   injury  or  damage      rather  than  to  enable  it  being      placed in  the market.  Indeed,  in      Godfrey  Phillips,   this   was   a      factual  position   that  had  been      accepted   by    the   departmental      authorities earlier for a period of      a little  over six years which they      later wanted to go back upon."      After considering  some other  cases, the  decision  in Madras Rubber  Factory stated  the  test  in  the  following words:      "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."      Sri Sorabjee  placed a  good about of emphasis upon the word "necessary" occurring in the above test. It appeared as if the  learned counsel  was emphasising the said expression to the  exclusion of  all others in the said test. The test, as stated  by  this  Court  in  Madras  Rubber  Factory,  is "whether packing,  the cost  of where  of 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". The same was  reiterated employing  the  words  in  Bombay  Tyre International, to wit: "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". We  think it  appropriate  to point out  that the  test evolved  by this  Court in  Madras Rubber Factory  should be read and understood in the context of  the  preceding  discussion  including  the  express  and repeated affirmance  of the  test evolved  by  Mukharji  and Ranganathan, JJ.  in Ponds India Limited which is, in truth, nearer to  the definition  of the  word "value"  in  Section 4(4)(d)(i) of  the Act.  The word  "necessary" in  the  test evolved by  Bombay Tyre  International and  as reiterated in Madras Rubber Factory need not be over-emphasised. According to madras  Rubber Factory,  the true test is in terms of the one evolved  by Mukharji and Ranganathan, JJ. in Ponds India Limited, viz.,  "whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the  course of  wholesale trade  to the wholesale buyer". While judging  the necessity  of the  packing, what one must see is  whether it  is necessary  for putting  the excisable article in the condition in which they are generally sold in the wholesale  market at  the factory  gate and this must be judged  from   the  conduct  of  the  manufacturer  himself. Ordinarily speaking, no manufacturer would provide a packing which is not necessary for putting the excisable articles in the condition in which they are sold in the wholesale market at the  factory gate.  [Where a  special kind  of packing is

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provided by  the manufacturer  at the  specific request of a buyer, the  situation would be different but that is not the situation herein.] Therefore, one can proceed on the footing that whatever packing is provided at the time of delivery of the goods  at the  gate is  the packing  necessary  for  the purpose of  putting the  excisable articles in the condition in which  they are generally sold in the wholesale market at the factory gate. Unless the manufacturer establishes that a particular packing,  provided at  the time of such delivery, was not  really necessary for that purpose, the value of the packing cannot  be excluded.  In our respectful opinion, the above is  the correct understanding of the principle and the ratio of Madras Rubber Factory.      Now coming  to the facts of the case before us, we find that the  factual situation considered by this Court in 1986 in Geep  Industrial Syndicates  [this very assessee] and the factual situation now obtaining is no different. It was held by this  Court in  the said  decision that packing in wooden boxes was  not necessary  for putting  the articles  in  the condition in  which they are generally sold in the wholesale market at the factory gate and that it was done only for the purpose of  protecting them from damage during the course of transport,  i.e.,    transport  after  delivery.  The  7-ply corrugated cartons have now taken the place of wooden boxes. But for  this, there  is no  change in the factual situation since 1986.  In such  a factual  situation, it  would not be permissible for  us to arrive at a different conclusion than the one arrived at in 1986*. On this ____________________________________________________________ *    The decision  in Geep Industrial Syndicate was actually rendered on  April 2,  1986 though  reported in  Excise  Law Times in the year 1992.      ground alone, we hold in favour of the assessee.      For the  reasons recorded  hereinabove,  Civil  appeals Nos. 4608-4612  of 1996  and 4960  of 1996 [preferred by the assessee] are  allowed and  Civil Appeal  No. 14407  of 1996 [preferred by  the Revenue]  is dismissed. There shall be no order as to costs.