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CASE NO.: Appeal (civil)  1115 of 2000

PETITIONER: Triveni Glass Ltd.                                                          

RESPONDENT: Union of India & Ors.                                               

DATE OF JUDGMENT: 22/02/2005

BENCH: S. N. Variava,Dr. AR. Lakshmanan & S. H. Kapadia

JUDGMENT: J U D G M E N T

S. N. VARIAVA, J.

       This Appeal is against the Judgment dated 14.10.1999 passed by  the High Court of Allahabad at Allahabad.           Briefly stated the facts are as follows:-         The Appellants are manufacturers of sheet glass. The question  for consideration is whether the costs of wooden crates, in which the  sheet glass is packed, is includible in the assessable value of sheet  glass.         The relevant portion of Section 4 of The Central Excises and Salt  Act, 1944 (hereinafter referred to as ’the Act’) reads as follows:

"SECTION 4. Valuation of excisable goods for  purposes of charging of duty of excise.- (1) Where  under this Act, the duty of excise is chargeable on any  excisable goods with reference to value, such value, shall,  subject to the other provisions of this section, be deemed  to be \026

(a)     the normal price thereof, that is to say, the  price at which such goods are ordinarily sold  by the assessee to a buyer in the course of  wholesale trade for delivery at the time and  place of removal, where the buyer is not a  related person and the price is the sole  consideration for the sale:

xxx                     xxx                     xxx xxx                     xxx                     xxx

       (4) For the purposes of this section, -

       xxx                     xxx                     xxx                 xxx                     xxx                     xxx

(d) "Value", in relation to any excisable goods, -         (i) where the goods are delivered at the time  of removal in a packed condition, includes the  cost of such packing except the cost of the  packing which is of a durable nature and is  returnable by the buyer to the assessee.

Explanation.- In this sub-clause, "packing" means  the wrapper, container, bobbin, pirn, spool, reel or warp  beam or any other thing in which or on which the excisable  goods are wrapped, contained or wound.

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       xxx                     xxx                     xxx         xxx                     xxx                     xxx"

       Thus, as per the statutory provision the cost of packing is  includible in the value of the goods unless the packing is of the durable  nature and is returnable by the buyer to the assessee.         In this case the Appellants filed a price list in which the cost of  wooden crates was not included.  The Assistant Collector passed  orders including the costs of the wooden packing in the assessable  value of the glass sheets.  The Appeals filed by the Appellants were  allowed by the Collector (Appeals) and it was held that the special  packing was not necessary for making them marketable and thus the  costs is not includible in the value of the glass sheets.          It appears that the Assistant Collector still approved the price list  only by including the costs of the wooden crates.  The Appellants thus  filed a Writ Petition in the Allahabad High Court claiming that the  action of the Assistant Collector was in defiance of the Order of the  Collector (Appeals) and that the Assistant Collector be directed to  exclude the costs of wooden crates.         It must be mentioned that against the Order of the Collector  (Appeals) the Department had filed Revisions before the Central  Government.  With the constitution of the Customs, Excise and Gold  (Control) Appellate Tribunal (CEGAT) the Revisions were transferred to  CEGAT.  CEGAT disposed off these Revisions by concluding that the  cost of wooden crates was not to be includible in the assessable value  of glass sheets.         However, in the Writ Petition filed by the Appellants the High  Court has, by the impugned Judgment, held that the costs of the  wooden crates was includible in the value of the glass sheets as it was  necessary to put the glass sheets in a condition in which they can be  sold in the wholesale trade.  The High Court also held that the wooden  crates were not durable and returnable.  Thus this Appeal.         Two questions arise for consideration by us: (i)     Whether the costs of wooden crates is includible in the  value of glass sheets; and (ii)    Whether the wooden crates can be said to be "durable  and returnable packing".

       We have today delivered a Judgment in Civil Appeal No.  3819/1999 and a batch of similar Appeals wherein it has been held  that the costs of wooden cases is includible in the value of glass  sheets.  For the reasons set out in that Judgment we answer the first  question against the Appellants and hold that the costs of wooden  packing is includible in the value of glass sheets.  To this extent the  impugned Judgment cannot be faulted.         In support of their contention that the wooden cases are durable  and returnable the Appellants rely upon a Clause in their bills/invoices  which reads as follows: "Packing charge:- packing of durable and returnable  nature subsequent to initial packing for facilitating safe  transport which will be refunded if the same are returned  intact @ Rs.140/- per crate."

       Reliance is also placed upon the case of Mahalakshmi Glass  Works (P) Ltd. v. Collector of Central Excise reported in 1988 (36)  E.L.T. 727 (SC) wherein it has been held that under Section 4(4)(d)(i)  of the Act the costs of packing which is of durable and returnable  nature is to be excluded. It is held that there must be an arrangement  between the buyer and the assessee that the packing be returned to  the assessee.  It is held that it is not the physical capability of the  packing to be returned which is the determining factor but the  condition that if the buyer chooses to return the packing the seller is   obliged to accept it and refund the stipulated amount.  It is held that

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the question whether the packing is actually returned or not has no  relevance.         Reliance was also placed upon the case of Wipro Products Ltd.  v. Union of India reported in 1991 (51) ELT 281 (Bombay).  In this  case Bombay High Court took the view that actual return or the extent  of return has no relevance and that all that is required is that there  must be an obligation on the seller to accept the packing if the buyer  chooses to return it.         In the case of Gobind Glass Industries Ltd. v. Commissioner  of Central Excise, Ahmedabad reported in 2002 (150) ELT 293,  CEGAT has also taken the same view.  In this case CEGAT has held  that the costs of wooden crates used for packing glass sheets would be  excludible from the value of glass sheets if there was an arrangement  under which the seller was obliged to take back the crates and pay the  stipulated amount if the buyer chooses to return the crates.         In the impugned Judgment the Allahabad High Court has held  that there was no evidence that, even in a single case any wooden  crate had been returned to the Appellants. The High Court has held  that term "durable" meant that the packing was of such a nature that  the manufacturer intended to use it again and again and thus the  condition must be one that the buyer must return the packing to the  seller. It has been held that the mere theoretical possibility of the  crates being returned was not sufficient.         Mr. Venkataramani has supported the view of the High Court and  submitted that the cost would only get excluded if the crates are  actually returned.           We have considered the submission of the parties.  In our view,  the law laid down by this Court in Mahalakshmi Glass Works (P)  Ltd. (supra) is the correct law.  There is no necessity that the crates  must be actually returned.  So long as there is an obligation on the  seller to take back the crates, if the buyer chooses to return them, it is  sufficient.  The term in the contract, set out above, imposes an  obligation on the Appellants to take back the wooden crates and to pay  the stipulated amount to the buyer if the buyer chooses to return  them.  Wooden crates merely consist of planks of wood which are  nailed together.  Therefore, even if they are dismantled by the buyer  and the planks are returned to the Appellants the Appellants would be  in a position to use them again.  In our view, the High Court was  wrong in holding that the wooden crates are not durable or returnable.   The answer to the second question therefore has to be in favour of the  Appellants.  It is held that, in view of the specific term in the  bills/invoices, the wooden crates are durable and returnable packing  whose costs is not to be included in the value of glass sheets.         In this view, the impugned Judgment is set aside on this point.  To this extent the Appeal is allowed.  There will be no order as to  costs.