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PETITIONER: UNION OF INDIA & ORS.ETC.

       Vs.

RESPONDENT: METAL BOX CO. OF INDIA LTD.ETC.

DATE OF JUDGMENT:       01/10/1996

BENCH: B.P. JEEVAN REDDY, SUHAS C. SEN

ACT:

HEADNOTE:

JUDGMENT: J U D G M E N T B.P.JEEVAN REDDY,J.      Leave granted  in the  Civil Appeal  No.12657  of  1996 [arising from special Leave Petition (C) No.1836 of 1982].      Common questions of law arise in this batch of appeals. For the  sake of  convenience, we may deal with the facts in Civil Appeal  No.100 of  1981 [Union  of India  v. Metal Box Company of  India Ltd.]. The matter arises under the Central Excises and Salt Act, 1944.      The respondent,  Metal Box  Company of  India  Limited, were manufacturing  tubes,  popularly  known  as  "aluminium collapsible and  rigid tubes".  The collapsible  tube  is  a cylinder of  pliable  metal.  These  tubes  were  originally manufactured  from   lead  but   later   they   were   being manufactured predominantly  from aluminium.  The  respondent was manufacturing the said tubes from aluminium by extrusion process". After  the tube  is delivered  from the  extrusion press, it  is trimmed  to a correct length and its nozzle is threaded to  the appropriate specification. According to the respondent, the  operation of extrusion is completed at this state and  the resultant  product is  known as  an "extruded tube".  According   to  the   respondent  further,   several processes/operations are done to such tubes like, making the tube collapsible,  giving coating with appropriate colour to the tubes,  printing the  appropriate material  as  per  the desire of  the customer,  fitting  caps  to  the  tubes  and packing them  into cartons. According to the respondent, all these operations  are post-extrusion  operations and totally distinct from the operation of extrusion.      One of  the customers  of the  respondent was  Colgate- Palmolive  [India]   Private  Limited.   According  to   the agreement arrived  at between  the respondent  and  Colgate- Palmolive, the  latter was  to purchase  and supply  to  the respondent the  plastic caps  to be  fitted to the aluminium extruded tubes  manufactured by  the respondent. On December 29, 1971,  the respondent  wrote a  letter to  the Assistant Collector of  Central Excise pointing out the said agreement and asking  for approval  of the  enclosed price list [which did not  include the cost of the caps]. While the matter was pending, the  respondent filed  a revised  price  list.  The

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excise officer,  however, called  upon the respondent to pay excise duty  including the value of the caps in the value of the tubes.  The respondent  thereupon approached  the Bombay High Court  by way  of a  writ petition [No.511 of 1973] for issuance of a writ, order or direction to the Central Excise authorities not  to include  the costs/charges  relating  to coating or  printing and  relating to plastic caps fitted to extruded aluminium  tubes in  the assessable  value of  such tubes. The  respondent also  asked for  the quashing  of the demand notice  issued by  the Central  Excise Officer. It is significant to note that while the controversy raised by the respondent before  the excise  authorities pertained only to the inclusion  of the  value of  the  plastic  caps  in  the assessable value  of the  said tubes,  a larger  relief  was asked in  the writ  petition seeking  the exclusion  of  the value of  coating/printing in  addition to  the exclusion of the value  of plastic  caps. The learned Single Judge of the Bombay High  Court allowed  the writ petition. The reasoning of the  learned Single Judge is to be found in the following observations:      "It is  accepted on  behalf of  the      respondents that the extruded tubes      are sold  in the  market either  in      their maked  (naked?) form or after      lacquering or  printing or  fitting      with caps  thereon. It  is accepted      that the  extruded tubes  are known      in the  market  although  they  are      neither lacquered  nor  printed  or      fitted with  caps. The respondents,      by paragraph  5 of the return, have      further   conceded   that   certain      processes are carried out after the      process    of    extrusion    takes      place....what is  liable for excise      duty is  a manufactured  product of      extruded   tubes...    only   those      processes which  are incidental  or      ancillary to  the completion of the      manufactured  product   would  come      within    the     expression     of      ’manufacture’....It is  undoubtedly      true  that   the  excise   duty  is      leviable on  an article  when it is      taken outside  the factory  and the      rate of the duty is determined with      reference to  the date of which the      article is  taken outside the place      of manufacture. But that fact would      not enable  the respondents to take      into  consideration   the  cost  of      printing, painting  or fitting  the      caps which  is really in the nature      of  post   manufactured  cost.  The      process of  manufacture of extruded      tubes is  not postponed  till  such      tubes   are   painted,   lacquered,      printed or  fitted withe caps. That      operation is  done only to suit the      convenience of  the customer and is      clearly     a     post-manufactured      operational process. That being so,      it is  not possible  to include the      cost  of   those  operations  while      determining the  value of  extruded

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    tubes for  the  purpose  of  excise      duty."      The learned Judge relied upon and followed the decision of the  Gujarat High  Court  in  Extrusion  Process  Private Limited v.  N.R.Jadhav,  Superintendent  of  Central  Excise [1979 E.L.T.  J380 =  74 Gujarat  Law Reporter  161]. A writ appeal preferred  by the Revenue against the judgment of the learned Single  Judge was  dismissed in limine by a Division Bench of  the High Court on March 24, 1980 [Appeal No.129 of 1980].      A reading  of the judgment of the learned Single Judge, which was  rendered on  July 24,  1979,  shows  that  it  is influenced by  the concept  of "post-manufacturing expenses" which was  then in  vogue but  which theory  has since  been rejected by  this Court  in Union  of India  v. Bombay  Tyre International [1984  (1) S.C.C.467]  and again  recently  by this Court  in Government  of India  & Ors. v. Madras Rubber Factory Ltd.  & Ors.  [1995 (4)  S.C.C.467] where  even  the expression "post-removal  expenses" is  held to  be  not  an accurate description  of the  method of  levy and  valuation underlying Sections  3 and  4 of  the Central Excise Act. We find it  difficult to  sustain the  judgment of  the learned Single Judge  and of  the Division  Bench, for more than one reason. But  first we  must mention  that the filing of, and entertaining,  the  writ  petition  straightaway  against  a notice  of   demand  issued  by  a  Central  Excise  Officer [Superintendent of  Central Excise]  in a  matter  involving valuation was inadvisable. It has been repeatedly deprecated by this  Court,  the  latest  decision  being  in  Executive Engineer, Bihar  State Housing Board v. Ramesh Kumar Singh & Ors. [1996  (1) S.C.C.327],  which decision  refers  to  and affirms the ratio of the earlier decisions of this Court.      Now coming  to the  merits of  the case,  the  relevant tariff item,  viz., Tariff  Item 27  in the  Schedule to the Central Excise  Act, as  it stood at the relevant time, read as follows:                "ALUMINIUM      (a) (i) In any crude form including      ingots, bars, blocks, slabs,      billets, shots and pellets.      (ii)  Wire   bars,  wire  rods  and      castings, not otherwise specified.      (b) Manufactures, the following:      namely, plates, sheets, circles and      strips in  any form  or  size,  not      otherwise specified.      (c) Foils,  that is  a  product  of      thickness (Excluding  any  backing)      not exceeding 0-15 millimeters.      (d) Pipes  and  tubes,  other  than      extruded pipes and tubes.      (e) Extruded  shapes  and  sections      including   extruded    pipes   and      tubes."      Subsequently, clause  (f) has  been added  in the above Tariff Item,  which reads: "(f) Containers, plain, lacquered or printed  or lacquered  and printed".  The  definition  of "manufacture", as  inserted by  the Finance  Act (No.25)  of 1975 with  effect from  March 1,  1975 reads,  insofar as is relevant, thus:      "(2f)  ’Manufacture’  includes  any      process incidental  or ancillary to      the completion  of  a  manufactured      process; and....."      Section 4  provides that  where the  duty of  excise is

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chargeable  with  reference  to  value,  such  value  shall, subject to  other provisions  of the said section, be deemed to be  the normal  price thereof. The normal price means the price at  which  such  goods  are  ordinarily  sold  by  the assassee 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 - vide Section 4(1) (a).      In Bombay  Tyre International, it has been held by this Court that  the wholesale cash price at the place of removal is the  basis for  determination of  value of  an  excisable article and  whatever be  the wholesale  cash price at which the excisable  article is  sold in  wholesale trade  at  the place of  removal would represent the value of the excisable article on  which  excise  duty  is  leviable  and  that  no deduction from  such wholesale  cash  price  is  permissible except in  respect of  trade   discount and  the  amount  of excise duty  payable at the time of removal of the excisable article from the place of removal. It has been held that the expenses incurred  by the assessee upto the date of delivery cannot be  excluded from the assessable value. Of course, so far as the cost of packing is concerned, separate principles have  been   enunciated  in  that  behalf  which  have  been reiterated and  explained recently  in Madras Rubber Factory Limited, where  it has  been reiterated that the fundamental criterion for  computing the  value of the excisable article is the  price at  which the excisable article is sold by the manufacturer and  that it is not the bare manufacturing cost and manufacturing  profit which  constitute  the  basis  for determining such  value. It  has  also  been  held  that  no deductions  except   those  provided   by  Section   4   are permissible to be made from the wholesale price and that all expenses incurred  on account  of several factors which have contributed to  the value  of the  excisable goods  upto the date of  sale/date of  delivery are  liable to  be included. Applying the  said test, it would be evident that the theory underlying the  judgment of  the learned  Single Judge  that only the  value of the extruded tube shall form the basis of the  assessable   value  and   that  the  costs/charges  for coating/printing etc.  are not  includible in the assessable value, is  unsustainable in  law. It  is  not  necessary  to discuss the issue relating to packing charges for the reason that it  has not  been agitated  before us. [As we have said earlier, the law in that behalf is enunciated in Bombay Tyre International and Madras Rubber Factory Limited.]      For these  reasons, it  is also  not possible for us to agree with  the  decision  of  the  Gujarat  High  Court  in Extrusion Process Private Limited.      So far as the value of the plastic cap is concerned, it is submitted  by the learned counsel for the assesse that it is not  only supplied  by the  purchaser to the assessee but that it  does not form part of the tube which is sold by the assessee to  the purchaser.  It is  further submitted by the learned counsel that fitting of the cap to the tube does not amount to  manufacture, because  these caps are manufactured separately and  by another manufacturer. The learned counsel invited our  attention to  the order  of  this  Court  dated November 20,  1989 dismissing  Civil Appeal  No.1930 of 1984 filed by  the Collector of Central Excise, Calcutta, against the appellate  Tribunal’s order  in the case of Metal Box of India Ltd.,  Calcutta v.  Collector of Central Excise itself [reported in  1983 (13)  E.L.T.956] whereunder  the Tribunal had upheld  the aforesaid  contention of  the Metal  Box. We are, however, of the opinion that whether the cap forms part of the tube cleared and sold by the respondent, or not, is a

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question of  fact to  be decided  in a  given  case  and  no generalization is possible.  There has been no investigation of this  factual aspect  in this case because the respondent rushed to  the High  Court soon  after receiving  the demand notice. Moreover,  the said  decision was  rendered prior to the decisions of this Court in Bombay Tyre International and Madras Rubber  Factory Limited.  We do not, however, express any opinion  on the  correctness or  otherwise of  the  said decision of  the Tribunal in Metal Box of India Ltd. [(1983) 13 E.L.T.956].  The proper course in the circumstances is to leave the  matter to  be gone  into and  determined  by  the appropriate authority in charge of approving the price list. The  authority   shall  decide   the  said   question  after ascertaining the  relevant facts and in the light of the law declared by this Court.      The appeal  is accordingly  allowed and the judgment of the learned  Single Judge  and the  Division  Bench  of  the Bombay High  Court is  set aside   subject  to the direction that insofar  as the  inclusion of  the value of the plastic caps in  the value  of the  extruded tubes is concerned, the matter shall  be gone into and determined by the authorities under the Act in accordance with law. No costs.      In one  of the  appeals, viz.,  Civil Appeal No.2132 of 1991,  which   deals  with   the  position  obtaining  after inclusion of  clause (f)  in Tariff Item 27, the validity of the said  clause (f)  is challenged. The challenge is liable to fall  in view  of the  decision of  this Court  in Ujagar Prints &  Ors.etc. v.  Union  of  India  &  Ors.  [1989  (3) S.C.C.488]. Yet  another contention  raised in  this  appeal relates to the validity of the levy of duty upon these tubes between June  1, 1980 and August 25, 1980. The contention is that the  Finance Bill introducing clause (f) in Tariff Item 27 was  introduced in  Parliament on  June 18, 1980 and that the Bill  became law  on passing  of the Finance (No.2) Act, 1930 with  effect from August 25, 1980. It is submitted that though a  declaration  as  provided  by  Section  3  of  the Provisional Collection  of Taxes  Act, 1931  was made  while introducing the  said Bill  in Parliament,  such declaration cannot enable  the excise authorities to include the charges of printing  and lacquering  in the  assessable value of the said tubes  and  rigid  cans.  Not  only  is  this  argument untenable  in  law  but  it  does  not  actually  arise  for consideration in  view of our holding in Civil Appeal No.100 of 1981,  that even apart from the said clause (f), the said charges are includible in the assessable value.      For the  above reasons,  civil appeal [No.2132 of 1991] is dismissed. No costs.      Civil Appeal  Nos.3660 of  1991 and 5017 of 1991, filed by the  assesses, are  also dismissed  for the same reasons. Civil Appeal No.63 of 1992 and Civil Appeal No.12657 of 1996 [arising out  of S.L.P.(C)  No.1826 of  1982, filled  by the Revenue, are allowed. No costs.