BHAVNAGAR ELECTRICITY COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) BY the order dated 21st July 1981 the Assistant Collector, Central Excise, Bhavnagar, rejected the application of the Bhavnagar Electricity Co. Ltd., Bhavnagar (petitioner) for claim of deduction of 0 -75 p. per tin while determining the value of the excisable goods as the petitioner was paying 0 -75 p. per tin as commission to two wholesale dealers. That order is produced at Annexure "1 -4" to the petition. By the order dated 26th June 1981 (Annexure "G"), the Assistant Collector, Central Excise, Bhavnagar, rejected the petitioner's application not to include the value of the tin containers in assessable value of vegetable products on the ground that the packing or putting vegetable product in tin containers could not be said to be process incidental or ancillary to the completion of manufactured product. It was rejected on the basis of Section 4(4)(d)(i) of the Central Excises of Salt Act, 1944 as there was no understanding between the manufacturer and the customers or dealers, express or implied, to the effect that packing material (tins) is to be returned to the manufacturer so that it can be used again for packing the product. By orders dated 12th August 1981 (Annexures "7", "8" and "10"), the Assistant Collector, Central Excise, Bhavnagar, rejected the petitioner's applications for refund on the ground that those application were beyond the period of six months.

(2.) AT the time of hearing of this petition, the learned Advocate for the petitioner submitted that the order passed by the Assistant Collector, Bhavnagar, on 21st July 1981 (Annexure "1 -4") is illegal because for determining the value of excisable goods under Section 4(4)(c)(ii) the trade discount allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale, is required to be excluded.

(3.) FURTHER , it cannot be said that the order passed by the Assistant Collector, Central Excise, rejecting the petitioner's application praying that value of excisable goods manufactured by the petitioner should be determined by excluding the cost of the tin, is in any way illegal or erroneous. Section 4(4)(d)(i) specifically provides that where the goods are delivered at the time of removal in a packed condition, the cost of such packing except the cost of the packing which is of a durable and is refundable by the buyer to the assessee, is to be included for determining the value of the excisable goods. In view of the aforesaid section, normally when goods are sold in packed condition, such cost of packing is required to be included in the value. For getting benefit of exception manufacturer has to prove that the packing is of durable nature. He has further to prove that it is returnable by the buyer to the assessee. There is no evidence on record that there was agreement between the assessee and the buyer that packing material, i.e. the tins were returnable by the buyer to the assessee. Apart from the section itself being very clear, this question is also covered by the decision of the Supreme Court in the case of K. Radha Krishnaiah v. Inspector General, Excise Gooty. A. I. R. 1987 Supreme Court 1774. In that case the Court has held that unless there is an arrangement between the assessee and the buyer that packing shall be returned, it cannot be said that packing is returnable. The relevant observations are as under: