KIRLOSKAR CUMMINS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners are a Company incorporated under the Companies Act and are running a factory at Pune where diesel engines are manufactured. The petitioners import diverse diesel engine components from United States for the purpose of their business and the components of such diesel engines attract Customs Duty as per the provisions of the Indian Customs Act read with the provisions of the Indian Tariff Act, 1934. Under the provisions of the Indian Tariff Act, the Customs duty on an ad valorem basis was levied on the components.

(2.) On November 25, 1967, in exercise of the powers conferred under sub-section (1) of Section 25 of the Customs Act, 1962, the Central Government issued Notification No. 114, inter alia, providing that where the goods are imported in India packed in any materials, the materials in which the goods are so packed would be exempt from the whole of the duty of customs including countervailing duty, provided that the goods were packed in materials normally used in trade for packing such goods and the packing was not suitable for repeated use. The petitioners were importing components from United States of America from their collaborators Cummins Engine Company and the practice generally followed by the suppliers was to charge from their buyers the price of the particular components and a standardised packing charge at the rate of 4% of the value of such material. The components were packed in ordinary wooden boxes and creates which where not suitable for repeated use as they were fragile and often broke during handling. After the date of the Notification, certain consignments were imported by the petitioners and the petitioners claimed that the assessable value of the goods for the purposes of customs duty should be computed by excluding from the total invoice value the 4% packing charges. The Assistant Collector of Customs did not accept the claim and so also the Appellate Collector. The petitioners carried a revisional application before the Government of India, Ministry Finance, and by an order dated May 26, 1973, the claim of the petitioners was accepted. The revisional authority accepted various certificates issued by the various carriers certifying that the packing material was ordinarily used in trade for packing and was not durable. In pursuance of the order of the authorities, the petitioners became entitled to claim that the assessable value should exclude the packing charges of 4% as mentioned in the invoices.

(3.) The Central Government in supersession of the Notification No. 114 published Notification dated June 10, 1972 in exercise of the powers under sub-section (1) of Section 25 of the Customs Act. By this Notification, an additional condition was included to claim benefit under the Notification. The additional condition was that the value of the packing material should be included in the value for which the goods contained in the invoices. It would be appropriate to quote this additional condition :-