MUSIC INDIA LIMITED, RAMESH AMBALAL PATEL Vs. UNION OF INDIA , ASSISTANT COLLECTOR OF CENTRAL EXCISE, DIVISION VIII

JUDGEMENT

(1.) The petitioner No. 1 is a Public Limited Company registered under the provisions of the Companies Act and is engaged in the manufacture of gramophone records and music cassettes. The petitioner No. 1 has a factory at Kandivli in Bombay where gramophone records and music cassettes are manufactured. The gramophone records are liable to excise duty under Tariff item No. 37A, while music cassettes under Tariff Item No. 59. The petitioners cleared the goods prior to year 1980 after payment of excise duty upon assessable value which was inclusive of post-manufacturing expenses. It is the claim of the petitioners that they became aware of the judgment of this Court in the case of Bombay Tyres International Ltd. V/s. Union of India, 1979 4 ELT 625 1980 Census 37D delivered in November 1979 and realised that the assessable value cannot include post-manufacturing expenses. On May 27, 1980, the petitioners submitted price list to the Assistant Collector in which the assessable value stated was one determined after excluding the post-manufacturing expenses. The petitioners also filed revised price list but the Assistant Collector rejected the price list holding that the petitioners cannot deduct the post-manufacturing expenses for ascertaining the assessable value. The petitioners thereafter filed fresh price lists from time to time, but on the insistence of the Department that the assessable value should include the post-manufacturing expenses proceeded to clear the goods on payment of duty under protest. The petitioners thereafter instituted the present petition under Article 226 of the Constitution of India on July 28, 1982.

(2.) During the pendency of this petition, the Supreme Court delivered judgment dealing with deduction of post-manufacturing expenses in ascertaining the assessable value under Section 47 of the Central Excises and Salt Act (hereinafter referred to as the "Act") and that judgment is in the case of Union of India V/s. Bombay Tyres International Limited,1983 ELT 1896. In view of this judgment when the petition came up before me for hearing on December 9, 1983, certain directions were given and the petitioners were permitted to claim deductions for (a) insurance, (b) freight and forwarding, (c) cost of secondary packing, (d) trade discount, and (e) Bonus to dealers. By my order, I directed that the petitioners should file a fresh statement of deductions in respect of price list already filed and on such statement being filed, the Assistant Collector of Excise should pass a speaking order after giving opportunity to the petitioners to substantiate their claim and after a personal hearing. Accordingly, the petitioners filed their fresh statement claiming deductions in accordance with the decision of the Supreme Court and thereupon the Assistant Collector after hearing the petitioners passed order dated May 3, 1984 granting certain discount while disallowing the claim under some heads. The Assistant Collector rejected the claim of the petitioners for refund in respect of the duty paid by inclusion of post-manufacturing expenses for the period commencing from January 1, 1977 to May 26, 1980 on the ground that the claim was barred by limitation as contemplated by Section 11 B(l) of the Act. The petitioners have amended the petition to challenge the legality of the order passed by the Assistant Collector.

(3.) Shri Shroff, learned Counsel appearing on behalf of the petitioners, restricted his challenge to the order of the Assistant Collector in respect of claims for deduction of post-manufacturing expenses, under four headings only. The learned Counsel urged that the Assistant Collector was in error in disallowing the claim of deduction in respect of secondary packing The Assistant Collector in paragraph 4. 02 of his order dealt with the claim under the heading Secondary Packing. The petitioners claim that the expenses incurred in respect of packing material like wooden boxes corrugated cartons, steel strap, plastic strap, gum tapes, etc. for goods meant for out-station deliveries must be deducted, while determining the assessable value. The Assistant Collector declined to grant the relief on the ground that the packings were used by the Company on its own without any requests from the buyers. The Assistant Collector held by reference to certain observations in the decision of the Supreme Court in the case of Bombay Tyres International Limited that secondary packing which is necessary for putting the excisable articles in the condition in which it is gene-rally sold in the wholesale market at the factory gate must be included in the value of the article for the purpose of excise duty. The Assistant Collector observed that secondary packing is very essential for the petitioners to forward the products, to the branches and as such costs are incurred in the normal course of business, and therefore the deduction for the expend incurred in respect of secondary packing cannot be granted Shri Shroff submits that the finding recorded by the Assistant Collector on this count is totally contrary to the decision of the supreme court in the case of Union of India and others V/s. Godfrey Philips India and others, 1985 22 ELT 306. The submission of the learned Counsel is correct and deserves acceptance, The Supreme court in the case of Godfrey Philips India Limited, after referring to its earlier decision Bombay Tyres International Limited, held that on a proper construction of Section 4(4)(d)(i) read with the Explanation, the cost of secondary packing done for the purpose of facilitating transport and smooth transit of goods to be delivered to the buyer in the wholesale trade cannot be included in the value for the purpose of assessment of excise duty. In the case before the Supreme Court, the facts were cigarettes after manufacture were usually placed in paper/cardboard packets containing 10 or 20 cigarettes and subsequently these packets were packet in paper-cardboard cartons, each of the cartons containing a number of packets of cigarettes. Number of such cartons were then put in corrugated wooden fibre board containers for delivery and the question arose whether the cost of packing in corrugated fibre board containers can be included in the value of cigarettes for the purpose of assessment of excise duty. The supreme Court held that the price of corrugated fibre board cannot be included because the secondary packing was done only for the purpose of facilitating the smooth transport of the cartons containing the packets of the cigarettes to the buyer in the wholesale trade. In view of the dictum laid down by the Supreme Court, it is impossible to sustain the finding of the Assistant Collector that the expenses incurred in respect of secondary packing material cannot be excluded while determining the assessable value of gramophone records and music cassettes.