ORDER M.C. Agarwal, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner prays for the following reliefs :
"i. Writ Order or direction in the nature of certiorari quashing the orders of the Assistant Collector, Central Excise, Allahabad dated 29-6-1981 and 30-6-1981 on the price list Nos. 1 of 1980 and 1 of 1981 (Annexure V & VI).
ii. Issue writ order or direction in the nature of mandamus directing the Assistant Collector Central Excise, Allahabad to approve the price lists as submitted by the petitioner excluding the cost of packing.
iii. Issue writ order or direction declaring Section 4 of the Central Excises and Salt Act to be ultra vires the legislative competence of the Parliament and/or to be ultra vires Section 3 of Act, which is the charging section.
iv. Issue writ order or direction restraining the respondents not to demand the excise duty on the cost of packing for the period form 19-6-1980 to 1-3-1981 and 2-3-1981 to 30-6-1981.
v. Issue writ order or direction in the nature of mandamus directing the Assistant Collector Central Excise to refund the amount of excise duty paid under protest on the cost of packing charges on or after 1st July, 1981 and not to demand any excise duty on the cost of packing charges on future clearance."
2. The petitioner is a company registered under the Companies Act, 1956 and is engaged in the business of manufacture and sale of excisable goods i.e. sheet glass. The question raised is about the inclusion of the cost of secondary packing in computing the assessable value of the goods for the levy of excise which is leviable ad valorem. Section 4 of the Central Excise Act, 1944 provides for determination of the value of excisable goods for the purpose of charging duty of excise and it was amended by Section 2 of the Central Excises and Salt (Amendment) Act, 1973 and was enforced from 1st October, 1975. The relevant portion of Section 4 of the Act is as under :-
"(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 -
(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:
Provided that -
(i) where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers not being related persons each such price shall, subject to the existence of the other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such class of buyers:
(ii)...
(iii)...
(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."
3. The petitioner contended that the excise duty levied at the point of manufacture and, therefore, the amended Section 4 was invalid in so far as it provided for the inclusion of the cost of packing. At the hearing, however, this contention on which relief (iii) was claimed was not pressed. The petitioner's case was stated in paragraphs 10,11,12 and 13 of the writ petition which are as under :
"10. That the petitioner has sold and is selling sheet glass, manufactured by it, in loose form i.e. without any packing as well as packing according to the instruction of the customers.
11. That the sheet glass is a very fragile item. It can break by the jerks of movement in transit from the factory to the place of purchaser. Its packing is done by the petitioner only and solely to avoid the risk of breakage in transit and to facilitate its safe delivery and transport. The packing of sheet glass has nothing to do with its manufacture.
12. That the petitioner packs sheet glass manufactured by it, because it is generally desired by its buyers. The packing is done to meet requirements of the buyers and they pay for it. Quite often packing is done in advance to avoid delay in delivery and to bring efficiency in sales.
13. That the buyers of the petitioner are at liberty to purchase sheet glass from the petitioner without any packing or to purchase it and to take delivery of it in their own packing materials. They can purchase it and take its delivery in their own trucks or vehicles, which may be layered with materials, such as, hay or grass to protect it from breakage during transits."
4. The petitioner submitted the price list of its product for approval and the Assistant Collector, Central Excise by order dated 20th June, 1981 approved the price list subject to inclusion in the assessable value of packing charges when the goods are cleared in packed condition. This order, copy of which is Annexure 5 to the writ petition was in respect of price list No. 2 of 1980 dated 18-6-1980. Annuxure 6 is another order in respect of price list No. 1 of 1980 in which also the same condition was placed. The price list as contained in Annexure 6 states that the prices mentioned in column 3 include the costs of initial packing i.e. bundle packing. Against the aforesaid order the petitioner filed appeals to the Appellate Collector who allowed the appeals by order dated 14-10-1977. The Central Government proposed to revise the order passed by the Appellate Collector in exercise of powers under Section 36 of the Act and issued notices in that regard to the petitioner who in its turn claimed a refund of the excess duty paid and having failed to get the refund filed writ petition No. 477 of 1978 which was allowed by this Court and the respondents were directed to refund Rs. 12,70,367.35 paise. It was only after this Court's order and the subsequent threat of contempt proceedings that the aforesaid amount was ultimately refunded. The petitioner has stated that it has not paid the excise duty on the costs of packing for the period 19-6-1980 to 1-3-1981 and 2-3-1981 to 30-6-1981. It is on the aforesaid averments that this petition was filed for the reliefs mentioned above.
5. The respondents filed a counter affidavit and the relevant averments have been made in paragraphs 9,10,11,12,13 and 14 of the counter affidavit which are reproduced below:
"9. That the contents of paragraph 10 of the writ petitioner, as stated therein are not admitted. It is incorrect to say that the petitioner has cleared sheet glasses in loose form. A case was registered against the petitioner for wrong declaration. In Gate pass No. 1 dated 8th January, 1976 the petitioner had shown that they had cleared 658 glass sheets in loose form. When the Excise Inspector concerned checked this consignment on the spot, it was found that the consignment had been cleared in 25 crates and not in loose form. For this contravention a case was registered which was adjudicated upon by the Superintendent (Technical) of I.D.O. Allahabad vide his Adjudication Order No. 17/MP/76 dated 30th November 1976 and a penalty of Rs. 30/- was imposed on the petitioner. In reply to the charge of the afrorsaid case the petitioner had admitted the mistake. It is also incorrect that the petitioners sell glass sheets in loose form without packing. The correct position is that the production of sheet glass in the factory of the petitioner is accounted for only when they are packed and the sheet glass loose form remains unaccounted for till they are packed. Only packed glass sheet can be cleared from the factory which are duly accounted for in the production account maintained by the petitioner under Central Excise Act and the Rules framed thereunder and sheet glass in loose form without packing cannot be cleared from the factory.
10. That the contents of paragraph 11 of the writ petition, as stated therein are not admitted. All the processes are ancillary and incidental to the completion of manufactured goods till the goods are finally accounted for in the records showing production and since the sheet glass is accounted for only when it is packed, the process of packing is ancillary and incidental to the completion of manufacture of the sheet glass.
11. That the contents of paragraph 12 of the writ petition are not admitted. Packing of sheet glass is necessary in order to make them portage and fit for storage. Packing is needed even for transferring the sheets from finishing room to the store-room.
12. That the contents of paragraph 13 of the writ petition are not admitted. Only these sheets of glass which have duly been packed and accounted for in the records relating to the production (in departmental terminology, it is known as R.G.I stage). The sheet glass which have not been packed are not taken out from the factory of the petitioner and the buyers are left with no alternative but to purchase the sheet glass in packed condition.
13. That the contents of paragraph 14 of the writ petition, as stated therein are not admitted. Packing of sheet glass is necessarily done by the petitioner to account for the sheet glass into production records and therefore, it is clear that the sheet glass cannot remaining the store room of the petitioner without packing.
14. That the contents of paragraph 15 of the writ petition as stated therein are not admitted. Sheet glass is supplied by the petitioner in a packed condition and the retailers can sell the sheet glass in the manner as they like. So far as the petitioner is concerned, the sheet glasses are always cleared and removed from the factory in a packed condition."
6. The petitioner filed a rejoinder affidavit and the relevant averments have been made as under :
"That in reply to the special packing in which delivery is sometimes given to the buyers on their request it is necessary to place some facts before this Hon'ble Court which had not been earlier placed. The packing which is done by the petitioner is of four types, namely, (1) bundle packing (2) frame packing, (3) crate packing and (4) case packing. As regards the bundle packing the practice is that its cost is included in the price of the sheet glass itself. As such the question of inclusion of the cost of bundle packing for determination of assessable value does not arise. The petitioner has been advised to state that, according to the correct legal position, the petitioner is entitled for the deduction of the costs of bundle packing from the price of sheet glass for determination of its assessable value. As regards the other three types of packing the following facts are necessary to be noted. First, these packings are only undertaken and supplied at the instance of the buyer. Secondly the cost of this packing is separately shown in the invoice; and it is paid by the buyer separately from the price of the sheet glass. Thirdly it is always specifically mentioned in the invoce that the cost of such packing is refundable to the buyer as and when he returns the packing material. By this condition the petitioner is always under an obligation to refund the costs packing to the buyer as and when the buyer may return packing material and ask for refund. Fourthly, the packing is durable and re-usable. If it not be so, the very purpose of the packing would be frustrated. This durability of the packing much protects the sheet glass inside during transit. The durability of the packing also makes the packing returnable if the buyer so desires. Fifthly, the packing is neither necessary nor is normally undertaken in the course of wholesale at factory gate. In the case of wholesale of sheet glass the Government of India has accepted the fact that sheet glass is completely manufactured and can be sold without any packing vide its Circular F. No. 6/24/74-CK 1 dated August 18,1975. A true copy of this circular is Annexure R.A. 52 to this affidavit. In this regard it may be stated that the buyers of the petitioner, who purchase sheet glass in packed condition use the same packing again for further delivery to their buyers. Lastly the normal whole sale at the factory gate is either in loose form or in bundle packing as stated above. The delivery is made at the factory gate in the above two forms in the normal course of whole sale business. The three other types of packing, namely, frame packing, crate packing and case packing, are not necessary for whole sale at the factory gate. These facts relating to wholesale of sheet glass by the petitioner are independent of the fact that the packing of sheet glass is a post manufacturing activity and its cost cannot be included in the assessable value for excise duty.
That the aforesaid three types of special packing, namely, frame packing, crate packing and case packing, is secondary packing. It is secondary because in the normal course of whole sale business delivery is being made at the factory gate either in loose form or in bundle packing. As already submitted, it is also secondary packing because it is not necessary if delivery is made at the factory gate in the course of whole sale trade. It is always at the option of the buyer to ask for the delivery in one of the aforesaid types of packing or to accept delivery in loose form or in bundle packing. In either of these cases he will not have to bear the cost of aforesaid secondary packing. To repeat, the buyer asks for such packing to prevent breakage of sheet glass in transit. Whenever the buyer does not fear the risk of breakage he accepts delivery in loose form or in bundle packing."
7. We have heard Sri Rajesh Kumar, learned Counsel for the petitioner and Sri Surya Prakash, learned Standing Counsel for the respondent.
8. As is evident the question that is agitated between the parties is whether the cost of the secondary packing is includible in the assessable value. This controversy was being agitated before the Hon'ble Supreme Court in some appeals and the present petitioner filed a transfer application in the Hon'ble Supreme Court. The Hon'ble Supreme Court decided Civil Appeal No. 3119 and 3120 of 1980 - Union of India v. Shri Vallabh Glass Works Ltd. vide order dated 20th July, 1995 whereupon the transfer application was rejected and the Hon'ble Supreme Court's order in the aforesaid appeal was communicated to this Court. The Hon'ble Supreme Court held that unless it is shown that the wooden containers were durable and returnable the costs thereof would be includible in the assessable value. It is in the aforesaid circumstances that this petition revolves round the question as to whether the costs of secondary packing of the glass sheet in wooden crates etc., was includible in the assessable value or not.
9. Union of India v. Bombay Tyre International Limited - 1983 (14) Excise Law Times 1896 (S.C.) is the first important case in which the provisions of amended Section 4 came in for consideration before the Hon'ble Supreme Court. It was observed as under :-
"It is relevant to note that the packing of which the cost is included, is the packing in which the goods are wrapped, contained or wound when the goods are delivered at the time of removal. In other words, it is the packing in which it is ordinarily sold in the course of wholesale trade to the wholesale buyer. The degree of packing in which the excisable article is contained will vary from one class of articles to another. From the particulars detailed before us by the assessees, it is apparent that the cost of primary packing, that is to say, the packing in which the article is contained and in which it is made marketable for the ordinary consumer, for example a tube of toothpaste or a bottle of tablets in a cardboard carton, or biscuits in a paper wrapper or in a tin container, must be regarded as falling within Section 4(4)(d)(i). That is indeed conceded by learned counsel for the assessee. It is the cost of secondary packing which has raised serious dispute. Secondary packing is of different grades. There is the secondary packing which consists of larger cartons in which a standard number of primary cartons (in the sense mentioned earlier) are packed. The large cartons may be packed into even larger cartons for facilitating the easier transport of the goods by the wholesale dealer. Is all the packing, no matter to what degree, in which the wholesale dealer takes delivery of the goods to be considered for including the cost thereof in the "value" ? Or does the law require a line to be drawn somewhere ? We must remember that while packing is necessary to make the excisable article marketable, the staturory provision calls for strict construction because the levy is sought to be extended beyond the manufactured article itself. It seems to us that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the "value" of the article for the purpose of the excise levy. To what extent, the cost of secondary packing cannot be deducted from the wholesale cash price of the excisable article at the factory gate."
10. Then came Union of India v. Godfery Philips India Ltd. 1985 (22) Excise Law Times 306. It was a case of a manufacturer of cigarettes which were packed initially in paper/card board packing of 10 and 20 and these packets were then packed together in paper/card board cartons/outers. Thereafter there was yet another round of packing in which the cartons/outers were placed in corrugated fibre board containers and it is such corrugated fibre board containers which were delivered by the manufacturer to the wholesale dealers at the factory gate. It was held that the cost of third stage packing was not includible in the assessable value. The Hon'ble Supreme Court observed as under :-
"Is the packing in corrugated fibre board containers necessary for putting the cigarettes in the condition in which they are generally sold in the wholesale market at the factory gate? In my opinion, it is not. The corrugated fibre board containers are employed only for the purpose of avoiding damage or injury during transit. It is perfectly conceivable that the wholesale dealer who takes delivery may have his depot a very short distance only from the factory gate or may have such transport arrangement available that damage or injury to the cigarettes can be avoided. The corrugated fibre board containers are not necessary for selling the cigarettes in the wholesale market at the factory gate."
11. In Geep Industrial Syndicate Ltd. v. Union of India -1992 (61) Excise Law Times 328 (S.C.) the situation was similar to the one in Godfrey Philips India Ltd. The only difference was that the goods in question were torches and batteries. There was a third stage of packing in wooden boxes and following Godfrey Philips the Hon'ble Supreme Court held that the cost of wooden boxes was not includible in assessable value.
12. The controversy that seems to arise again and again re-emerged before the Hon'ble Supreme Court in Government of India v. Madras Rubber factory Ltd. - 1995 (77) Excise Law Times 433 and the whole gamut of case law had to be re-analysed. The apex Court concluded : -
"The test laid down in Bombay Tyre International has never been departed from in any of the later decisions and must be treated as good and sound. We may as well stress the obvious: in a matter like this, certainty in law is essential. It may be that in applying the principle having regard to the facts of a given case, there may be some divergence in conclusion but so far as the principle-the relevant test to be applied-is concerned, there should be no uncertainly. The test is : whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further, even if the packing is "necessary" in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasise that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test, or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case."
13. As stated above, the petitioner had applied to the Hon`ble Supreme Court for transfer of this petition to the apex Court for hearing with the appeal of Shri Vallabh Glass Works. The Hon'ble Supreme Court had stayed the hearing of this appeal and the stay was vacated when Civil Appeal Nos. 3119 and 3120 of 1980 - Union of India v. Shri Vallabh Glass Works were decided by judgment dated 20-7-1995, a copy of which was forwarded to this Court. That was also a case of a manufacturer of glass products. The High Court had taken the view that the value of wooden containers into which the glass products were packed, could not form part of the value of the glass products. The Hon'ble Supreme Court disapproved this view and held that in view of the decision in Government of India v. Madras Rubber Factory Ltd. - 1995 (77) E.L.T. 433 (S.C.), unless it is shown that the wooden containers were durable and returnable, the value of such containers would be includible in the assessable value.
14. It is in the light of the above exposition of law by the apex Court that the present controversy has to be decided. Whether the cost of secondary packing of glass sheets in wooden crates etc. would be includible in the assessable value would, therefore, depend on:
(i) Whether such packing is necessary for putting the glass sheets in the condition in which it is generally sold in the wholesale market at the factory gate;
16. The provisions of Section 4 show that different prices can be charged from different types of buyer, meaning thereby that there may be buyers who are willing to buy the goods without packing that was otherwise necessary for putting the goods in the condition in which they are generally sold in the wholesale market at the factory gate and this has been recognised by the respondent while approving the price lists in which it was provided that where the goods are cleared in packed condition the packing charges would be included in the assessable value. As stated above, the petitioner's contention has been that the primary packing which consists of hay and paper wrapping is done in respect of all the sheets manufactured by it and that value of such packing is included in the value of the goods as shown in the price lists and that the secondary packing is done at the request of the buyers and is not necessary for putting the glass sheets in the condition in which they are generally sold in the wholesale market at the factory gate. The petitioner has filed with the rejoinder affidavit a large number of bills and gate passes to show that the glass sheet have been sold loose i.e. without the secondary packing. Most of these bills relate to sale of goods to M/s. Hindustan Safety Glass Works Ltd., an industrial unit situate at Allahabad itself, which uses the sheets as raw material for production of other goods. Thus that party is a local bulk purchaser and seems to have made own arrangements for the transport of glass sheets to avoid the costs of secondary packing. Even in respect of certain sales to this buyer, secondary packing has been done and the value of the crates has been charged in the bill. One such bill is at page 30 of the rejoinder affidavit which contains the following endorsement:
"Packing charges - packing of durable and returnable nature subsequent to initial packing for facilitating safe transport which will be refunded if the same are returned intact on 16 crates @ Rs. 140/- per crate."
17. There are other bills also in respect of this very party through which the goods have been sold with secondary packing and the packing charges have been billed. The averments made in paragraphs 11 and .12 of the writ petition which have been reproduced above, show that secondary packing is necessary to put the goods in a condition in which they are sold in the wholesale market. So much so that in paragraph 12 the petitioner says that such packing is generally required by the buyers and is even done in advance to avoid delay in delivery and to bring efficiency in sales. Glass sheets being fragile in nature, we are unable to accept the dealer's contention that the secondary packing was not necessary for selling the goods in wholesale at the factory gate. We may mention that the petitioner has not put in substantial evidence to show that the wholesale buyers, particularly out station ones, buy the goods without the aforesaid secondary packing.
18. As regards the question whether the secondary packing is durable and returnable, apart from the averment in some bills, no material has been placed on record to show that such packing was actually returnable and was so durable that it could be returned intact. The words "durable and returnable" used by Hon'ble Supreme Court do not carry their literal meaning only. What seems to be necessary is that the packing cases should be so durable that the manufacturer intends to use them again and again and places a condition that the buyer must return the packing. 'Returnable' does not merely refer to a theoretical possibility of the crates being returned. What in our view is necessary that the packing should be of a special use to the manufacturer so that it is a condition of the contract that the packing material will be returned to the seller. There are several trades in which it is necessary that the packing material should be returned to the seller. For example, yarn sold wrapped on bobbin, spool, reel etc., is sold with .the condition that after the removal of the yarn the bobbin etc., would be returned to the seller who will use it again for the same purpose. In the same way gas cylinders are required to be returned to the manufacturer of gas after the purchaser has used the gas. So is the case with glass bottles of cold drinks. They need frequent re-circulation and are usually of a special patented and design and the manufacturer insists on their return so that they can be filled again. On the other hand, take the case of a tin container in which cold drinks or other eatable goods are packed. Though such containers are durable in nature and they became unserviceable once they are opened for consuming the contents. Therefore, the mere fact that the crates are made of wood does not mean that they are so durable that they can be used again and again. There is not even one instance put on record by the petitioner to show that any purchaser returned the crates and they were reused. In our view the petitioner has not been able to establish that the secondary packing of the nature described was unnecessary even when it was actually used and also that it was durable and returnable in the sense discussed above. We, therefore, do not find any error in the orders passed by the Assistant Collector approving the price lists subject to the aforesaid conditions.
19. Learned counsel for the petitioner placed reliance on a judgment of the Customs, Excise and Gold (Control) Appellate Tribunal in the assessee's own case. This is a judgment dated 3rd January, 1989 and the dealer's case for exclusion of the secondary packing was accepted. Appeals before the Tribunal had been filed by the Union of India against the orders of the Appellate Collector referred to above and in respect of which the Government was at one time thinking of exercising revisional jurisdiction. The law has been expounded by the Hon'ble Supreme Court in several cases after the aforesaid order of the Tribunal and in view of what we have stated above, we are unable to place any reliance thereon.
20. In the result, we find no force in the present petition and the petitioner is not entitled to any of the reliefs claimed. The writ petition is, accordingly, dismissed. We, however, make no order as to costs. Ther interim order dated 1-9-1981 is discharged.