Appeal granted, trial judgment overturned, cross-objections dismissed, certificate for Supreme Court appeal issued.

The appeal was allowed, setting aside the trial court's judgment and dismissing the respondent-company's suit. The court also dismissed the cross-objections for interest, as the main claim was negated. A certificate of fitness for appeal to the Supreme Court was granted due to substantial questions of law. The status quo was ordered to continue for two weeks from the delivery of the certified copy of the judgment.

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Issues Involved:
1. Legality of excise duty on packing material.
2. Interpretation of Section 4 of the Central Excises and Salt Act, 1944.
3. Inclusion of packing costs in the assessable value of excisable goods.
4. Claim for refund of excise duty paid under mistaken belief.
5. Implications of Full Bench decision in Calico Mills case.
6. Consumer burden and unjust enrichment.

Detailed Analysis:

1. Legality of Excise Duty on Packing Material:
The respondent-company filed a suit for recovery of excise duty amounting to Rs. 1,02,46,701.52, claiming it was illegally collected on packing material. The trial court decreed the suit based on precedents set by Division Bench decisions in Golden Tobacco Co. Ltd. v. Union of India and Alembic Glass Industries Ltd. v. Union of India, which held that the cost of packing should not be included in the assessable value of excisable goods.

2. Interpretation of Section 4 of the Central Excises and Salt Act, 1944:
The main dispute centered around the interpretation of Section 4 of the Act. The court juxtaposed the old and amended sections, highlighting that the amended Section 4(4)(d)(i) explicitly included the cost of packing in the assessable value of excisable goods unless the packing was of a durable nature and returnable by the buyer.

3. Inclusion of Packing Costs in the Assessable Value of Excisable Goods:
The Full Bench decision in Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. Union of India held that the cost of packing should be included in the assessable value of excisable goods. The Full Bench rejected the argument that packing costs should be excluded, emphasizing that the amended Section 4(4)(d)(i) explicitly included these costs. The trial court's reliance on earlier Division Bench decisions was thus deemed incorrect.

4. Claim for Refund of Excise Duty Paid Under Mistaken Belief:
The respondent-company claimed a refund based on the mistaken belief that packing costs were not part of the assessable value. The court noted that the company had passed on the excise duty to consumers and questioned the fairness of refunding the company rather than the consumers who bore the burden. The court highlighted the principle against unjust enrichment, noting that the company should not benefit from a mistake at the expense of consumers.

5. Implications of Full Bench Decision in Calico Mills Case:
The Full Bench decision in Calico Mills was pivotal. It clarified that excise duty should include packing costs unless the packing was durable and returnable. The court underscored that this decision overruled the earlier Division Bench rulings, making the trial court's decree based on those rulings untenable.

6. Consumer Burden and Unjust Enrichment:
The court expressed concern about the unjust enrichment of the respondent-company at the expense of consumers. It emphasized that the judicial system should not allow a situation where consumers bear the burden of excise duty, only for the company to claim a refund and benefit from the mistake. The court highlighted the broader implications of fairness and equity in tax matters.

Conclusion:
The appeal was allowed, setting aside the trial court's judgment and dismissing the respondent-company's suit. The court also dismissed the cross-objections for interest, as the main claim was negated. The court granted a certificate of fitness for appeal to the Supreme Court, recognizing the substantial questions of law involved. The status quo was ordered to continue for two weeks from the delivery of the certified copy of the judgment.

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