Court rules cost of packing not includable in assessable value under Central Excises & Salt Act

The court ruled in favor of the assessee, holding that the cost of packing should not be included in the assessable value under Section 4(4)(d)(i) of the Central Excises & Salt Act, 1944. The court allowed the writ petition, quashed the demand notice, and directed the respondents to refund the excise duty paid for the specified period, subject to verification by the department. The petition was allowed with no order as to costs.

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Issues Involved:
1. Inclusion of cost of packing in the assessable value under Section 4(4)(d)(i) of the Central Excises & Salt Act, 1944.
2. Entitlement to refund of excise duty paid for the period 1-11-1975 to 8-1-1976.
3. Validity of the demand for excise duty for the period 1-10-1975 to 31-10-1975.

Detailed Analysis:

Issue 1: Inclusion of Cost of Packing in the Assessable Value
The primary issue in this case is whether the cost of packing cement in gunny bags should be included in the assessable value under Section 4(4)(d)(i) of the Central Excises & Salt Act, 1944. The court noted that for the cost of packing to be excluded from the assessable value, two conditions must be satisfied:
1. The packing material must be of durable nature.
2. It must be returnable by the buyer to the assessee.

There was no dispute regarding the durability of the gunny bags. However, the respondents contended that the gunny bags were not returnable by the buyers to the assessee. The court examined various documents, including the Price Fixation Order dated 1-10-1975, Release Order dated 1-5-1975, and a letter dated 30-10-1975, which indicated that there was an arrangement for the return of the gunny bags. The court concluded that it is not necessary to show actual return of the packing material; it is sufficient to show that the packing is returnable under an arrangement between the buyer and the assessee.

Issue 2: Entitlement to Refund of Excise Duty Paid for the Period 1-11-1975 to 8-1-1976
The assessee claimed a refund of Rs. 11,16,270.31 for the period 1-11-1975 to 8-1-1976, during which they paid excise duty at an enhanced rate "under protest." The court held that since the cost of packing should not have been included in the assessable value, the assessee is entitled to a refund. However, the court noted that there was no material to support the exact amount claimed and directed that the refund be subject to verification by the department.

Issue 3: Validity of the Demand for Excise Duty for the Period 1-10-1975 to 31-10-1975
The Assistant Collector had demanded Rs. 5,23,204.25 for the period 1-10-1975 to 31-10-1975, arguing that the assessee had not included the cost of packing charges in the value of the cement. The court quashed this demand, holding that the cost of packing should not be included in the assessable value under Section 4(4)(d)(i) of the Act, as the gunny bags were returnable by the buyers to the assessee under an arrangement.

Conclusion
The court allowed the writ petition, quashed the demand notice of Rs. 5,23,204.25, and set aside the orders of the Assistant Collector and the Appellate Collector. It issued a writ of mandamus directing the respondents to refund the excise duty of Rs. 11,16,270.31 for the period 1-11-1975 to 8-1-1976, subject to verification by the department. The petition was allowed with no order as to costs.

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