TaxTMI 
TaxTMI 
1995 (12) TMI 121
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....e record it was noticed that the appellants were found raising Debit Notes regularly in favour of M/s. Duphar Interfran Ltd. and used to recover the extra money (prises) under the heading `Packing, Forwarding and Despatch Expenses' at the following uniform rate :- (i) Bottle of Lacto Calamine Lotion - 120 ml. @ 0.58 ps per bottle; (ii) bottle of Lacto Calamine Lotion - 60 ml. @ 0.38 ps. per bottle; and (iii) bottle of Lacto Calamine Lotion - 30 ml. @ 0.29 ps. per bottle, over and above the approved prices declared by the appellants in their price list. It was the further case of the Revenue that if the said "Packing, Forwarding and Despatch Expenses" are taken into consideration by including it in the value then in that case the appellants would not be entitled to avail the benefit of Notification No. 140/83, dated 5-5-1983 in the financial years 1986-87 and 1987-88 as they had crossed the exemption limit of value of clearances worth Rs. 15 lakhs in the preceding financial year. It was also the case of the Revenue that since the appellants were using the brand name of "Duphar" they were not entitled to avail the benefit of said Notification from 1-10-1987 onwards. On th....
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....ding charges which were required to specially incurred for them for supply to different customers all over India and these charges were also recoverable through Debit Note. They also stated that the said M/s. Duphar Interfran Ltd. paid the normal prices of the product manufactured by them on the basis of the normal packing for the bottles which consist of 3-Ply double faced corrugated boxes and that it is this price which they have declared in their price lists which was duly approved from time to time. As regards the exemption under Notification No. 140/83-C.E., dated 5-5-1983 it was pleaded that the benefit was rightly availed by the appellants as the cost of special packing is not to be included in the value. As regards the demand raised for duty on the goods bearing the brand name of Duphar after amendment, the appellants submitted that after the amendment of the Notification with effect from 1-10-1987 they have been paying full duty on the branded goods and not the concessional rate of duty as alleged by the Department. Demand was also challenged on the ground that it was time barred. However, the Collector of Central Excise and Customs, Vadodara confirmed the demand and....
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....boxes, universal folding type. The Ld. Sr. Counsel vehemently contended that the adjudicating authority has included the cost of the subject packing that is to say 7-Ply double faced corrugated boxes, universal folding type on the finding that this special packing was provided by the factory of the appellants itself. Challenging these findings he contended that for the purpose of determining the value under Section 4(4)(d)(i) of the Act it is immaterial whether the special packing is provided in the factory or outside the factory. Since the test is whether a particular kind of packing is done in order to put the goods in the condition in which they are generally sold in the wholesale market at the factory gate as laid down in the case of Union of India & Others v. Bombay Tyre International Ltd., 1983 (14) E.L.T. 1896 (SC) = 1983 ECR 1627D (SC) and as explained in Government of India & Others v. The Madras Rubber Factory Ltd. & Others, 1995 (77) E.L.T. 433 (SC) = 1995 (58) ECR 385 (SC). Since the 7-Ply double faced corrugated boxes, universal folding type are employed only for the purpose of avoiding damage or injury during transit, these 7-Ply double faced corrugated boxes, univ....
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....e 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, ........... 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. Applying the above test we proceed to decide whether in the facts and circumstances of the present case whether the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type was - (i)  necessary for putting the subject product in the condition in which it is generally sold; (ii) in the wholesale market at the factory gate; (iii)  to the wholesale buyer. 6.  In the instant case it is not in dispute that the appe....
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....s. The Hon'ble Chief Justice comprising the Bench evolved the test of "necessity or essentiality of such secondary packing" for sale of the excisable goods at the factory gate in the course of wholesale trade. By majority view it was held that the cost of CFCs was not includible in the value for the purpose of assessment of excise duty. Hon'ble Pathak, J. (as he then was) posed the question, "Is the packing in corrugated fibre board containers necessary for putting the cigarettes in the condition in which they are generallry sold in the wholesale market at the factory gate?" and answered in the negative observing that CFCs containers were not necessary for selling the cigarettes in the wholesale market at the factory gate. In the case of Geep Indust- rial Syndicate Ltd. v. Union of India, ibid, the relevant facts were that the assessee therein was the manufacturer of torches and batteries. The torches and batteries were manufactured by it were first packed in Polythene boxes and then these Polythene packets were placed in cardboard boxes. There was no dispute about the inclusion of the value of polythene boxes and cardboard boxes. The dispute was only with respect to the cost of wo....
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....for onward despatch of the goods at the request of the wholesale buyer that is to say M/s. Duphar Interfran Ltd. as per the agreement between the appellants and the said M/s. Duphar Interfran Ltd. Further, that in the instant case it was not the case of the Department nor the Ld. Collector has said so in his impugned order that there was no likelihood of damage or injury to the 3-Ply double faced corrugated boxes containing the bottles, namely, Lacto Calamine Lotion employed as a primary packing even if the goods are transported without the special packing that is to say 7-Ply double faced corrugated boxes, universal. folding type. This is indicative of the fact that the goods are not so sold generally in the wholesale market at the factory gate. It is also not the case of the Department that the subject product, namely, Lacto Calamine Lotion are sold in special cartons even in wholesale trade. This is further indicative of the fact that the subject goods are not so sold ordinarily in the wholesale market at the factory gate. Further we find from the agreement entered into by the appellants and M/s. Duphar Interfran Ltd. (Exhibit 'B') on the record that the 3-Ply double....
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....ter is reproduced below :- "The bottles will be packed by you in 3-Ply d.f.c. boxes accommodating them as follows:- 120 ml. -- 10 bottles 60 ml. -- 15 bottles 30 ml. -- 20 bottles The 3-Ply d.f.c. boxes will be the normal packing for the bottles and our prices will be for the bottles, inclusive of this normal packing. You will be required to despatch the lotion in different types of bottles to our various customers all over India according to the advice which we shall be sending to you from time to time. In order to ensure that the bottles do not suffer any damage in transit, we request you to provide special packing in the form of 7-Ply double faced corrugated boxes, universal folding type. For this special packing, we shall be prepared to pay you separately. You may raise Debit Notes for recovery of these charges from time to time. We are interested in maintaining a uniform price for the lotion in different sizes of bottles for all the customers in India. Since we are casting the responsibility of despatching the goods to our customers, we are prepared to bear not only the special packing charges for the boxes as mentioned above but we feel shall also reimbur....
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....inancial year. For record it may also be stated that since it was stated by the appellants in the reply to the Show Cause Notice itself that from 1.10.1987 onwards they were not availing the benefit of the said Notification and paying the duty at the full rate, the demand raised on this count also cannot be sustained and, therefore, the demand if confirmed on this count also cannot be sustained. ON LIMITATION 12.  It was contended by the learned Counsel, Shri A.N. Haksar, that by agreement dated 10th July, 1984 (Exhibit 'A' on the record) entered into between the appellants and M/s Duphar Interfran Limited, the appellant was to manufacture Lacto Calamine Lotion, as per the specifications given by M/s. Duphar with the trade mark or trade name 'Crookes Lacto Calamine' and the price for the said product was to be mutually agreed upon from time to time and was to be inclusive of excise duty, but excluding freight, sales tax and other levies. By a letter dated 14th August, 1984 (Exhibit 'B' on the record), the said M/s. Duphar Interfran Limited requested the appellants to manufacture the said product in three different sizes strictly according to their specifications an....
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..../s. Duphar Interfran Ltd., respondent therein, to the wholesale dealer in respect of packing and distribution costs does not represent the cost of unit packing but merely represents the cost of additional packing, if it is so desired by the wholesale dealer, and therefore cannot be taken into account by the authorities for determining the assessable value. In this premises, he submitted that the Show Cause Notice dated 29-3-1990 raising the demand for the period from 1984-85 to August, 1989 was time barred being issued after the expiry of the period of six months as provided under Section 11A of the Act as there was no suppression of facts by the appellants with intent to evade payment of duty especially when all the facts were known to the Department since the Office of the Department as well as the audit party have been checking and verifying their documents and records from time to time. Drawing our attention to paragraph 18.2 of the impugned order wherein the Collector of Central Excise while deciding the issue framed by him, as to whether the appellants suppressed the facts of recovering such extra charges from M/s. Duphar Interfran Ltd. turned down the plea of the....
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....984 (18) E.L.T. 6. But this view of the Tribunal was not approved by the Apex Court on appeal by the said assessee M/s. Cosmic Dye Chemicals v. Collector of Central Excise, Bombay, 1995 (75) E.L.T. 721 (SC). For ready reference, the relevant portion of the said order is reproduced as under : "6.  Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word `wilful' preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful. 7.  Now coming to the facts of the case, the appellant's case is that he thought bona fide t....
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....failure to pay duty or take out excise licence is not always due to fraud, mis-statement, collusion, suppression of facts or contravention of Rules with intent to evade duty. 17.  That apart, during the relevant period in the instant case from 1984-85 to August, 1989, the law was well settled that the cost of special packing was not required to be included while arriving at the assessable value by the two decisions of the Apex Court rendered in the case of M/s. Godfrey Philips India Ltd. judgment dated 30-9-1985, and followed in the case of Geep Industrial Syndicate Ltd. v. Union of India, judgment dated 2-4-1986. Even in the judgment rendered by the Apex Court in the case of M/s. Pond's India Ltd. (judgment dated 19-10-1989, reported in 1989 (44) E.L.T. 185 (SC) ), the said two judgments were not over-ruled and the case was remanded to the Tribunal only to find out as to whether the excisable goods involved therein are so sold (that is to say, sold in wooden boxes called master cartons) usually and as such used to become marketable in such manner. Even the Apex Court in its recent judgment dated 8th May, 1995 rendered in the case of M/s. MRF, has reiterated the principle l....
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....ame was not includible while determining the assessable value. In this view of the matter, it cannot be said that the appellants suppressed the facts wilfully with intent to evade payment of duty. Thus we hold that the demand in the instant case being raised beyond six months was time barred. 22.  In the result, the impugned Order is set aside and both the appeals are allowed with consequential relief to the appellants, if any, according to law. Sd/- (G. P. Agarwal) Dated : 3-8-1995 Member (J) 23. [Contra per : Shri P.K. Kapoor, Member (T)]. - I have gone through the order recorded by Learned Member Judicial Shri G.P. Agarwal but have not been able to persuade myself to agree with the findings therein. I am therefore recording this separate order. 24. Since the facts of the case have been recorded in the order passed by Member Judicial, it is not necessary for me to repeat the same. It is an admitted fact that the appellants were engaged in the manufacture of "Lacto Calamine Lotion" on behalf of M/s. Duphar Interfran Ltd. Bombay according to the specifications provided by them. The "Lacto Calamine Lotion" manufactured by the a....
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....nce in conclusion but so far as the principle - the relevant test to be applied - is concerned, there should be no uncertainty. 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......" 26. Learned Member Judicial has held that the judgment in the case of Collector of Central Excise v. Ponds India Ltd. (supra) also does not suppo....
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.... appellants are not only manufacturing the goods but are also despatching the fully finished goods to the customers of M/s. Duphar Interfran Ltd. as per their instructions. They receive purchase orders placed by various customers along with the sale invoice from M/s. Duphar Interfran Ltd. and they send finished goods directly from their factory to the customers of M/s. Duphar Interfran Ltd. with the sale invoices issued by Duphar Interfran Ltd. The appellants do not collect any sale proceeds from the parties to whom goods are despatched by them but they raise invoices on M/s. Duphar Interfran Ltd. on the basis of the price declared in the price list i.e., inclusive of the cost of 3-ply double faced corrugated boxes and they recover from M/s. Duphar Interfran Ltd. the cost of the outer 7-ply double faced corrugated boxes through separate debit notes under the heading "packing, forwarding and despatch expenses". From this arrangement for manufacture, invoicing and despatch of the goods to various wholesale buyers directly from the appellants factory, it is evident that the goods are invariably supplied with special packing in the form of 7-ply double faced corrugated boxe....
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....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 uncertainty. 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....
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....e cost of transportation. We are of the opinion that on the above findings recorded by the Assistant Collector, the only conclusion that can follow is that the cost of the cartons/cardboard boxes cannot be excluded from the value of the goods. If, however, the assessee wishes to challenge the correctness of the findings of fact recorded by the Assistant Collector, the proper course is to file an appeal as provided by law." 28. On the ratio of the judgment of the Hon'ble Supreme Court extracted above, I hold that the cost of special 7-ply double faced corrugated box universal folding type was necessary for putting the subject product in the condition in which it was generally sold in the wholesale market at the factory gate to the wholesale buyer and accordingly except the element that may be attributable towards the cost of transportation of the goods from factory premises to the transport company the disputed "packing, forwarding and despatch expenses" recovered by the appellants from their sole buyer over and above the declared sale price, through separate debit notes, would form a part of the assessable value of the goods. LIMITATION 29.&ems....
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....Tribunal wherein it has been held that regardless of the intent, mere suppression of fact or mis-statement in the information statutory required to be supplied to the ensure authorities attract a larger period of limitation. Intent is immaterial in so far as fraud, mis-statement or suppression of fact are concerned. I further refer the case of Central India Machinery Co. v. Collector reported in 1989 (39) E.L.T. 306, wherein Hon'ble CEGAT hold that in case there is non-levy arising due to the suppression of facts, extended period of Five years is applicable." 30. I am inclined to agree with the Collector that having regard to the prescribed proforma of the price list the appellants were under obligation to disclose the nature and details of different types of packing used for the goods and the total realisation made from the customers towards the sale of the goods including packing and thereafter claim deduction on account of packing the cost of which according to them was not includible in the assessable value in terms of Section 4 of the Central Excises & Salt Act. Failure on the part of the appellants to disclose to the Department the recoveries made through separate ....
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....way to deliver my opinion in this matter. Ld. Member (J) after going through the letter dated 14th April, 1984 of M/s. Duphar Interfran Ltd. and the agreement entered into with the appellant, and examining the case law on the subject, has held that the 7-Ply double faced corrugated boxes, universal folding type, are generally not used for goods sold in the wholesale market at the factory gate. The ld. Member (J) has also examined the point of limitation and has held that the appellants were holding bona fide belief in view of several Supreme Court's judgments as cited, to hold that the cost of this special packing is not includible in the assessable value. On the other hand ld. Member (T) in Para 27 at page 37 of his opinion has clearly held that there is no evidence on record that any goods were being sold in the wholesale market at the factory gate with such special 7-Ply double faced corrugated boxes. Ld. Member (T) has further held that there is also no evidence on record to show that the special packing in question was of durable nature and was returnable. He has, however, held that since the product, namely, `Lacto Calamine Lotion' was marketed in glass bottle it cannot be....
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....king in the wholesale market at the factory gate. I notice that the conclusion arrived at by ld. Member (J) is based on the facts of the case, pleadings, allegations in the show cause notice and assertions made by the assessee that similar goods are sold in the wholesale market at the factory gate in primary packing only and the assessee had also relied on the case law and therefore, the opinion expressed by the ld. Member (J) is well considered and requires acceptance. Further reason being that the appellants are manufacturing the goods for M/s. Duphar Interfran Ltd. The Hon'ble Supreme Court in M/s. Duphar Interfran Ltd.'s case had accepted this proposition in respect of the same goods and to that extent the judgment of Hon'ble Supreme Court stands confirmed and not modified by the later judgment rendered in the case of Madras Rubber Factory Ltd. The assessee had contended that this packlng was being done outside the factory gate. However, the Collector had rejected the same on the basis of statements of those transporters who removed the goods from godown and the Ld. Collector had not considered any evidence of packer or transporter who removed the goods from the factory gate. T....
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....ellants had not declared and had not clearly indicated in the price list about the special packing, and also the manner in which they were collecting the charges by debit notes, yet I am inclined to give the benefit of doubt to the assessee in view of unsettled legal position regarding this point and more particularly regarding the revenue's failure to prove the manner in which these goods were sold in wholesale trade at factory gate. Further, I notice that the department had also not issued the show cause notice within six months from the date of collection of all the evidence in this matter. This shows the casual manner in which the revenue proceedings are initiated in these cases against the assessee and the casual manner in which they take their own time to issue the show cause notice after considerable lapse of time. The Tribunal has been emphasising time and again on these aspects of the matter and yet the revenue officials do not take interest to initiate proceedings well in time at the time of approval of classification/price list stage itself. The revenue should have granted provisional approval and after thorough enquiry and after personal scrutiny on visit to ....