TaxTMI 
TaxTMI 
1995 (12) TMI 121
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 these allegations a Show Cause Notice dated 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upply 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 imposed different penalties and also confiscated land, building, plant and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded 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, universal folding type are not necessary for selling the subject goods in the wholesale market at the factory gate, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er. 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 appellants are manufacturers of "LACTO CALAMINE LOTION" for M/s. Duphar Interfran Ltd. according to the specifications provided by them. In their factory and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 wooden boxes in which the card board cartons were placed at the time of the delivery at the factory gate. There was dispute between the parties whether the cardboard were packed in wooden boxes or not. It was suggested by the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 faced corrugated boxes would be the normal packing for the bottles and the price for the subject product would be inclusive of this normal packing. This was reiterated by the appellants in their defence. The Department has not rebutted the said def....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 reimburse you for the handling and forwarding charges which you will have to specially incur. These too may be recovered from us separately." 9. From the above, it is clear that the special packing in the form of 7-Ply double faced corrugated boxes, universal folding type w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 and requested that the said bottles should be packed by the appellants in three ply double faced corrugated boxes which would be the normal packing for the bottles. The price for the said product would be inclusive of this normal packing. He highlighted that by this letter M/s Duphar Interfran Limited furth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 appellants that there was no intention on the part of the appellants to evade payment of duty on the ground that in the case of M/s. Cosmic Dye Chem v. Collector of Central Excise, Bombay, 1984 (18) E.L.T. 6, it was held that, mere suppression of the fact or mis-statement in the information statutorily required to be s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lusion 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 that he need not include the value of the Rapidogens in his declaration, for the reason that the said product was fully exempt from duty under Notification No. 180/61, dated November 23, 1961. Certain facts are brought to our notice in support of this plea. It is also brought to our notice that on the date of filing of his declaration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 laid down in the case of M/s. Bombay Tyre International, 1983 (14) E.L.T. 1896, without disturbing the findings of facts and the conclusion arrived therein by the Apex Court in the case of M/s. Godfrey Philips India Ltd. supra, and M/s. Geep Industrial Syndicate Ltd. supra. 18.  In the instant case, the Collector of Central Excise in hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 appellants is initially filled in bottles of 30 ml., 60 ml. and 120 ml. capacity and thereafter such bottles are packed in 3-ply double faced corrugated boxes. The number of bottles of each type accommodated in a single 3-ply corrugated box was as under : (i)120 ml. 10 bottles (ii)60 ml. 15 bottles (iii)30 ml. 20 bottles. The supplementary agreement regarding packing and distribution of go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 support the Department's case since the Collector of Central Excise has not said in the impugned order that the special packing in the form of 7-ply double faced corrugated boxes, universal folding type was necessary for putting the subject product in the condition in which it is generally sold in the wholesale market at the factory gate nor there is any evidence on record to that effect. In this regard reference has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterfran 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 boxes, universal folding type and there is no evidence on record that any goods were being sold in the wholesale market at the factory gate without such special 7-ply double faced corrugated boxes. There is also no evidence on record to show that the special packing in question was of durable nature and was returnable. Since the product, namely, "Lacto Calamine Lotion" was marketed in glass bottle it cannot be denied that in respect of such good....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 44. Keeping the above principle in mind, we shall now turn to the facts in Civil Appeal No. [5375] of 1995 arising out of S.L.P. (C) 4041 of 1981 (Union of India v. Hinduatan Lever) because it is in this case that the issue of cost of packing has been argued by Shri Harish Salve. The assessee claims deduction of the cost of 'outer packing'. The Assistant Collector who examined the claim pursuant to the 'format order' rejected the claim. He has stated in his....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich 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. As discussed earlier, the appellants were recovering the price of the 7-ply double faced corrugated boxes which was invariably provided by raising separate debit notes on M/s. Duphar Interfran Ltd., Bombay but in the price list filed by them, from time to time, the details regarding special additional packing and price realised in respect of such additional packing was not declared even though they were under obligation to declare such details in the relevant column of the Price List. In this regard, the findings of the Collector in Paras 18 to 18.2, being relevant, are reproduced below :- "18. It is proved beyond doubt from the discussion in the preceding paragraph that the Notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 debit notes in respect of special packing of 7-ply double faced corrugated boxes, universal folding type, in my view, amounted to a deliberate suppression of fact with the intention of evading duty and cannot be attributed to any bona fide belief on their part that they were not required to disclose such additional recoveries on account of special packing in the price list. Hence the judgment in the case of Collector of Central Excise v. Chemphar Drugs & Linimants and Padmini Products v. Collector of Central Excise (supra) cannot be of any assistance to them. 31. In view of the foregoing, I confirm the findings of the Collector and hold that the amounts recovered on account of separate packing, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uble 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 denied that in respect of such goods in addition to the 3-Ply double faced corrugated box packing, additional protection in the form of 7-Ply double faced corrugated box packing was indispensable, as in the absence of the same it could not have been possible to conveniently deliver the goods to the customers. 35. I have carefully considered the submissions made by both the sides and have perused the impugned order and the opinions expressed by the respective Members. The Hon'ble Supreme Court in the case of Madras Rubber Factory in para 43 has laid down the test regarding the includibility of packing charges. It has been held that 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 articl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lng 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. The appellants had further contended that packing of these goods were not done inside the factory and generally the goods were being sold at the factory gate in wholesale trade with 3-ply double faced corrugated boxes. It is further seen that the appellants were generally packing and sending these goods under the cover of gate passes and the officials were visiting the factory every now and then and it is very strange on the part of the revenue to contend that they have not seen packings being done outside the factory gate or for that matter the goods being removed at the factory gate with secondary packing. The assessee has also contended that the goods packed in 3-ply packing had been kept in the bonded store rooms. This assertion has not been denied by the department. Therefore, it falls to reason that special packing could have been done outside the factory gate. However, in the absence....