TaxTMI 
TaxTMI 
1985 (9) TMI 88
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.... the value of the cigarettes for the purpose of assessment to excise duty. The respondents in these appeals are manufacturers of cigarettes. They manufacture cigarettes in their factories and the cigarettes so manufactured are packed initially in paper/card board packets of 10 and 20 and these packets are then packed together in paper/card board cartons/outers. These cartons/outers are then placed in corrugated fibre board containers and it is these corrugated fibre board containers filled with cartons/outers containing packets of cigarettes of 10 and 20 which are delivered by the respondents to the wholesale dealers at the factory gate. It was common ground between the parties that the wholesale price charged by the respondents for the cigarettes sold to the wholesale dealers includes not only the cost of primary packing in packets of 10 and 20, but also the cost of secondary packing in cartons/outers and the cost of final packing in corrugated fibre board containers. So far as the two items of cost, namely, cost of primary packing into packets of 10 and 20 and the cost of secondary packing in cartons/outers, are concerned, there was no dispute between the parties that these two ....
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....tation and, therefore, the cost of such packing was not liable to be included in the value of the cigarettes. These were the rival contentions urged on behalf of the parties and we shall now proceed to examine them. We have broadly dealt with the question of cost of packing in the judgment delivered by us in Bombay Tyre International's case [1986] 59 Comp Cas 460 (SC) and it would be convenient at this stage to reproduce what we have said in that judgment in regard to the cost of packing (at p. 498) : "The case in respect of the cost of packing is somewhat complex. The new section 4(4)(d)(i) has made express provision for including the cost of packing in the determination of 'value' for the purpose of excise duty. Inasmuch as the case of the parties is that the new section 4 substantially reflects the position obtaining under the unamended Act, we shall proceed on the basis that the position in regard to the cost of packing is the same under the Act, both before and after the amendment of the Act. Section 4(4)(d)(i) reads:... 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 ar....
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....ties. But we did not proceed to decide whether the cost of every degree of secondary packing would be liable to be included in the value of the goods or whether a distinction could be drawn between one degree of secondary packing and another. We posed the question : " 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 did not answer this question specifically, leaving it to a later date when this question would directly come up for consideration on the facts of a particular case. We, however, laid down the general proposition 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 I value ' of the article for the purpose of the excise duty ". Where, therefore, a question arises whether the cost of any particular kind of secondary packing is liable to be included in the value of the article, we would have to ask does the pack....
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.... ordinarily be regarded as forming part of packing. The Explanation then proceeds to say that " packing " means wrapper, container or any other thing in which the excisable goods are wrapped or contained. It is apparent from the wide language of the Explanation that every kind of container in which it can be said that the excisable goods are contained would be " packing " within the meaning of the Explanation and this would necessarily include a fortiori corrugated fibre board containers in which the cigarettes are contained. When Bombay Tyre International's case [1984] 1 SCC 467; [1986] 59 Comp Cas 460 (SC) was argued before us, it was at one stage sought to be contended, though rather faintly, that it is only the immediate packing in which the excisable goods are contained, that is primary packing alone, which would be liable to be regarded as " packing " within the meaning of the Explanation. But this argument was given up when it was pointed out that even secondary packing would be within the terms of the Explanation, because such secondary packing would also constitute a wrapper or a container in which the excisable goods are wrapped or contained. That is why, we held in the j....
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....esale dealer. It is apparent that unless the goods are in such packed condition, the wholesale dealer would not ordinarily take delivery of the goods and necessarily, therefore, such would be the packed condition in which the goods are generally sold in the wholesale market at the factory gate. It makes no difference to the applicability of the definition in section 4(4)(d)(i) read with the Explanation that the packing of the goods ordinarily sold by the manufacturer in the wholesale trade is packing for the purpose of protecting the goods against damage during transportation or in the warehouse. The question is not for what purpose a particular kind of packing is done. 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 and if they are generally sold in the wholesale market at the factory gate in a certain packed condition, whatever may be the reason for such packing, the cost of such packing would be includible in the value of the goods for assessment to excise duty. Of course, as pointed out by us in the judgment in the Bombay Tyre International's case [19....
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....sultation with the Ministry of Law and, in view of the provisions of section 4, the cost of packing, " whether initial or secondary in which the excisable goods are packed at the time of the removal, may form part of the assessable value of such goods " and the earlier advice inconsistent with this position should be treated as cancelled. The question which was raised on behalf of the respondents on this set of facts was as to whether during the period between May 24, 1976, and November 2, 1982, the respondents were liable to pay excise duty on the basis that the cost of corrugated fibre board containers was includible in the value of the goods. It was contended on behalf of the respondents that the cost of corrugated fibre board containers was not includible in the value of the goods and there were two arguments urged in support of this contention. The first argument was that the letter dated May 24, 1976, constituted an exemption order within the meaning of rule 8, sub-rule (2), of the Central Excise Rules, 1944, and the respondents were accordingly exempt from payment of excise duty on the cost of corrugated fibre board containers used for packing the cigarettes. The second argu....
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....ise and Customs and the Central Government. The representation contained in the letter dated May 24, 1976, was undoubtedly made by the Central Board of Excise and Customs but we may safely assume, and for this assumption there is clear warrant in the proceedings in Special Civil Application No. 787 of 1976, in the Gujarat High Court, that this representation was made with the approval of the Central Government and it was accepted by the Central Government as correctly representing the stand of the Revenue. It is significant to note that when the petitioners in Special Civil Application No. 787 of 1976, in the Gujarat High Court contended that the value of corrugated fibre board containers was not includible in the value of the goods manufactured by the petitioners, it was conceded on behalf of the Union of India and the excise authorities both in the affidavit in reply filed in that case as also in the course of the arguments that the cost of corrugated fibre board containers used for packing by the petitioners would not form part of the value of the goods for assessment of excise duty. The representation contained in the letter dated May 24, 1976, could, therefore, legitimately be....
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....settled that the doctrine of promissory estoppel is not limited in its application only to defence but it can also found cause of action. The decision of this court in Motilal Sugar Mills' case [1979] 118 ITR 326 (SC) contains an exhaustive discussion of the doctrine of promissory estoppel and we find ourselves wholly in agreement with the various parameters of this doctrine outlined in that decision. More importantly, it is necessary to point out that the decision in Motilal Padampat Sugar Mills' case [1979] 118 ITR 326 (SC) marks a significant development in the law relating to the doctrine of promissory estoppel. The principal question debated in that case was as to whether and, if so, to what extent, is the doctrine of promissory estoppel applicable against the Government. It was contended on behalf of the State of Uttar Pradesh that the plea of promissory estoppel is not available against the exercise of executive functions of the State, for the State cannot bind itself, so as to fetter its future executive action. This contention was sought to be supported by relying on the observations of Rowlatt J. in an early decision in Rederiaktiebolaget Amphitrite v. King [1921] 3 KB 5....
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.... pointed out that it did not release the Government from its obligation to honour the promise made by it, if the citizen, acting in reliance on the promise, had altered his position. The doctrine of promissory estoppel was in such a case applicable against the Government and it could not be defeated by invoking the defence of executive necessity. This court in Motilal Padampat Sugar Mills' case [1979] 118 ITR 326 also negatived the argument that if the Government were held bound by every representation made by it regarding its intention, the result would be that the Government would be bound by a contractual obligation even though no formal contract in the manner required by article 299 of the Constitution was executed. It was held by this court that a party who has, acting in reliance on a promise or representation made by the Government, altered his position, is entitled to enforce the promise or the representation against the Government, even though the promise or representation is not in the form of a formal contract as required by article 299 and that article does not militate against the applicability of the doctrine of promissory estoppel against the Government. The resulta....
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....Mills' case [1979] 118 ITR 326 (SC). This court, in Motilal Padampat Sugar Mills' case, quoted with approval the observations of Shah J. in Century Spinning and Manufacturing Co. Ltd. v. Ulhasnagar Municipal Council [1970] 3 SCR 854, where the learned judge said: " Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice. " (at p. 1024 of AIR 1971 (SC)). " If our nascent democracy is to thrive, different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice." (at p. 1025 of AIR 1971 (SC)). The court refused to make a distinction between a private individual and a public body so far as the doctrine of promissory estoppel is concerned. There can, therefore, be do doubt that the doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental, public or executive functi....
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....of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation mad....
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....gitimately be said that, having regard to the representation made by the Cigarette Manufacturers' Association, there were circumstances of an exceptional nature which required the exercise of the power under sub-rule (2) of rule 8. The Central Government and the Central Board of Excise and Customs were, therefore, clearly bound by promissory estoppel to exclude the cost of corrugated fibre board containers from the value of the goods for the purpose of assessment of excise duty for the period May 24, 1976, to November 2, 1982. The respondents would, therefore, be entitled to exclusion of the cost of corrugated fibre board containers from the value of the cigarettes only during the period May 24, 1976, to November 2, 1982. Save and except in respect of this period, the cost of the corrugated fibre board containers would be liable to be included in the value of the cigarettes for the purpose of assessment of excise duty. I would, therefore, pass an order in these appeals in terms of the format order which has been evolved by the consent of parties in Bombay Tyre International's case [1984] 1 SCC 467 [1986] 59 Comp Cas 460 (SC) and I would direct that the assessing authorities shall ....
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....e strictly construed, for what is being included in the value now is something beyond the value of the manufactured commodity itself. In Union of India v. Bombay Tyre International Ltd. [1984] 1 SCC 467; [1986] 59 Comp Cas 460 (SC), we observed: " 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. 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 arrangements ' available that damage or injury to the cigarettes can be avoided. The corrugated fibre board containers are not necessary for....
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.... must also be included in the value for the purpose of assessment of excise duty. When tobacco is rolled up in paper following the appropriate process of manufacturing cigarettes, cigarettes come into existence. The paper in which cigarettes are rolled is indeed a part of the manufactured product itself. The paper in which a cigarette is rolled forms no part of the packing and is indeed a part of the cigarette itself. When the cigarettes, after their manufacture, are put in packets, each packet usually containing 10 or 20 cigarettes, the packets in which the cigarettes are packed indeed constitute the primary packing for the purpose of delivery and there can be no question that the cost of this packing must necessarily be included in the value for the purpose of assessment of excise duty. A number of packets containing cigarettes either 10 or 20 in number in each packet are then put in larger cartons according to the requirements of the buyer in the wholesale trade. Packing a number of packets of cigarettes in a larger carton for delivery to the buyer in the wholesale trade according to his requirement constitutes secondary packing but the cost of this packing on a true constructi....