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Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944
Central Excises & Salt Act, 1944

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The petitioners are a public limited company manufacturing vanaspati, refined oil, bakery shortening and related products. Those products are assessable under Tariff Item No. 13 of the First Schedule to the Central Excises & Salt Act, 1944 at the rate of 10% ad valorem. Value for excise purposes is determined under Section 4 of the Act and Section 4(4)(d)(i) provides that where goods are delivered in packed condition the value "includes the cost of such packing, except the cost of packing which is of a durable nature and is returnable by the buyer to the assessee."

The petitioners packed vanaspati and refined oils in 30 gauge tin-coated steel plate containers of 18 litres capacity. By a circular dated 1 November 1978 issued to stockists, the petitioners announced that, due to scarcity and rising prices of tin plate, they would re-use the 18-litre tin containers and would refund Rs. 7.65 per tin on return provided the tin was not damaged. By letter dated 4 December 1978 the petitioners informed the Superintendent of Central Excise, Amalner, that they would deduct the cost of containers from assessable value on the ground that the containers were durable and returnable, and then began removing goods and paying excise duty excluding the container cost.

The Superintendent of Central Excise required the petitioners to produce evidence that the containers were durable and returnable. After correspondence, including a letter of 28 April 1979 stating no evidence had been produced and asserting that packing value could not be excluded, the petitioners paid duty under protest from 7 May 1979. The petitioners challenged the Superintendent's refusal to exclude the container cost from assessable value and sought relief in the present proceedings.

Legal Issues Presented

Whether the cost of 18-litre tin containers, being packing that is durable and returnable by the buyer, is excludible from the assessable value under Section 4(4)(d)(i) of the Central Excises & Salt Act, 1944.
Whether the petitioners' circular and their practice constituted an arrangement under which the containers were "returnable by the buyer to the assessee" for the purposes of Section 4(4)(d)(i).
Whether the amount to be excluded from assessable value is the actual cost of the tin containers at the time they left the factory gate (as contended by petitioners) or some other figure (for example, the stated refund amount of Rs. 7.65), and what evidence is required to establish that value.

Arguments of the Parties

Petitioners' Arguments (as represented by Shri Rana)

The circular dated 1 November 1978 constituted an agreement with stockists/customers that the petitioners would accept return of the 18-litre tin containers and refund Rs. 7.65 per tin, thereby making the containers "durable and returnable" within Section 4(4)(d)(i).
The existence of returned containers (the return filed by an Assistant Collector stated that 4,303 containers were received back) supports that the containers were in fact returnable and returned.
When computing the amount of packing to be deducted from assessable value, the relevant figure should be the actual cost/value of the tin containers at the time they left the factory gate; the Rs. 7.65 refund figure represents a depreciated value and the actual cost should be considered in assessment.

Superintendent of Central Excise / Respondent Position (as reflected in the opinion)

The petitioners were required to satisfy the excise authorities that declared prices on gate passes reflected value determined under Section 4; the petitioners failed to produce requisite evidence that the containers were durable and returnable.
On review of gate passes for the period 5 December 1978 to 31 March 1979, the Superintendent observed that the petitioners had deducted the price of metal containers from value but had not produced evidence to establish that the containers were durable and returnable; accordingly the value of packing must be included in assessable value.
As a result, the Superintendent communicated that no deduction for packing material was permissible unless evidence of returnability/durability and the appropriate value was produced; the petitioners were then required to pay duty including packing value and they did so under protest.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise (Supreme Court)	The interpretation of Section 4(4)(d)(i): cost of packing of a durable nature is excludible only if it is returnable "by the buyer to the assessee" — i.e., there must be an arrangement obliging the seller to accept return and refund; physical capability alone is insufficient; actual extent of return is not material.	The court relied on this authority to hold that actual return or extent of return is irrelevant to the legal question of returnability: what matters is the existence of an arrangement under which the seller is obliged to accept returns and refund. Applying that principle, the court accepted that the petitioners' circular and existing practice could establish returnability but directed that evidence be produced to establish the actual value of the tin containers at the time they left the factory for correct assessment and refund computation.

Court's Reasoning and Analysis

The court began with statutory text and precedent. Section 4(4)(d)(i) excludes from computation the cost of packing that is durable and "returnable by the buyer to the assessee." The court relied on the Supreme Court's interpretation in Mahalakshmi Glass Works that returnability requires an arrangement between buyer and seller obliging the seller to accept returns and refund; the mere physical capability of return is insufficient, and the extent of actual return is not determinative.

Applying that principle to the facts before it, the court examined the petitioners' circular of 1 November 1978 which offered a Rs. 7.65 refund on return of 18-litre tin containers and found that the circular could be read as establishing the requisite arrangement. The court also noted evidence (in the return filed by an Assistant Collector) that 4,303 containers had been returned, and rejected the Superintendent's submission that periodic re-issuance of the circular was necessary to make the term of sale effective.

On the question of valuation, the court accepted the petitioners' submission that the proper amount to be excluded from assessable value is the actual value or cost of the tin container at the time it left the factory gate (rather than simply the nominal refund amount), and therefore the petitioners must lead evidence to establish that actual value. The Superintendent's refusal to allow any deduction in the absence of such evidence was addressed by directing a further fact-finding and computation process.

Procedurally, the court quashed the Superintendent's order of 28 April 1979 (which had declined the deduction) to the extent it prevented exclusion of the container value where properly established, restrained the Superintendent from making any demand for differential duty from May 1979 until the date of filing of the petition, and directed the Superintendent to ascertain and refund any differential duty found payable after making the necessary valuation enquiries and computations.

Holding and Implications

Core Ruling: The petition partly succeeds and the order of the Superintendent of Central Excise dated 28 April 1979 is quashed insofar as it denied deduction for packing that is durable and returnable where the requisite arrangement and proper valuation are established.

Direct consequences and directives issued by the court:

The Superintendent of Central Excise is restrained from demanding any differential duty for the period commencing from May 1979 until the date of filing of the petition.
The Superintendent is directed to ascertain the amount of differential duty refund payable to the petitioners from 5 December 1978 until the date of filing of the petition, after determining the actual price or value of the tin containers at the time they left the factory gate.
The Superintendent must call upon the petitioners to produce evidence to establish the value of the tin containers at factory gate, compute the correct assessable value of the goods, and determine the refund accordingly.
The Superintendent is directed to determine and refund the differential duty paid by the petitioners by the end of December 1990.
The bank guarantee furnished by the petitioners is to stand discharged.
There will be no order as to costs.

Broader implications: The court applied established Supreme Court authority on the meaning of "durable and returnable" packing. The decision enforces the principle that an arrangement obliging the seller to accept returns is the legal criterion; actual extent of returns is irrelevant. No new legal principle or novel precedent was announced by the court beyond applying the cited Supreme Court authority to the facts and directing factual enquiry into valuation.

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Wipro Products Ltd. v. Union Of India

1. The petitioners are a Public Limited company and are engaged in manufacture of Vanaspati, refined oil, bakery shortening and other products. The vanaspati and refined oil manufactured by the petitioners is assessable under Tariff Item No. 13 of the First Schedule to the Central Excises & Salt Act, 1944 and the rate of duty is 10% ad valorem. The value in relation to the excisable goods is assessed in accordance with provisions of Section 4 of the Act and sub-section (4)(d)(i) prescribes that value in relation to any excisable goods, where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing, except the cost of packing, which is of a durable nature and is returnable by the buyer to the assessees. The petitioners pack Vanaspati and refined oils in 30 gauge tin coated steel plate containers of 18 liters capacity.

2. On November 1, 1978 the petitioners issued a circular to all Wipro stockists intimating that the tin plate is rapidly becoming a scarce commodity in India and supply of the containers is reduced to a substantial degree. The tin plate prices were also escalating at an alarming rate. The circular recites that the industry practice in existence was to discard the once used 18 litres tin container or to sell it as scrap. The circular points out that 18 litres tin containers are durable and it is possible to re-use the tin container at least a few times. The circular then mentions that with a view to utilise the durability of the 18 litre tin container, as also to increase the availability of such containers at a reasonable cost, the petitioners had decided to re-use the 18 litre tin container. The stockists were informed that with effect from November 1, 1978, 18 litre tin container will be returned and on such return a refund of Rs. 7.65 per tin will be given, provided the tin is not damaged or dented. The petitioners stated that in case the tin containers are found damaged, then the exact amount of refund would be at the discretion of The Company.

By letter dated December 4, 1978 the petitioners informed the Superintendent of Central Excise, Amalner, that the petitioners would be deducting the costs of the containers from the assessable value of the vegetable products manufactured by them as the containers were both durable and returnable. Along with the letter a copy of the circular dated November 1, 1978 issued to the stockists was annexed. Thereafter the petitioners began removing the vegetable products from their factory and paid excise duty on the assessable value thereof after excluding the costs of the tin containers in which the products were packed.

3. The Superintendent of Central Excise inform the petitioners by letter dated February 27, 1979 that the petitioners will have to satisfy the respondents that the prices declared on the gate passed do in fact present the value as determined under Section 4 of the Act. The petitioners were called upon to produce requisite evidence in support of their contention that the containers were durable and were returnable. The petitioners sent their reply on March 5, 1979. By latter dated April 7, 1979 the Superintendent, Central Excise, pointed out to the petitioners that the petitioners had failed to produce any evidence to establish that the containers were in fact return to them. By letter dated April 28, 1979, copy of which is annexed as Exhibit 'B' to the petition, the Superintendent, Central Excise, informed that the checking gate passes for the period from December 5, 1978 to March 31, 1979 at the time of finalisation of the assessment, it was observed that the petitioners had deducted the price of metal containers from the value of vegetable products. The superintendent informed the petitioners that no evidence was product to establish that the metal containers are durable and returnable. The Superintendent also claimed that the petitioners are not entitled to deduct any amount in respect of packing material and the duty will have to be determined on the basis of the price, including the value of the packing material. After receipt of this latter the petitioners paid the duty, assessed by inclusion of value of value of packing material, from May 7, 1979 under protect. The petitioners challenge the action of the Superintendent, Central Excise in declining the relief sought by the petitioners by excluding the value of packing material, while assessing the duty payable on manufacture of vegetable products.

4. Shri Rana, learned counsel appearing on behalf of the petitioners, submitted that the petitioner company had entered into an agreement with the stockists in respect of return of tin containers and in support of the submission reliance is placed on the circular dated a November 1, 1978. The learned counsel submitted that the circular makes it crystal clear that the petitioners had agreed to take back the tin containers in which the vegetable products were sold by refund Rs. 7.65 per tin provided the container is in good condition. The learned counsel urged that the fact that the containers are durable and returnable is also reflected from paragraph 4 of the return field by Jitendra Chaturvedi, Assistant Collector of Central Excise and Customs, Jalgaon Division, and sworn on April 21, 1984. In paragraph 4 of the return it is claimed that as per the data available with the excise authorities the petitioners have sold by many as 80 lakhs containers science 1978 and the containers received back are 4303. The retain claims that the circular issued by the petitioners cannot be claimed to be a term of sale offered to every customer. The return claims that there is no material to indicate that such circular was issued every financial year and therefore the promise to refund Rs. 7.65 per tin container cannot be treated as a term of sale. It is not possible to accept the claim made in the return. It is difficult to appreciate why circular dated November 1, 1978 is required to be issued every financial year. Once the circular is issued and the stockists and customers are aware that the company willing to refund Rs. 7.65 on return of the tin container, then it is hardly necessary that such circular should be issued periodically to spell out the term of sale in favor of the petitioners. The observation of the Superintendent of Central Excise in letter dated April 28, 1979 that the company is not produce evidence to establish that the tin containers area durable and returnable also cannot be accepted in view of the fact that in the return it is clearly mentioned that at least 4303 containers were returned.

Shri Rana very appropriately relied upon the decision of the Supreme Court [Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise]. The Supreme Court observed.

"What Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 excludes from computation is the cost of packing which is durable nature is "returnable by the buyer to the assessee". The packing must be one which is retunable by the buyer to the assessee and obviously that must by under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in that event, the words "by the buyer to the assessee" need not have found a place in the section; they would be superfluous. The actual or extent of return has not relevance".

What is necessary is that if the buyer choose to return the packing, the seller should be obliged to accept it and refund the stipulated amount. In the present case there was no evidence of the agreement that the cartons and gunny bags were returnable, the cost thereof is not excludible as that of durable and returnable packing."

It is obvious from the decision of the Supreme Court that the actual return or extent of return has no relevance while determining whether the cost packing, which is of a durable nature and is returnable by the buyer, can be excluded while determining assessable value under Section 4 of the Act. Shri Rana submitted that though the petitioners had promised to return Rs. 7.65 per tin on the customers returning the durable tin containers while computing the amount of packing to be deducted, the actual cost incurred by the petitioners for the tin containers should be taken into consideration. The learned counsel urged that amount of Rs. 7.65 is determined as a depreciated value of the container and while computing the assessable value the actual cost incurred by the petitioners for securing the tin containers should be borne in mind. The submission is correct and deserves acceptance. The petitioners will have to lead evidence before the Superintendent of Central Excise to establish what is the actual value of the tin containers at the time when the tin containers left the factory. The actual value of the tin containers which are durable and returnable, will have to be excluded while computing the assessable value of the vegetable products sold by the petitioners.

5. Accordingly, petition partly succeeds and the order passed by the Superintendent of Central Excise and communicated to the petitioners by letter dated April 28, 1979 is quashed. The Superintendent of Central Excise is restrained from making any demand in any respect of differential duty for the period commencing from May 1979 till the date filling of the petition. The Superintendent of Central Excise should ascertain the amount of refund of differential duty payable to the petitioners from December 5, 1978 till the date of filling of the petition. The Superintendent of Central Excise should determine the amount of refund of duty payable after ascertaining what is the actual price or the value of the tin containers at the time it left the factory gate. The superintendent of Central Excise should call upon the petitioners to produce evidence to establish the value of the tin containers at the time of leaving the factory gate and thereafter compute the assessable value of the goods and then ascertain what amount of refund is payable to the petitioners. The Superintendent of Central Excise is directed to determined and refund the differential duty paid by the petitioners by end of December 1990. The bank guarantee furnished by the petitioners to stand discharged.

6. There will be no order as to costs.

Wipro Products Ltd. v. Union Of India

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments (as represented by Shri Rana)

Superintendent of Central Excise / Respondent Position (as reflected in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Wipro Products Ltd. v. Union Of India

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