In the Supreme Court of India
Equivalent Citation:
AIR 1986 SC 806
Appellants
Union of India and Ors.
Respondent
Godfrey Philips India Ltd.
Decided on
30 September 1985
Bench
P.N. Bhagwati, C.J., R.S. Pathak and A.N. Sen, JJ.
Background
Section 4(4)(d)(i) of the Central Excises and Salt Act (1944) provides for the determination of value for the purpose of duty. In the instant case, the question was whether the cost of secondary packing of cigarettes in corrugated fibre board containers for the purpose of protecting it in transit should be included in the cost of cigarettes for the purpose of assessment of duty. Further, the applicability of a circular issued by the Central Board of Excise and Customs exempting the value of such secondary packing from the value of cigarettes for the assessment of duty was also questioned.
Facts
The respondents were manufacturers of cigarettes.The cigarettes manufactured by them were packed initially in paper/card board packets of 10 and 20 and these packets were then packed together in paper/card board cartons/outers. These cartons/ outers were then packed in corrugated fibre board containers and delivered to whole sale dealers at the factory gate.On 24-05-1976, the CBEC issued a letter exempting the cost of secondary packing in the form of corrugated fibre board containers from the cost of cigarettes for the purpose of assessment of excise duty from 24-05-1976 to 02-11-1982.The question was whether the cost of final packing in corrugated fibre board containers would be liable to be included in the value of the cigarettes for the purpose of assessment to excise duty under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944.
Issues
- Whether the cost of secondary packing is liable to be included in the cost of cigarettes for the purpose of assessment of excise duty under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944?
- Whether the circular issued by C.B.E.C acts as Government estoppel?
Contentions
By Appellants
- The cost of the packing of the cigarettes, primary or secondary, is liable to be included in the cost of cigarettes for whole sale trade.
By Respondent
- For the sake of whole sale trade, only the cost of secondary packing of cigarettes was liable to be included in the cost of cigarettes.
Judgment
Minority
The secondary packing of cigarettes in corrugated fibre board containers was held to be ‘packing’ as included in the explanation to section 4(4)(d)(i) of the Act. Hence, the cost of such corrugated fibre board containers is liable to be included in the cost of cigarettes. Cost of packing of goods in the condition in which they are generally sold in the wholesale market at the factory gate is includible in the assessable value of goods irrespective of the purpose for which the particular kind of packing is done. 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.
Majority
The purpose of secondary packing of the cigarettes in corrugated fibre board containers was to prevent any damage to the cigarettes while transporting them. Such secondary packing is not necessary for selling those cigarettes at the whole-sale market at the factory gates. Hence, it was held that it was not to be included in the value of cigarettes for the purpose of assessment of excise duty. A proper construction of section 4(4)(d)(i) of the Act would render the cost of secondary packing for the purpose of facilitating the transfer and the transit of the goods to the buyer unnecessary for the calculation of the value of the cigarettes for the purpose of assessment of excise duty.The Hon’ble Court relied upon its decision in Union of India v. Bombay Tyre International Ltd. [(1984) 1 S.C.C. 467] while construing section 4(4)(d)(i) of the Act.
The Central Board of Excise and Customs can formulate Special Orders under Rule 8 sub-rule (2) to exempt any excisable goods from payment of duty. The letter by C.B.E.C could not be considered to be such a special order which exempts cigarette manufacturers from paying excise duty with respect to secondary packing in the form of corrugated fibre board containers.The doctrine of promissory estoppel is applicable against the Central Government and the C.B.E.C. who were bound to exclude the cost of corrugated fibre board containers from the value of cigarettes but instead issued only a representation. Therefore, the cost of corrugated fibre board containers is excluded from the value of cigarettes only for the period mentioned in the representation.
Case commentary
The secondary packing of the cigarettes in corrugated fibre boards was held to be only for the purpose of protecting the cigarettes during transit and its value was held to be not includable in the value of cigarettes for the purpose of assessment of duty. The Hon’ble Court also held that the circular issued by CBEC was not issued according to rule 8 sub-rule 2 and hence, would not function as Government estoppel.
Edited by Parul Soni
Approved & Published – Sakshi Raje
