ALEMBIC GLASS INDUSTRIES LIMITED Vs. UNION OF INDIA
HIGH COURT OF GUJARAT
ALEMBIC GLASS INDUSTRIES LIMITED
UNION OF INDIA
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S.H.SHETH, J. -
(1.) ALEMBIC Glass Industries Limited is the petitioner. The petitioner is manufacturing glass and glassware which fall under Tariff Item No. 23A in the First Schedule to the Central Excises and Salt Act, 1944. The petitioner has got a factory at Baroda in the State of Gujarat. The glass and glassware produced by the petitioner company are purchased by wholesale buyers. Anyone can buy the petitioner -Company's products in wholesale. Amongst the buyers the excisable goods produced by the petitioner -Company are manufacturers of medicines, producers of oil, manufacturers of chemicals and milk Dairies. It is the case of the petitioner -Company that it is not necessary that glass and glassware manufacturing by it should be sold in packed condition. According to them they can be sold in naked condition. The petitioners next contend that in some cases their buyers supply the packing material and sometimes they purchase the packing material from the market, pack the goods in it and sell them to their wholesale buyers. The petitioner -Company's buyers sometimes require a particular kind of packing, as for example, in cartons or in corrugated sheets. Others are satisfied with ordinary packing consisting of buy or straw padding in gunny bags. The petitioner further contends that under tariff item 17 in First Schedlue to the Central Excises and Salt Act, 1944, excise duty is leviable on packing materials themselves. It is further alleged that the cost of packing material is borne by the buyer and that the petitioner show the price of the excisable goods and the price of packing materials separately in its price -list. It next alleged that price of packing material is not identifiable with the value of the excisable goods and that, therefore, excise duty cannot be levied on the composite price of the excisable goods as well as the packing material. Next the petitioner alleges that packing material is not a part of the manufacturing process. In other words, according to them, it is not incidental to manufacture. The petitioner further avers that packing is done for the safety of the goods during transportation and that no further manufacturing process is applied to a packing material. After amended Section 4 of the Central Excises and Salt Act, 1944, came into force on October 1, 1975, the Central Excise authorities started assessing the excise duty on the composite price of excisable goods as well as packing material and did not approve the price -list submitted by the petitioner showing the price of excisable goods alone.
(2.) THE petitioner, therefore, filed this petition in which two reliefs are claimed : - (1) Definition of the expression 'value' given in Clause (d) of Sub -section (4) of Section 4 of the Central Excises and Salt Act, 1944, is beyond the legislative competence of Parliament under Article 246 of the Constitution read with Entry 84 in the Union List; and
(2) any collection of excise duty on the basis of this definition is without authority and bad in law and it is hit by Article 265 and Article 31.
In order to examine the first contention which has been raised on behalf of the petitioner, it is necessary to reproduce the definition on 'value' given in Section 4 (4) (d) of the Central Excises and Salt Act. It is in the following terms : -
'(d) 'value' in relation to any excisable goods -
(i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.
Explanation.~In the sub -clause 'packing' means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which, or on which the excisable goods are wrapped, contained or wound;
(ii) does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.'
Let us now analyse this definition - This definition in terms excludes from the value of excisable goods the cost of packing which is of a durable nature and which is returnable by the buyer to the assessee. The expression 'returnable' used in the definition suggests that actual return of the packing material of a durable nature by the buyer is not of any great consequence. In other words, what is excluded from the value of the excisable goods is the cost of packing which is of a durable nature and which can be returned by the order to the assessee irrespective of whether the returns it or not. Excluding such cost of packing, the cost of other packing is required to be included in the value of the excisable goods in order to find out its assess the value for the purpose of collecting excise duty.
Now packing material may originate, broadly speaking, from three sources: (i) the buyer may supply the packing material and the manufacturer may pack his excisable goods in it and deliver them to the buyer; (ii) the manufacturer may buy it from the market, pack the goods in it and deliver it to the buyer; and (iii) the manufacturer may himself manufacture it, pack the goods in it and deliver to the buyer. So far as the last category is concerned, it can be sub -divided into two parts; packing material which a manufacturer manufactures may be an integral part of the process of manufacture of excisable goods of it may not be such an integral part of the manufacturing process applied to the excisable goods. It is quite probable that the packing material manufacturing by a manufacturer may itself be subject to duty of excise. It may as well be not subject to it. We have to consider this aspect in detail because it is not necessary for us to do in this case. In this case it is undisputed on record that either the petitioner Company's buyers supply the packing material or the petitioner -Company purchases packing materials from the market packs the excisable goods in them and delivers them to its buyers. Therefore, the question which has arisen before us is whether the cost of packing material supplied by the buyer to the manufacturer or the cost of packing material purchased by the manufacturer from the market for the purpose of packing the excisable goods in it and delivering it to its buyer can be included in the assessable value of the excisable goods. Ordinarily the measure or standard of assessable value which the Parliament prescribes cannot be called in question unless while doing so it has entranced upon a forbidden field. We shall revert to this aspect a little later.
(3.) LET us first examine some of the definitions given in the Central Excises and Salt Act, 1944. Section 2(d) defines 'Excisable goods' so as to mean goods specified in the First Schedule as being subject to a duty of excise and includes salt. There is no doubt or dispute about the fact that glass and glassware which the petitioner -company manufactures fall under Entry 23A in the First Schedule to the said Act, Section 2(f) is very material for the purpose of this case. It defines 'manufacture' in the following terms: - . * * *
This long definition of 'manufacture' makes it clear beyond any doubt two propositions. Firstly, process of manufacture includes any process incidental or ancillary to the completion of a manufactured product. The second proposition which is made clear is that wherever the Parliament wanted to include in the process of manufacture certain incidental or ancillary processes, it has said so as for example, in sub -clause (i) of Clause (f) and in sub -clause (ia) of Clause (f).;
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