Arijit Pasayat, J. - (1.) The Revenue is in appeal against the judgment rendered by the Customs Excise and Gold (Control) Appellate Tribunal, Bench, Calcutta (in short the CEGAT). Since there was a difference of opinion between the Member (Judicial) and the Member (Technical), the matter was referred to a third member i.e. another Member (Technical). By majority 108 appeals filed by the respondent (hereinafter referred to as the assessee) were allowed. There were essentially two issues involved. The first related to the question as to whether packing charges realized by the assessee from its customers in different situations for different types of packing would form part of assessable value of the final product or not to attract duty under the Central Excise and Salt Act, 1944 (in short the Act). Second question was whether some of the show-cause notices were issued beyond the period prescribed under Section 11A of the Act. The majority view was in favour of the assessee in respect of both the aforesaid issues.
(2.) Dispute arose in the following background : The assessee is engaged in the manufacture of various types of glass bottles for milk, soft drinks, medicines, hair-oil, beer etc. The bottles manufactured by the assessee are used by the various manufacturers of the consumer products for packing of their goods. According to the assessee, these bottles are delivered by it in loose condition at the factory-gate in the course of wholesale trade. In a good number of cases its buyers want the goods to be packed in some sort of packing for safe transportation of the goods and to avoid the breakage etc. during transit, whereas in some cases, the buyers send their own packing materials like gunny bags, wooden cartons, wooden crates etc. In some cases, it buys the packing materials on behalf of its customers who reimburse the cost of the same. Wherever the packing material is supplied by the buyers viz, cardboard boxes and wooden crates etc. at their own cost, only ex-factory prices for the sale of the goods is being realized by it as the sale is in loose condition and it is the headache of the customers to provide any type of packing to ensure safe transportation of the goods. It only charges some extra sums termed as initial packing in lieu to the extra services rendered at the buyers request by way of labour charges etc. after putting the bottles in the boxes/crates supplied by its customers and also towards the costs of stores material and other related expenditure such as cost of pins, gum type, coir string and sutti etc. No initial packing charges were being realized by it prior to April, 1977 and also in those cases where the goods were delivered in loose condition without any packing whatsoever at the factory gate. It is also the assessees contention that even where the packing materials are being provided by it at the behest of the buyer, the same is invariably durable and returnable justifying its non-inclusion in the assessable value. Its price-lists were approved without the inclusion of packing charges, though these charges were reflected in the price-list depending upon the type of packing the customer opted for.
(3.) A show-cause notice dated 31-12-1970 was issued by the Department raising demand of duty on packing undertaken by the assessee during the period from 1st January to 31st March, 1974. Thereafter further show-cause notices (111 in total) were issued on the allegation that the assessee had not included the packing charges in the assessable value of its final product. The show-cause notices covered period upto 14-11-1975. The show-cause notices and subsequent demands made on the assessment memorandum of RT-12 Returns were the subject matter of challenge of Writ Petition No. 5002(W) of 1980 before the Calcutta High Court, wherein the assessee challenged the attachment of its goods by the Department by letter/order dated 9-4-1980. An interim order was passed on 30-4-1980 to which reference shall be made infra. Another interim order dated 14-5-1980 extending the application for extension of the interim order was passed along with clarifications. The writ petition was finally disposed of by the High Court on 3-4-1986 directing the concerned appellate/revisional authority to dispose of the matter in the light of the principles enunciated by this Court in several judgments. Matter was remanded with liberty to approach the High Court further in case it was warranted. The interim order was directed to be continued till disposal of the case by the concerned authorities. During the pendency of the writ petition before the High Court demands on various counts including packing charges were raised by the Revenue on the RT-12 Returns. In show-cause notices it was indicated that the demand was subject to the decision of the Calcutta High Court in the writ petition. The Assistant Commissioner, Central Excise (Calcutta) (hereinafter referred to as the adjudicating authority) adjudicated all the show-cause notices and by order-in-original dated 18-12-1986 confirmed the demand of duty amounting to Rs. 2, 13,89,696.29. (subsequently corrected to Rs. 2, 13,78,926.16) on the ground of packing charges and dropped the demands relatable to certain other aspects. Appeal was filed before the Commissioner (Appeals) (referred to as the appellate authority) by the assessee which was dismissed. Therefore, 108 appeals were filed before the CEGAT. Stand of the assessee before the CEGAT was two-fold. It was submitted that the moot question was whether the packing expenses are required to be added in the assessable value or not and secondly whether 24 show cause notices were barred by limitation. It was pointed out that 24 show-cause notices which were issued after the expiry of the stipulated period and subsequently confirmed by the authority were barred by limitation of six months in terms of Section 11A of the Act. It was pointed out that interim orders passed by the High Court had not restrained issuance of show-cause notice. There was some amount of confusion in the orders passed by the adjudicating authority and the appellate authority. While adjudicating authority categorically held that the assessments were final assessments, but were provisional in certain aspects, the appellate authority held that it was provisional and, therefore, concluded that the notices were within time. The conclusion of the appellate authority that the interim orders passed by the High Court were understood by the parties as if there was a restraint on issuance of the show-cause notice is clearly erroneous. As the factual situation shows, out of the total number of show-cause notices (111 notices) only 24 notices were barred by limitation and if revenue understood that there was restraint on issuing show-cause notices, it could not have issued 77 notices. The interim orders related to realization and not levy. On merits it was submitted that the goods are not generally sold in the packed condition at the factory gate. Packing of the bottles in straw, gunny bags, cardboards or wooden boxes/crates depend upon choice of the respective customers who either provide the packing materials themselves or ask the assessee to do the job on their behalf. Packing suggested by the customers was to ensure safe transportation of goods and to avoid loss of damage during transit. Different rates were quoted for different modes of packing on the basis of the orders placed by the customers specifying the mode of packing. The price-list filed specified wholesale ex-factory prices and different charges for the different modes. Wherever packing had been ordered by the customers, packing charges were shown separately in the invoice. Wherever the buyers had not asked for any packing goods were delivered in loose condition without any packing. In any event, the packing used was of durable and returnable in nature, and the buyers were entitled to the refund of cost on return. In a number of cases, such packing had been returned by the buyers and the same had been also re-used by the assessee and adjustment towards the cost of the same has been made. Though the authorities accepted the factum of return of packing material, it ignored the same on the ground that number was very small. The Revenue on the other hand submitted that in view of the categorical language of Section 4(4)(d)(i) there was no scope for excluding the packing charges on the artificial distinction of primary/specific packing charges. Even if there were some cases of return it was insignificant when compared to the volume of transactions. On the question of limitation, it was submitted that the assessee had in fact understood the order of the High Court to mean that the notices were not to be issued awaiting decision and, therefore, all the notices were within time. As noted above, the Member (Judicial) and second Member (Technical) decided both the issues after referring to the factual aspects in favour of the assessee. It was held that there was no question of any provisional assessment as projected by the Revenue and, in fact, the adjudicating authority himself had held that there was final assessment, but it was provisional for some purposes. A different view was taken by the Member (Technical). Another Member (Technical) concurred with the Member (Judicial) and the appeals were allowed. The conclusions of the majority members of the Tribunal were as follows :- (1) Packing charges collected by the assessee are not includible in the assessable value of glass and glassware. (2) Initial packing charges towards packing of the goods in durable and returnable containers is includible in the assessable value. (3) 24 show cause notices involving duty of Rs.66,34,680.27 are barred by limitation. ;