B.P.Jeevan Reddy, J. - (1.) Leave granted in the Civil Appeal No. 12657 of 1996 (arising from Special Leave Petition (C) No. 1836 of 1982).
(2.) Common questions of law arise in this batch of appeals. For the sake of convenience, we may deal with the facts in Civil Appeal No. 100 of 1981 (Union of India vs. Metal Box Company of India Ltd.). The matter arises under the Central Excises and Salt Act, 1944. 2. The respondent, Metal Box Company of India Limited, were manufacturing tubes, popularly known as "aluminium collapsible and rigid tubes". The collapsible tube is a cylinder of pliable metal. These tubes were originally manufactured from lead but later they were being manufactured predominantly from aluminium. The respondent was manufacturing the said tubes from aluminium by extrusion, i.e., by forcing slugs or lumps of aluminium through a die under pressure. This process is called "Extrusion process". After the tube is delivered from the extrusion press, it is trimmed to a correct length and its nozzle is threaded to the appropriate specification. According to the respondent, the operation of extrusion is completed at this stage and the resultant product is known as an "extruded tube". According to the respondent further, several processes/operations are done to such tubes like, making the tube collapsible, giving coating with appropriate colour to the tubes, printing the appropriate material as per the desire of the customer, fitting caps to the tubes and packing them into cartons. According to the respondent, all these operations are post-extrusion operations and totally distinct from the operation of extrusion.
(3.) One of the customers of the respondent was Colgate-Palmolive (India) Private Limited. According to the agreement arrived at between the respondent and Colgate-Palmolive, the latter was to purchase and supply to the respondent the plastic caps to be fitted to the aluminium extruded tubes manufactured by the respondent. On December 29, 1971, the respondent wrote a letter to the Assistant Collector of Central Excise pointing out the said agreement and asking for approval of the enclosed price list (which did not include the cost of the caps). While the matter was pending, the respondent filed a revised price list. The Excise Officer, however, called upon the respondent to pay excise duty including the value of the caps in the value of the tubes. The respondent thereupon approached the Bombay High Court by way of a writ petition (No. 511 of 1973) for issuance of a writ, order or direction to the Central Excise authorities not to include the costs/charges relating to coating or printing and relating to plastic caps fitted to extruded aluminium tubes in the assessable value of such tubes. The respondent also asked for the quashing of the demand notice issued by the Central Excise Officer. It is significant to note that while the controversy raised by the respondent before the excise authorities pertained only to the inclusion of the value of the plastic caps in the assessable value of the said tubes, a larger relief was asked in the writ petition seeking the exclusion of the value of coating/printing in addition to the exclusion of the value of plastic caps. The learned single Judge of the Bombay High Court allowed the writ petition. The reasoning of the learned single Judge is to be found in the following observations : "It is accepted on behalf of the respondents that the extruded tubes are sold in the market either in their maked (naked ) form or after lacquering or printing or fitting with caps thereon. It is accepted that the extruded tubes are known in the market although they are neither lacquered nor printed nor fitted with caps. The respondents, by para 5 of the return, have further conceded that certain processes are carried out after the process of extrusion takes place.......what is liable for excise duty is a manufactured product of extruded tubes........only those processes which are incidental or ancillary to the completion of the manufactured product would come within the expression of manufacture......It is undoubtedly true that the excise duty is leviable on an article when it is taken outside the factory and the rate of the duty is determined with reference to the date of which the article is taken outside the place of manufacture. But that fact would not enable the respondents to take into consideration the cost of printing, painting or fitting the caps which is really in the nature of post manufactured cost. The process of manufacture of extruded tubes is not postponed till such tubes are painted, lacquered, printed or fitted with caps. That operation is done only to suit the convenience of the customer and is clearly a post-manufactured operational process. That being so, it is not possible to include the cost of those operations while determining the value of extruded tubes for the purpose of excise duty." ;