COLLECTOR OF CENTRAL EXCISE versus PONDS INDIA LTD.

Citation: [1989] SUPP. 1 S.C.R. 479 · Decided: 19-10-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

COLLECTOR OF CENTRAL EXCISE 
A 
v. 
POND'S INDIA LTD. 
OCTOBER 19, 1989 
[SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] 
B 
Central Excises and Salt Act 1944: Section 4(4)(d)(i)-Cost of 
packing-Whether includible in value of goods for purposes of assess-
ment to excise duty. 
The Respondent-assessee used to manufacture talcum powder 
C 
and face powder and were clearing the same on payment of excise duty. 
The assessee claimed deduction of cost of packing for transportation in 
respect of small packings of powder ranging 'from 0.27 paise to 11. 76 
paise per dozen packings and the same was first approved by the 
Department but later the Department having noticed that the small 
packs were first packed in dozen, and thereafter packed in secondary 
D 
packings for easy transportation to the wholesale dealer, disallowed the 
claim of dednction. 
The Assistant Collector in view of this Court's decision in post-
manufacturing expenses cases took the view that the amount claimed:by 
the Respondent was not deductible and accordingly issued a show cause 
E 
notice to the Respondent raising a demand on the respondent to pay the 
differential duty on the cost of secondary packings which was stated to 
be Rs.3,46,151.92 P. for the period from 2.12.85 to 31.5.1986. The Asstt 
Collector by his order dated 27 .2.87 disallowed the Respondent's claim 
for exclusion of the cost of packing for transportation and thus rejected 
the claim. 
F 
The Respondent preferred an appeal to the Collector of Customs 
but did not succeed and thus appealed to the Customs, Excise and Gold 
(Control) Tribunal. The Respondent relied on the decision of this Court 
in Union of india v. Godfrey Philips India Ltd., [1985] 3 Suppl SCR 
123 and contended that in view of the decision of this Court, the cost of G 
third stage packing, the outer cartons, intended for transport could be 
inclnded in the assessable value only if packing was necessary for the 
sale of goods in the wholesale market. The Tribunal however relying on 
the decision of this Court in Union of India & Ors. v. Bombay Tyre 
International Ltd., [1984] l SCR 347 held that the Cost of outer or 
bigger cartons in which the smaller cartons containing powder tins ·are 
H 
479 
A 
B 
c 
D 
E 
F 
480 
SUPREME COURT REPORTS 
[1989] Supp. 1 S.C.R. 
packed is not includible in the assessable value as the delivery of the 
goods can be taken in smaller cartons at the factory gate by a buyer in 
the course of wholesale trade. 
Being aggrieved by that decision the Revenue came up in appeal 
to this Court under Section 3SL(b) of the Act. 
Allowing the appeal and remanding the case to the Tribunal with 
directions, this Court, 
HELD: (Per Sabyasachi Mukharji, J.) 
What is to be included in the value has to be determined in terms 
of Section 4(4)(d)(i) of the Act. [485F] 
The question is not for what purpose a particular kind of packing 
is done but the test is whether a particular packing is one 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. [490B-C] 
In the present case, it has been factually found by the Collector 
that. the talcum powder and face powder are packed either in metal 
containers or in plastic containers, and thereafter they are put in dozen 
packing also of cardboard packings, which are inner cartons, and con-
tain one dozen. The same are then put in the master carton for purpose 
of delivery to wholesale dealers. [490C-D] 
The correct position seems to be that the cost of that much of 
packings, be they primary or secondary, which are required to make 
the articles marketable would be includible in the valut. How much 
packing is necessary to make the goods marketable is a q.lestion of fact 
to be determined by application of the correct approach. Packing which 
G 
is primarily done or mainly done for protecting the goods\ and not for 
making the goods marketable should not be included. l49IH; 492AJ 
The Tribunal was in error in approaching the problem before it 
by looking al the question whether the goods packed in the smaller 
cartons conld he sold in a wholesale market in the course of wholesale 
1-1 
trade at the factory gate without the outer cartons in whic

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