LexM/S. TATA CHEMICALS LTD. versus THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD
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[2015) 8 S.C.R. 1009 M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD (Civil Appeal Nos. 7251-7302 of 2000) AUGUST 6, 2015 _. ,, [DIPAK MISRA AND V. GOPALA GOWDA, JJ.] A B Central Excise Act, 1944: s. 4(4)(d) - Co'Stof packing C material/gunny bags returnable for reuse by the assessee- seller- Inclusion in assessable value- Whetherthe price of the gunny bags be included in the assessable value of the soda ash for the purpose of levy of excise under the Act - Per Dipak Misra, J - Once the existence of arrangement and 0 choice to return the pac~ing material for reuse are established for the period in question, the packing cost would not be included- Per II. Gopala Gowda, J - In order to arrive at conclusion that the assessee is not liable to get the exemption from payment of excise duty on· the packing E material of soda ash, it has to be determined whether the gunny bags which are used for packing soda ash by the assessee were durable and returnable in nature and whether the same were returned to the assessee for re~uselrepacking of soda ash and it has to be further determined whether there F was any arrangement, express or implied by the appellant with its buyers of soda ash with regard to the returnabi/ity of the used gunny bags to it- In view of difference of opinion, matter referred to larger bench. Referring the matter to Larger Bench, the Court HELD: PER DIPAK MISRA, J. 1. The letters issued by the assessee-seller spell out an arrangement G 1009 H 1010 SUPREME COURT REPORTS [2015) 8 S.C.R. • A between the assessee and the buyers. Once the existence of arrangement and choice to return the packing material for reuse are established for the period in question, the packing cost would not be included. If the assessee succeeds in establishing the choice B mentioned in the documents which is accepted to be an arrangement, and is prevalent during the relevant period, the appellant shall be given the benefit. If he fails to establish the same, the adjudicating authority shall look into the consideration the actual return. [Para C 20] [1032-D-H; 1033-A] D Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise (1988) Supp SCC 601: 1988 Suppl. SCR 587; Triveni Glass Ltd. v. Union of India (2005) 3 SCC 484: 2005 (2 ) SCR 223; CCE v. Hindustan National Glass & Industries Ltd. (2005) 3 SCC 489: 2005 (2) SCR 744; K. Radha Krishnaiah v. Inspector of Central Excise (1987) 2 SCC 457 - relied on . E PER V. GOPALA GOWDA, J: 1. In order to arrive at an irrefutable conclusion that the appellant is not liable to get the exemption from payment of excise duty on the packing material of soda ash, it has to be determined whether the gunny bags which are used for packing F soda ash by the appellant were durable and returnable in nature and whether the same were returned to the appellant for re-use/repacking of soda ash by the appellant. Secondly, it has to be further determined whether there was any arrangement, express or implied G by the appellant with its buyers of soda ash with regard to the returnability of the used gunny bags to it. [Para 3] [1034-D-F] 2. By virtue of K. Radha Krishnaiah case, it is clear H that the gunny bags used for packing soda ash by the appellant have to be returnable in nature and the same M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF 1011 CENTRAL EXCISE, AHMEDABAD has to be done under an arrangement between the buyer A and the appellant. However, in the present case, with reference to the stated letters, it is apparent that no such express arrangement was made between the parties for the return of the gunny bags for the reason that there would be a deduction in the sale price, only when the B gunny bags were returned to the appellants. If such an arrangement is allowed to exist in the guise of conditional returnability of the gunny bags which may or may not be returned, th.)n the same~would run contrary to the principles laid down by this Court in the C cases of Mahalakshmi Glass Works (P) Ltd. and K. Radha Krishnaiah. The exclusion of the cost of the packing material from the value of the goods, irrespective of the customers returning the same to the appellants is illegal 0 and invalid and the same cannot be justified by the appellant by taking the plea that the letters indicate that there is an arrangement between the parties to return the used gunny bags to the appellant. Further,
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