Bhavnagar Electricity Co. Ltd. v. UNION OF INDIA — 1991 DIGILAW 268 (GUJ)

PER SHAH, J. :, J. ( 1 ) BY the order dated 21st July 1981 the Assistant Collector, Central Excise, bhavnagar, rejected the application of the bhavnagar Electricity Co. Ltd. , bhavnagar (petitioner) for claim of deduction of 0-75 p. per tin while determining the value of the excisable goods as the petitioner was paying 0-75 p. per tin as commission to two wholesale dealers. That order is produced at annexure "1-4" to the petition by the order dated 26th June 1981 (Annexure "g"), the Assistant Collector, central Excise, Bhavnagar, rejected the petitioners application not to include the value of the tin containers in assessable value of vegetable products on the ground that the packing or putting vegetable product in tin containers could not be said to be process incidental or ancillary to the completion of manufactured product. It was rejected on the basis of section 4 (4) (d) (i) of the Central Excises of Salt Act, 1944 as there was no understanding between the manufacturer and the customers or dealers, express or implied, to the effect that packing material (tins) is to be returned to the manufacturer so that it can be used again for packing the product. By orders dated 12th August 1981 (Annexures "7", "8" and "10"), the assistant Collector, Central Excise, bhavnagar, rejected the petitioners applications for refund on the ground that those application were beyond the period of six months. All the aforesaid orders are challenged before this Court by failing this petition. At the time of hearing of this petition, the learned Advocate for the petitioner submitted that the order passed by the assistant Collector, Bhavnagar, on 21st july 1981 (Annexure "1-4") is illegal because for determining the value of excisable goods under Section 4 (4) (c) (ii) the trade discount 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, is required to be excluded. In our view, this submisssion is without any basis. It should be noted that (before the Assistant Collector no reply was filed to the show cause notice for determining the value of the excisable goods Before the Assistant Collector the petitioner has claimed deduction of 0-75 p. per tin on the ground that the petitioner has appointed M/s. M. Ravji and Co. , ahmedabad, and M/s. K. R. Chitaiis and co. , ahmedabad, and M/s. K. R. Chitaiis and co. , Rajkot, as wholesale dealers on commission basis at 0-75 p. per tin. It is clear that the petitioner is not giving trade discount of 0-75 p. to M/s. M. Ravji and Co. , Ahmedabad, and M/s. K. R. Chitaiis and Co. , Rajkot. It is the say of the petitioner that they are appointed as wholesale dealers on commission basis. Therefore, no facts are stated or alleged by the petition before the Assistant collector that the petitioner is giving trade discount 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. Hence, in our view, the petitioner is not entitled to the benefit of Section 4 (4) (d) (ii) which inter alia provides that for determinig the value of excisable goods the trade discount (such discount not being refundable on any account whatsoever) allowed in a accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale, is not to be included. The assistant Collector, therefore, rightly arrived at the conclusion that the petitioner has failed to prove that ,the petitioner was giving trade discount to the aforesaid two dealers. In the case of seshasayee Paper and Boards Ltd. v. Collector of C. Ex. , 1990 (47) E. L. T. 202 (S. C.), the Supreme Court has held that it is well-settled that in the determination of the normal price for the purposes of levy of excise duty, it is only a normal trade discount which is paid to the purchaser which can be allowed as a deduction and commission paid to selling agents for services rendered by them as agents cannot be regarded as a trade discount qualifying as a deduction. In this view of the matter, there is no substance in this contention. Further, it cannot be said that the order passed by the Assistant Collector, Central excise, rejecting the petitioners application praying that value of excisable goods manufactured by the petitioner should be determined by excluding the cost of the tin, is in any way illegal or erroneous. In this view of the matter, there is no substance in this contention. Further, it cannot be said that the order passed by the Assistant Collector, Central excise, rejecting the petitioners application praying that value of excisable goods manufactured by the petitioner should be determined by excluding the cost of the tin, is in any way illegal or erroneous. Section 4 (4) (d) (i) specifically provides that where the goods are delivered at the time of removal in a packed condition, the cost of such packing except the cost of the packing which is of a durable and is refundable by the buyer to the assessee, is to be included for determining the value of the excisable goods. In view of the aforesaid section, normally when goods are sold in packed condition, such cost of packing is required" to be included in the value. For getting benefit of exception manufacturer has to prove that the packing is of durable nature. He has further to prove that it is returnable by the buyer to the assessee. There is no evidence on record that there was agreement between the assessee and the buyer that packing material, i. e. the tins were returnable by the buyer to the assessee. Apart from the section itself being very clear, this question is also covered by the decision of the Supreme court in the case of K. Radha Krishnaiah v. Inspector General, Excise Gooty. A. I. R. 1987 Supreme Court 1774. In that case the Court has held that unless there is an arrangement between the assessee and the buyer that packing shall be returned, it cannot be said that packing is returnable. The relevant observations are as under:"what is required for the purpose of attracting the applicability of the exclusion clause in S. 4 (4) (d) (i) is that the packing must be returnable by the buyer to the assessee. The question which has to be asked in each case is: Is the packing in this case returnable by the buyer to the assessee and obviously it cannot be said that the packing is returnable by the buyer to the assessee unless there is an arrangement between them that it shall be returned. The question which has to be asked in each case is: Is the packing in this case returnable by the buyer to the assessee and obviously it cannot be said that the packing is returnable by the buyer to the assessee unless there is an arrangement between them that it shall be returned. Here in the present case it is not the contention of the petitioner that there was any such arrangement for return of the packing by the wholesale buyers to the petitioner nor is there any evidence to that effect. "hence there is no substance in this petition and is, therefore, rejected. Rule discharged with no order as to costs. .