K.S. Puttaswamy, J.
1. M/s Alembic Glass Industries Ltd., Baroda, a public limited company, incorporated under the Companies Act, which is the petitioner before us, is engaged in the manufacture and sale of 'glass and glassware' at its two factories, one situated at Baroda and the other situated at Whitefield on the outskirts of the City of Bangalore. We are concerned in this case with the Whitefield factory.
2. 'Glass and Glassware' manufactured by the petitioner are dutiable to excise duty under the Central Excise and Salt Act, 1944 (Central Act No. 1 of 1944) ('the Act'). In conformity with the Act and the Rules made under the Act, the petitioner filed four price-lists before the Superintendent of Central Excise, Bangalore, for the period commencing from 1-10-1975 (Exhibit-A1), inter alia, claiming that 'cartons' or 'packing materials' supplied by its buyers and their cost thereto was not includible in the assessable value of excisable goods manufactured and supplied to its wholesale purchasers. On an examination of the said price-lists, the Superintendent provisionally accepted the same and allowed the clearance of good without payment of excise duty on the packing material supplied by the buyers.
3. But, the Assistant Collector of Central Excise, IDO No. 23, Bangalore-1, ('Assistant Collector') on a further examination has issued show cause notice No. C. No. V. 23A(17)18/75 (Exhibit-B) to the petitioner proposing to withdraw or revoke the provisional approval accorded by the Superintendent and subject the cost of such packing material in the assessable value and consequent payment of excise duty under the Act for the reasons stated therein. In this petition under Article 226 of the Constitution, the petitioners has challenged the constitutional validity of Section 4(4)(d)(i) of the Act and the aforesaid show cause notice issued by the Assistant Collector.
4. The petitioner has urged that Section 4(4)(d)(i) of the Act as amended by Central Act No. 22 of 1973 was beyond the legislative competence of the Union Parliament. On the show cause notice, the petitioner has urged that the cost of packing material supplied by the buyers was not includible in the assessable value of the manufactured goods supplied by it to its buyers.
5. In their return, the respondents have justified the Act and the show cause notice.
6. In Union of India and Others v. Bombay Tyre International Ltd. and others - : 1983ECR653D(SC) , the Supreme Court has rejected the very challenge and has ruled that Section 4(4)(d)(i) of the Act was within the legislative competence of the Union Parliament. In this view, the challenge to Section 4(4)(d)(i) of the Act is liable to be rejected.
7. On its case for excluding the 'packing material' supplied by the buyers, the petitioner in para 2 of its petition has stated thus :
'The products manufactured by the petitioners are purchased by different industries such as those mentioned above for their use. They are also purchased by independent wholesale merchants dealing in glass and glassware. It is not necessary to pack the glassware for the purpose of sale as they can be sold 'naked'. In fact, to some customers like United Breweries Ltd., Kisan Products Ltd., Hindusthan Milk Food . (manufacturers of Horlicks) and a few others, these articles are sold by petitioners at the factory gate in the form in which they are 'naked' condition. Some buyers supply packing materials of their own and ask and despatch them. Other buyers require the goods to be packed by petitioners themselves in their packing and dispatch them. The type of packing depends on the customers requirements and instructions. The packing cost at petitioner's factory in White filed ranges between 3.5% to 16% of the value of the goods depending upon the nature of packing material used.'
8. Without disputing the above facts, either in the show cause notice of the Assistant Collector or in their return also, the respondents have sought to sustain the former on a Circular issued by the Collector of Central Excise, Bangalore (Collector's) which reads thus :
'The requirement of law as laid down in Section 4(4)(d) of the Central Excise Act for the inclusion of the cost of packing in the value is that the goods should be delivered at the time of removal in a packed condition and that except the cost of packing which is of a durable nature and is returnable by the buyer to the assessee, the cost of every other packing has to be included in the value. Hence, glassware delivered at the time of removal in a packed condition with the packing materials supplied by the customer will not be entitled to the exclusion of the value of such packing material from the value for the purpose of assessment.'
What is stated in the show cause notice in reality reflects this very view expressed by the Collector.
9. Sri S. G. Sundaraswamy, learned counsel for petitioner, strenuously contends that packing material supplied by buyers is not includible in the assessable value of 'glass and glassware' manufactured and supplied by his client to the wholesale buyers under the Act and therefore, the impugned notice is manifestly illegal. In support of his contention, Sri Sundaraswamy strongly relies on a Division Bench ruling of the Gujarat High Court in one of the cases of the very petitioner, reported as Alembic Glass Industries, Baroda v. Union of India - 1979 E.L.T. (J 444) = 1980 (2) Taxation Law Reports, 2251 and a Full Bench ruling of Government of India in the matter of Gujarat Fertilizers Co., Ltd. (1982 E.L.T. 472).
10. Sri K. Shivashankar Bhat, learned Senior Standing Counsel for the Central Government, appearing for the respondents, refuting the contentions of Sri Sundaraswamy, contends that this Court should decline to interfere with the show cause notice on the ground that it is open to the petitioner to show cause, which the authority is bound to examine and decide and that the ultimate order to be made was appealable under the Act. In support of his latter contention, Sri Bhat strongly relies on the ruling of the Supreme Court in British India Corporation Ltd., v. Collector of Central Excise, Allahabad and Others : 1978(2)ELT307(SC) . In the very nature of things, it is necessary to examine the latter contention of Sri Bhat first and then deal with the merits if that becomes necessary.
11. Every one of the pleas or objections urged by Sri Bhat go contend that this Court should decline to interfere does not really touch on the jurisdiction of this Court to examine the impugned show cause notice and pronounce on its validity also. As seen earlier, there is no dispute on facts between the parties and therefore the question of the original and appellate authorities determining facts, does not arise. As it is, this case for reasons that are not necessary to examine, has been pending before this Court for more than 9 years. If at this stage, this Court were to decline to interfere, though there is no dispute on facts, the final determination of the question that arises is likely to take another decade. The Assistant Collector and probably the first appellate authority under the Act are bound by the circular issued by the Collector. This is one other factor that justifies our examination of the question and deciding the same one way or the other. We are of the view that the principles enunciated in British India Corporation's case that deals with a case for enforcement of fundamental rights do not militate against the view we have expressed. We are of the view that all the facts and circumstances justify the final determination of the questions raised in the case. We, therefore, reject the preliminary objection urged by Sri Bhat and proceed to examine the merits.
12. On the very terms of the show cause notice and the pleadings, we hold that 'packing materials' are supplied by the buyers only and that the same is neither manufactured nor purchased by the petitioner to supply its manufactured articles to the wholesale purchasers.
13. As ruled by all the earlier rulings of Privy Council, Federal Court and the Supreme Court in Bombay Tyre International Ltd., case in which all the earlier cases were viewed, excise duty levied under the Act was 'primarily a duty on the production or manufacture of goods produced or manufactured within the country' and that the amendments made by Act. No. 22 of 1973 had not really altered the nature of that levy. In levying excise duty on the manufactured article, the value of that article must necessarily be the criteria. Section 4(4)(d)(i) of the Act defines the term 'value' and its true scope is set at rest by the Supreme Court in Bombay Tyre International Ltd.'s case.
14. As found earlier, the whole of 'packing material' which is either manufactured or purchased by the buyers from others, as is the case, was supplied to the petitioner, who utilises the same for supplying its manufactured articles to the buyers or wholesale purchasers. The petitioner does not manufacture or purchase the packing material. All that the petitioner does was to put its manufactured articles to facilitate their smooth dispatch and supply to its buyers or wholesale purchasers. We are of the view that the use of such articles either within the factory or outside or at the factory gate, cannot and does not make any difference to hold whether the same does or does not fall within the meaning of the term 'value' occurring in Section 4(4)(d)(i) of the Act at all. When the same does not fall within the meaning of the term 'value', it follows that 'packing material' supplied by the buyers cannot be included in the assessable value of 'glass and glassware' manufactured by the petitioner and sold to the wholesale purchasers. Every one of the observations of the Supreme Court in Bombay Tyre International Ltd.'s case, on which reliance was placed by Sri Bhat, does not militate against our above construction or support his contention and the conclusion reached by the Collector and the Assistant Collector. We have therefore no hesitation in upholding the contention of the petitioner.
15. The term 'value' exhaustively defined in Section 4(4)(d)(i) of the Act provides for 'excluding the cost of packing material which is of durable nature and is returnable by the buyers to the assessee'. Sri Bhat does not dispute that the cost on 'packing material' used which is of a durable nature and is returnable by the buyer, is to be excluded on the very definition of the term 'value' found in Section 4(4)(d)(i) of the Act. If that is true, we fail to see any logic or reason for not excluding the packing material supplied by the buyer himself which is of a durable nature and is returnable by the assessee to the buyer. What is true of the former is also true of the latter. We are of the view that the provision providing for excluding the cost of packing material of durable nature and returnable by the buyer to the assessee must also be read as providing for the converse situation also as any other construction would do violence to the language of Section 4(4)(d)(i) of the Act and create an artificial definition of that term.
16. In the very case of the petitioner that arose before the High Court of Gujarat, the very question and various other questions arose for determination. On this limited question, with which only we are concerned, the Division Bench, speaking through Sheth, J., omitting those observations that relate to 'packing material purchased by the assessee' has expressed in these words :
'Therefore, in our opinion, the packing material which the buyer supplies is so independent of the manufacturing process of the excisable goods and so divorced from it that it is not even within a reasonable distance from the manufacturing process applied to the excisable goods.'
We are in respectful agreement with these views.
17. In Gujarat Fertilizers Co., Ltd.'s case, a Full Bench of Government, examining a similar question arising under the Act as amended by Act No. 22 of 1973, has taken a similar view. We are if the view that this view expressed by Government in Gujarat Fertilizers Co. Ltd.'s case correctly represents the legal position.
18. On the above discussion, it follows that the impugned show cause notice is liable to be quashed. With this, it follows that any application to be made by the petitioner for refund of excise duty, if any, paid has necessarily to be examined and decided by the authority in accordance with law.
19. In the light of our above discussion, we make the following orders and directions :
(i) We dismiss this writ petition in so far as it challenges the validity of Section 4(4)(d)(i) of the Act.
(ii) We quash the impugned show cause notice issued by the Assistant Collector (Exhibit-B).
20. Writ petition is disposed of in the above terms. But, in the circumstances of the case, we direct the parties to bear their own costs.