P.K. Banerjee, J.
1. In these rules the petitioner Shiva Glass Works Company Ltd. challenged the show cause notice given by the Superintendent of Central Excise, Inspection Unit No. 1, Calcutta X Division. The said show cause notice is in the following terms :
M/s. Shiva Glass Works Co. Ltd.,
128, B.T. Road, Calcutta.
L. 4. no. 1/Glass/61(1)
Head Office at 27, Brabourne Road, Calcutta.
Whereas it appears that M/s. Shiva Glass Works Co. Ltd., cleared the excisable goods (Glass and Glasswares) manufactured in their factory without declaring the correct assessable values of different items in their price lists effective during the period from 1-9-72 to 31-5-73 and charged extra amount as additional transportation, special packing, loading and unloading charges' in respect of each and every individual item of sale to their different customers (including wholesale dealers) in their separate set of sale bills and whereas it appears that proper Central Excise Duties were not paid under Rule 173 C of Central Excise Rules, 1944 on those clearance due to which the following duties have been short levied and whereas the said amount is recoverable from the said M/s. Shiva Glass Works Co. Ltd., under Rule 10 read with Rule 170J of C.E. Rules, 1944 the said M/s. Shiva Glass Works Co. Ltd., are hereby required to show cause to the Asstt. Collector of Central Excise Calcutta X Division, 18 Rabindra Sarani, Cal. 1 why the minimum of the additional amount as found to have been charged for different items as mentioned in Annexure 'A' at the rates mentioned against each item in Col. 8(b) of annexure 'A' should not be taken in consideration in fixing the correct assessable value and why the said M/s. Shiva Glass Works Co. Ltd., should not be required to pay duty on the said amount.
1. Particulars of the goods to which the short levy relates and particulars of the relevant clearance documents, if any vide annexure 'B' and R.T. 12s and G.P.I, is for the period from 1-9-72 to 31-5-73
2. Period to which the short levy relates 1-8-72 to 31-5-73.
3. Amount of short levy Rs. 1,01,137.11-(as detailed in annexure enclosed)
4. Grounds on which the aforementioned amount is proposed to be recovered.
In course of inspection of the records and documents of M/s. Shiva Glass Works Co. Ltd., at their factory premises situated at 128, B.T. Road, Calcutta 35 during the period from 20-6-73 to 13-3-73 the officers of the Inspection Unit no. 1 of Cal. X Division detected that the licenses charged extra amount in separate set of bills showing as additional transportation, special packing, loading and unloading charges on each variety of Glass and Glasswares cleared from the factory during the period from 1-9-72 to 31-5-73. This type of additional charges were found to have been charged at a fixed rate per gross or per dozen or per hundred pieces for a particular variety by the said M/s. Shiva Glass Works Co. Ltd., in a separate set of bills marked T/l, T/2 etc., for each and every individual items of glass bottles and phials cleared during the period under review in addition to the realisation of declared prices inclusive of Central Excise duties as per their price list in the said bills.
On scrutiny of records it was observed that the said M/s. Shiva Glass Works Co. Ltd., started selling of certain items in cash memos at the factory gate since 23-9-72. The varieties sold in those cash memos during the period found to be about 95% of the glass tubes and about 1% of the glass bottles and phials cleared by the licensee from the factory from 1-9-72 to 31-5-73. The sale of 1% glass bottles and phials at the factory gate out of the total sales of those varieties cannot therefore, establish that the market for those varieties for wholesale purchase existed at the factory gate and that the liability for payment of duty on the additional charges so realised in the shape of additional transportation, special packing, loading and unloading charges does not exist. Further, the scrutiny also revealed that the licensee also realised 'sales tax and surcharges on sale tax' on those additional charges so collected which is evident from each bill of such additional charges. Under Sales Tax Act, the sales tax is payable on the value of the goods. Consequently, the value of the goods so realised in addition should also formed a part of assessable value under Sec. 4. of the Central Excises & Salt Act, 1944 and hence it appears that such additional charges are to included in the value declared by the licensee in price list no. 2/71 and 3/71 which have been approved by the Superintendent.
A detaited calculation sheet for the 'differential duty involved on the basis of the proposed fixation of assessable value for the total clearances during the period from 1-9-72 to 31-5-73 is enclosed separately in Annexure 'C'.
5. M/s. Shiva Glass Works Co. Ltd., should produce at the time of showing cause all the evidences upon which the said M/s. Shiva Glass Works Co. Ltd., intend to rely in support of their defence.
6. M/s. Shiva Glass Works Co. Ltd., should also indicate in the written explanation whether they wish to be heard in person before the case is adjudicated.
7. If no cause is shown against the action proposed to be taken within 10 days of the receipt of this notice for the said M/s. Shiva Glass Works Co. Ltd., do not appear before the Asstt. Collector of Central Excise, Cal. X Div. when the case is posted for hearing the case will be decided in accordance with the provisions of Rule 10 (2) of theC.E. Rules, 1944 without further reference to them if the said M/s. Shiva Glass Works Co. Ltd., desire extension of time for showing cause they should make a written request to
that effect to the Asstt. Collector of Central Excise. Cal. X. Division Calcutta within 10 days of the receipt of this notice giving reasons for the extension requested for.
8. They are at liberty to defend themselves on the basis of documents relied upon and to examine and take copies and/or extracts thereof, if necessary by prior appointment within Supdt. (Tech) Cal. X Division, 18, Rabindra Sarani, Cal. J.
Superintendent of Central Ex. Inspection
Unit No. 1 Cal. X.'
2. The petitioners challenged the said show cause notice on the ground that Section 4 of the Central Excises and Salt Act, 1944 unamended (which was amended in 1974) does not and cannot include these charges as manufacturing cost or manufacturing profit. It is quite clear that the show cause notice has been challenged and the petitioners have filed reply to the said show cause notice, but they have not taken the order from the department. Therefore, the preliminary point is that the petitioners cannot come on the basis of the show cause notice as no final order has been passed. In my view the petitioners may challenge the show cause notice if there is violation of principles of natural justice or violation of the statutory provisions or the authorities concerned have acted without jurisdiction without any final order passed by them.
3. Mr. Mazumdar on behalf of the petitioners contended that the additional transportation, special packing, loading and unloading charges in respect of each and every individual item of sale to their different customers cannot be based upon which the excise duty can be levied. It must be stated that we are concerned only with the period between 1-6-72 to 31-5-73 when Section 4 of the Central Excises & Salt Act, 1944 was not amended. Section 4 of the Act is a provision for determination of value for the purpose of duty where it has been provided that any article is chargeable with duty at a rate dependent on the value of the article, such value be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for deliver at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists. ' As we are not concerned with Clause (b) in which it has been provided where such price is not ascertainable etc...., I do not set out the said clause of Section 4 of the Central Excises & Salt Act, 1944. But the explanation relating to the said section is important. The explanation is, in determining the price of any article under this section no abatement or deduction shall be allowed except in respect of trade discount and amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other premises aforesaid, or, in other words, the trade discount and the excise duty payable are to be deducted.
4. Now, in the present case admittedly second bills are made by the petitioner company on additional transportation, special packing, loading and unloading charges in respect of each and every individual item of sale to their different customers. This according to me cannot be manufacturing cost or manufacturing profit upon which only excise duty is levied or leviable. This unamended section was considered by this Court in the case of Bata Shoe Company v. Collector of Central Excise reported in 76 C.W.N. 518=1979 Excise Law Times (J 464) where the Division Bench of this Court held while determining the value of goods under an exemption notification the duty leviable is also to be taken into consideration because unless the duty is leviable, the exemption cannot be granted. It was further held that the value for the purpose of exemption notification is the real value after the duty has been paid and calculated and not the deemed value of Section 4 of the Central Excises Act. In the said case the Division Bench of High Court differed with the Division Bench of the Patna High Court in a case being Civil Revision Jurisdiction Case No. 1330 of 1970. It has been held by the Division Bench that the value for the purpose of exemption notification is the real value after the duty has been paid and calculated and not the deemed value of Section 4 of the Act. In the explanation it has been said that exemption would be given in respect of trade discount as also in respect of duty to be paid on the cost of manufacturing profit of the articles manufactured. In my opinion, taking the show cause notice to be corrected whether under the law the respondent can assess the excise duty on transportation, special packing, loading and unloading charges etc., during the period when Section 4 of the Act was not amended. In my opinion, these are post-manufacturing charges. The price list which has been approved is a list on which excise duty is to be levied. Post-manufacturing expenses or charges cannot be said to be the charges for the purpose of manufacture and is leviable to duty under Section 4 of the Central Excises & Salt Act. It appears that this question came up for consideration before the Mysore High Court (now Karnataka) in the case of Alembic Glass Industries Ltd. v. Union of India reported in 1979 Excise Law Times (J 461) wherein the Division Bench of the Mysore High Court held inter alia in respect of cost of packing Sections 3 and 4, that, if the goods are sold or are capable of being sold without packing then the cost of packing cannot be included in the assessable value even though such goods are sold in packed condition. It has been further held that under Section 2(f) and Item 23A packing is not incidental or ancillary to the process of manufacture of bottles. With due respect I fully agree with the observations made by the Hon'ble Judges of the Mysore High Court and of the Gujarat High Court which holds the same view in a case reported in 1979 Excise Law Times (J 444) holding inter alia that the cost of packing certainly enjoys the character of post-manufacturing expenses as it has nothing to do with the manufacturing process and manufacturing activity is over or completed. Moreover, it cannot be said that the manufacture of excisable goods is complete only when it is packed. The cost of packing and packing materials do not form the part of the value as defined in Section 4(4)(b) because the impost on packing material under the aforesaid circumstances cannot be levied or collected. In an another decision reported in 1979 Excise Law Times (J 158) in the case of Union of India v. Mansingka Industries the Division Bench of Bombay High Court held that the cost of packing and freight charges are not includible in the assessable value. Their Lordships of Bombay High Court held that packing in a tin-container and incurring of freight charges for transporting of Hydrogenated Vegetable Oil must be treated as post-manufacturing cost and therefore, excludible from the assessable value of such an excisable product. It has been held that it cannot be said that the manufacturer of Hydrogenated Vegetable Oil is incomplete until it is placed in tin-containers and therefore, packing of Vegetable Oil is not an integral part of its manufacture. All these decisions go to show that even packaging and transportation cost after manufacture of the bottles are not incidental or ancillary to the process of manufacture of bottles or incidental to the manufacturing activity. It is in fact post-manufacturing activity and has got nothing to do with the manufacturing cost of manufacturing profit. In that view of the matter, in my opinion, the show cause notice is without jurisdiction and cannot be sustained.
I, therefore, set aside the order being Annexure 'K' and restrain the respondents from taking any steps in pursuance thereof. The rules are accordingly made absolute.
There will be no order as to costs. Rule made absolute no costs.