Holding

While Section 4(4)(d)(i) makes packing costs includible in the assessable value, such cost must be excluded where the packing is of durable nature and the seller is contractually bound to accept its return, as is the case with the wooden crates used by the appellants.

Summary

Triveni Glass Ltd., a manufacturer of sheet glass, challenged the inclusion of the cost of wooden crates used for packing its glass sheets in the assessable value under the Central Excises and Salt Act, 1944. The Assistant Collector had included the packing cost, whereas the Collector (Appeals) had excluded it, leading to a writ petition before the Allahabad High Court, which held the crates were not durable or returnable and thus includable. The Customs, Excise and Gold (Control) Appellate Tribunal had earlier held the opposite, excluding the cost. The Supreme Court examined whether the packing cost is includible and whether the crates qualify as "durable and returnable" packing under Section 4(4)(d)(i). It affirmed that packing cost is generally includible but clarified that when the packing is contractually deemed durable and the seller is obliged to accept its return, the cost must be excluded. The Court found the contractual clause in the invoices created such an obligation, rendering the wooden crates durable and returnable. Consequently, the High Court’s finding on durability was set aside and the appeal was allowed.

Issues considered

Whether the cost of wooden crates used for packing glass sheets is includible in the assessable value of the glass sheets under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944.
Whether the wooden crates qualify as "durable and returnable" packing within the meaning of the Act.

Legislation cited

Central Excises and Salt Act, 1944s. 4

Subjects

Excise dutyvaluationassessable valuepacking costdurable packingreturnable packingSection 4wooden cratesglass sheets

Judgment

· TRIVENI GLASS LTD.; ALLAHABAD A
v.
. UNION OF INDIA AND ORS.

, . FEBRUARY
, I, . ' •.
22, 2005

[S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] B

Centr~I Ei:cises and Salt Act, 1944-S~ction 4~/rus sheets-Valuation
of-For levy ofexcise duty-/nc/usi~n ofcost ofwooden packing in l1Ssessabl~
value thereof-Permissibility"of-Held : ·The cost .of wooden packing is C
inc/udible In the assessable value ofglass sheets-Homer, if the packing is
of durable and returnable. nature, its cost not to be· included in the value of
glass sheets.· ..
;; ' .. ,
. . Appellani-manufacturer of glass sheets filed .a price list in which the
co;t or wooden crates ~s~d for'packing the glass sheets was not included. D
Assistant Colleetor p~ssed orders including the costs ofthe wooden packing '
in the1a~sessable value of the glass sheets. Appeal thereagainst was allowed
holding th~t the special packing was not necessary for making them
marketable a;;d ihus .the .cost thereof was not includible in the value or
the glass she~ts: Despit~ the' order in the appeal Assistant Collector
approved pri~e list by incl~di~g the co~t of wooden crates. Appellants filed E
Writ Petition seeking direction to Assistant Collector to exclude the cost
of wooden crates as this order was in defiance of order.in appeal. High
Court held that th·e cost of wooden crates was includible in the assessable
value of glass sheets; and that the wooden crates were. not durable and
returnable; that mere theoretical possibility of the crates being returned F
was not sufficient and there was no evidence of the return of the crates;
and that 'durable' meant_ packing being of.such nature that the
manufacturer intended the repe~ted use of the same.

Department had also filed Revision Petition wherein Customs, Excise
and Gold (Control) Appellate Tribunal held that cost of wooden crates G
was not includible in the assessable value_ of glass sheets.

In appeal, against the order o( the High Court, the appellant
contended that because as per the bills/invoices the packing was of durable
and returnable nature and the same was to be refunded if returned intact
223 H ·
224 SUPREME COURT REPORTS

A after facilitating safe transport, the same was liable to be excluded from
assessable value of glass sheets. ··• · .

Partly allowing the appeal, the Court

HELD: I. The costs of wooden packing is includible in the assessable
B value of gla~s sheets. (227-AI
;_,.

Commissioner of Central Excise, Allahabad v. Mis. Hindustan Safety
Glass Works Ltd Judgment dated 22.2.2005 passed by Supreme Court in
Civil Appeal No. 3819 of 1999, relied on. · •

c 2. Jn view of the specific term in the bills/invoices, the wooden crates·,
are durable and returnable packing whose costs is not to be included in :
the value of glass sheets. High Court was wrong in holding that the wooden
crates are not durable or returnable. Wooden crates merely consist of
planks of wood which are nailed together. Therefore, even if they are
dismantled by the buyer ~nd the planks are returned to the Appellants
D the Appellants wo~ld be in a position' to u•e them again~ There is no
necessity that the crates m.usi be actually returned. So long as there is an
~ ·. - . .. . -·.
obligation on the seller to take back the. crates, if the buyer chooses to
return them, it is sufficient. The terin iri° the ~on tract, imposes an obligation
on the AppellantS to take back the woode~ crates and to pay the stipulated
E amount to 'the' buyer if the buyer chooses to ret~rn them: (228-C-E)
. .
/lfahalakshmi Glass Works (P) Ltd v. Collector ofCentral Excise, (1988)
36 E.L.T. 727; Wipro Products Lid v. Union of India, (1991) SJ ELT 281
Born. and GobindGlasslndustries Ltd v. Commissioner of Central Excise,
Ahmedabad (2002) 150 ELT 293 CEGAT, referred to.·
.,' .
F "'
CIVIL APPELLATE JURISDICTION : Civil Appeal No .. I 115 of2000.
, . I .. . .' I .. '
From the Judgment and Order dated I4.10.99 of the Allahabad High
Court in C.M. W.P. No. 57(; of 1981.. . . .. . , ., .
.'
S.K~
0

G . Bagaria, Tarun Gulati and. Praveen
' . .' 'Kumar
- . for. .the . Appellant. . . .
R. Venkataramani; cC Umapathy, Ashok Panigrahi, S. Gowtham, · P.
Parmeswaran
. .
and B. Krishna
.. .
Prasad for
. the Respondents.
, . ' '

The Judgment of the Court was deli~~red by ,
; • < • • • ' ., •• ' ' ; - ~ j

H
TRIVENI GLASS LTD. v. U.0.1. [VARIAVA . .I.] 225

;:,.N. V ARIA VA, J. This Appeal is against the Judgment dated A
14.10.1999 passed by the High Court of Allahabad at Allahabad.

Briefly stated the facts are as follows :-

The Appellants are manufacturers of sheet glass. The question for
consideration is whether the costs of wooden crates, in which the sheet glass B
is packed, is includible in the assessable value of sheet glass.

The relevant portion of Section 4 of The Central Excises and Salt Act,
1944 (hereinafter referred to as 'the Act') reads as follows :

"SECTION 4. Valuation of excisable goods for purposes of charging C
of duty of excise. - (I) Where under this Act, the duty of excise is
chargeable on any excisable goods with reference to value, such value,
shall, subject to the other provisions of this section, be deemed to be

(a) the nonnal price thereof, that is to say, the p!"ice at which such
goods are ordinarily sold by the assessee to a buyer in the course D
of wholesale trade for delivery at the time and place of removal,
where the buyer is not a related person and the price is the sole
consideration for the sale :

xxx xxx xxx
E
xxx xxx xxx

(4) For the purposes of this section, -

xxx xxx xxx

xxx xxx xxx F
(d) "Value", in relation to any excisable goods, -

(i) where the goods are delivered at the time of removal in
a packed condition, includes the cost of such packing
except the cost of the packing which is of a durable (]
nature and is returnable by the buyer to the assessee.

Explanation. - In this sub-clause, "packing" means the wrapper,
container, bobbin, pirn, spool, reel or warp beam or any other thing
in which or on which the excisable goods are wrapped, contained or
wound. H
226 SUPREME COURT REPORTS [2005] 2 S.C.R.

A xxx xxx xxx

xxx xxx xxx"

Thus, as per the statutory provision the cost of packing is includible in
the value of the goods unless the packing is of the durable nature and is
B returnable by the buyer to the assessee.

In this case the Appellants filed a price list in which the cost of wooden
crates was not included. The Assistant Collector passed orders including the
costs of the wooden packing in the assessable value of the glass sheets. The
Appeals filed by the Appellants were allowed by the Collector {Appeals) and
C it was held that the special packing was not necessary for making them
. marketable and thus the costs is not includible in the value of the glass
sheets.

It appears that the Assistant Collector still approv6-9 the price list only
by including the costs of the wooden crates. The Appelli;infs thus filed a Writ
D Petition in the Allahabad High Court claiming that the action of the Assistant
Collector was in defiance of the Order of the Collector (Appeals) and that the
Assistant Collector be directed to exclude· the costs of wooden crates.

It must be mentioned that against the Order of the Collector (Appeals)
E the Department had filed Revisions before the Central Government. With the
constitution of the Customs, Excise and Gold (Control) Appellate Tribunal
(CEGA T) the Revisions were transferred to CEGA T. CEGA T disposed off
these Revisions by concluding that the cost of wooden crates was not to be
includible in the assessable value of glass sheets.

F However, in the Writ Petition filed by the Appellants the High Court
has, by the impugned Judgment, held that the costs of the wooden crates was
includible in the value of the glass sheets as it was necessary to put the glass
sheets in a condition in which they can be sold in the wholesale trade. The
High Court also held that the wooden crates were not durable and returnable.
Thus this Appeal.
G
Two questions arise for consideration by us :

(i) Whether the costs of wooden crates is inc.ludible in the value of
glass sheets; and
H (ii) Whether the wooden crates can be said to be "durable and
TRIVENI GLASS LTD. v. U.0.1. [VARIAVA . .I.) 227

returnable packing". A
We have today delivered a Judgment in Civil Appeal No. 3819/1999
and a batch of similar Appeals wherein it has been held that the costs of
wooden cases is includible in the value of glass sheets. For the reasons set

...
out in that Judgment we answer the first question against the Appellants and
hold that the costs of wooden packing is includible :n t!it value of glass B
sheets. To this extent the impugned Judgment cannot be faulted.

In support of their contention that the. wooden cases are durable and
·returnable the Appellants rely upon a Clause in their bills/invoices which
reads as follows :
c
"Packing charge :- packing of durable and returnable nature
subsequent to initial packing for facilitating safe transport which will
be refunded if the same are returned intact @ Rs.140/- per crate."

Reliance is also placed upon the case of Mahalakshmi Glass Works (P)
Ltd v. Collector of Central Excise, reported in (l 988) 36 E.L.T. 727 SC D
wherein it has been held that under Section 4(4 )(d)(i) of the Act the costs of
packing which is of durable and returnable nature is to be excluded. It is held.
that there must be an arrangement between the buyer and the a5sessee that
the packing be returned to the assessee. It is held that it is not the physical
capability of the packing to be returned which is the determining factor but E
the condition that if the buyer chooses to return the packing the seller is
obliged to accept it and refund the stipulated amount. It is held that the
question whether the packing is actually returned or not has no relevance.

Reliance was also placed upon the case of Wipro Products Ltd v.
Union ofIndia. reported in ( 1991) 51 EL T 281 (Bombay). In this case Bombay F
High Court took the view that actual return or the extent of return has no
relevance and that all that is required is that there must be an obligation on
the seller to accept the packing if the buyer chooses to return it.

In the case of Go bind Glass Industries ltd. v. Commissioner of Central. G
Excise, Ahmedabad, reported in (2002) 150 EL T 293, CEGAT has also taken
the same view. In this case CEGAT has held that the costs of wooden crates
used for packing glass sheets would be excludible from the value of glass
sheets ifthere was an arrangement under which the seller was obliged to take
back the crates and pay the stipulated amount if the buyer chooses to return
the crates. H
228 SUPREME COURT REPORTS [2005] 2 S.C.R.

A In the impugned Judgment the Allahabad High Court has held that
there was no evidence that, even in a single case any wooden crate had been
returned to the Appellants. The High Court has held that term "durable"
meant that the packing was of such a nature that the manufacturer intended
to use it again and again and thus the condition must be one that the buyer
B must return the packing· to the seller. It has been held that the mere theoretical
possibility of the crates being returned was not sufficient. ·
....
Mr. Venkataramani has supported the view of the High Court and
submitted that the cost would only get excluded if the crates are actually
returned.·
c We have considered the submission of the parties. In our view, the law
laid down by this Court in Mahalakshmi Glass Works (P) Ltd (supra) is the
correct law. There is no necessity that the crates must be actually returned.
So long as there is an obligation on the seller to take back the crates, if the
buyer chooses to return them, it is sufficient. The term in the contract, set out
D above, imposes an obligation on the Appellants to take back the wooden
crates and to pay the stipulated amount to the buyer if the buyer chooses to
return them. Wooden crates merely consist of planks of wood which are
nailed together. Therefore, even if they are dismantled by the buyer and the
planks are returned to the Appellants the Appellants would be in a position
E to use them again. In our view, the High Court was wrong in holding that the
wooden crates are not durable or returnable. The answer to the second question
therefore has to be in favour of the Appellants. It is held that, in view of the
specific term in the bills/invoices, the wooden crates are durabl~ and returnable
packing whose costs is not to be included in the value of glass sheets.

F In this view, the impugned Judgment is set aside on this point. To this
extent the Appeal is allowed. There will be no order as to costs.

K.K.T. Appeal allowed.