# 8 S.C.R. 1009 M/S. TATA CHEMICALS LTD v. THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD - **Citation:** [2015] 8 S.C.R. 1009 - **Court:** Supreme Court of India - **Decided:** 2015-08-06 - **Case number:** Civil Appeal Nos. 7251-7302 of 2000 - **Bench:** Dipak Misra, V. Gopala Gowda - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/8-s-c-r-1009-m-s-tata-chemicals-ltd-v-the-collector-of-central-excise-ahmedabad-30951 - **Pages:** 37 ## Headnote A B Central Excise Act, 1944: s. 4(4)(d) - Co'Stof packing C material/gunny bags returnable for reuse by the assesseeseller- 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 an ## Text _Characters 0–39,973 of 64,784. This is a partial read: ask again with offset=39973 for what follows._ [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 assesseeseller- 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, the appellant has already charged for the value of the gunny E bags from the customers by adding the same to the cost of soda ash. The fact that some of the customers of the appellant have returned the gunny bags out of several ones already sold between the period of 1971 to 1988, dces not entitle it to get the benefit of exclusion of the F cost of all the gunny bags which were not even returned to the appellant. The test for the determination of inclusion or exclusion of the value of the gunny bags from the overall value of the soda ash can be ascertained on the basis of whether such packing is necessary for G putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. The burden to prove that the value of the gunny bags is not inclusive and not excisable with the value of ·the soda ash, lies on th~ appellant and it has miserably H 1012 SUPREME COURT REPORTS [2015) 8 S.C.R. A failed to do so as is clear from the facts and circumstances of the case that the soda ash are sold in bulk in the gunny bags at the factory gate to the wholesale market and such packing is indispensible for the transport and preservation of soda ash. The appellant B has also failed to establish an arrangement as per Section 4(4)(d)(i) of the Act. Hence, in these circumstances the appellant is bound to include the cost of the gunny bags that are provided by it in the overall value of the soda ash as per the provisions of the Act [Paras 6to 11) [1038C F-H; 1039-A-F; 1041-A-C, E-F] 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 D 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 Case Law Reference DIPAK MISRA, J.: 1988 Suppl. SCR587 relied on. Para 4 2005 (2) SCR 223 relied on. Para 4 F 2005 (2) SCR 744 relied on. Para 4 (1987) 2 sec 457 relied on. Para 4 PER V. GOPALA GOWDA, J.: G 1988 Suppl. SCR 587 relied on. Para 2 2005 (2) SCR 223 · relied on. Para 2 2005 (2) SCR 744 relied on. Para 2 (1987) 2 sec 457 relied on. Para 2 H M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF 1013 CENTRAL EXCISE, AHMEDABAD CIVILAPPELLATEJURISDICTION: CivilAppeal Nos. A 7251-7302 of 2000 From the Judgment and Order dated 06.09.2000 of the Customs Excise and Gold.(Control)Appellate Tribunal, New Delhi in Final Order Nos. 721to772/2000-AinAppeal No. E/ B 1073-1090/90-A, 4285-4289/90-A, E/4293-4294/91-A and El 4296-4322/91-A Ravinder Narain, Rajan Narain, Ajay Aggarwal, Mallika Joshi, Shravani Shekhar, Ruchika fortheAppellant. c Mukul Rohtagi, AG, Rajiv Dutta, B. Krishna Prasad, Rupesh Kumar, Arijit Prasad, A.T.M. Sampath for the Respondent. The Judgments & Order of the Court were delivered by D DIPAK MISRA, J. 1. In this batch of appeals, the appellant calls in question the assailability of judgment and order dated 6.9.2000 passed by the Customs, Excise and Gold Control (Appellate) Tribunal, New Delhi (for short 'the tribunal') E in Appeal Nos. E/1073-1090/90-A, E/4285-4289/90-A, E/ 4293-4294/91-A, E/4296-4322/91-A, whereby the tribunal has not accepted the letters dated 15.12.1970, 01.02.1971 and 02.04.1971 to bring out the arrangement for the return of durable packing, namely, gunny bags, for reuse as packing F material for selling the soda ash in bulk. The tribunal has further opined that assessee's effort to establish that there was an arrangement between the manufacturer and their customers to return the durable packing, namely, gunny bags, and accordingly the claim put forth by them that the value of gunny G bags used for packing soda ash manufactured by them should be excluded in finding out the assessable value was · unsustainable and hence, unacceptable. H 1014 SUPREME COURT REPORTS [2015) 8 S._C.R. A 2. The controversy, to be appreciated, requires narration of certain background facts. Dispute with regard to these gunny bags between the assessee and revenue have arisen for the period from 1970 to 1985. As is evidenf. proceedings for the entire period were taken in three B compartments, namely, 1970-75, 1976-1980 and 1981-1985. Initially the dispute related to payment of duty of excise on the value of goods manufactured i.e. soda ash, after exclusion of post-manufacturing expenses. Subsequently, it was settled as a proposition that post-manufacturing expenses as such were C not deductible and that the deduction/exclusions could only be in terms of specific provisions contained in Section 4 of the Central Excise Act, 1944 (for brevity, 'the Act'). On the basis of the aforesaid law laid down, the matters were remanded by 0 this Court for reconsideration. 3. Be it noted, it was for the first period, that is, 197075, the matter was remanded to the Assistant Commissioner to decide the issue relating to exclusion/inclusion of cost of packing in determining the value of goods for payment of E excise duty under Section 4 of the Act. The claim of the assessee was eventually rejected by order no. 194/2006-ExPB dated 14.2.2006 in appeal No. E-480/04. That compelled the assessee to prefer Civil Appeal No. 2988/2006. The said F appeal has been disposed of by this Court vide judgment and order dated 21.8.2014. This Court had referred to certain paragraphs of the order passed by the tribunal and thereafter passed the following order:- G H ''The aforesaid paragraphs clearly demonstrate that the Tribunal has followed the reasoning that it had followed for the period 1981 to 1985. Mr. B.L. Narasimhan, learned counsel forthe appellant would contend thatthe claim of the assessee before the authorities we absolutely different inasmuch as two contentions were raised before the authorities, namely, that excise duty M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] was not leviable on the packing materials supplied by the buyer, and the second, the same was durable and., returnable, but, the Tribunal has adverted to the sei::on_d aspect by expressing its view on the basis of the deci~i<;>n. · rendered by it pertaining to the assessment years 1981 to 1985 and not adverted to the issue that no levy could_ have been imposed on packing material, if it is supplied by the purchaser and the said fact proven to the satisfaction of the authorities that it has been used for packing. Learned counsel for the appellant fairly submitted that he does not intend to press the issue with regard to durability and returnability. He has confined his submission with regard to levy of excise duty on the packing material supplied by the buyer. Mr. Rohtagi, learned Attorney General, we must appreciably state submitted with all fairness at his command that as far as the first aspect is concerned, if the packing materials are supplied by the buyer, the levy could no~ have been impsed. The said contention is absolutely correct is view of the law laid down in Mis. Hindustan Polymers Vs. Collector of Central Excise 1• As the Tribunal has not adverted to the said facet, we allow this appeal and remand the matter to the Tribunal exclusively for delineation on the said issue. Accordingly, the order of the Tribunal is set aside to the said limited extent. We may hasten to clarify, our setting aside of the order would not have no effect whatsoever for the assessment years 1981 to 1985. 4. It is necessary to mention here that for the subsequent period, i.e, 1976-1980, the matter is still subjudice before the adjudicating authorities and I am not concerned with the same. 1 (1989) 4 sec 323 1015 A B c D E F G H 1016 SUPREME COURT REPORTS [2015] 8 S.C.R. A The present batch of appeals relates to the period 1981-1985. It is apt to note here that when the batch of appeals was listed before a three-Judge Bench, it referred to Section 4(4)(d) of the Act and letters issued by the appellant; took note of the decisions in Mahalakshmi Glass Works (P) Ltd. v. B Collector of Central Excise', Triveni Glass Ltd. v. Union of India & Ors. 3 and Commissioner of Central Excise v. Hindustan National Glass & Industries Ltd.4 ; adverted to the order of the tribunal that has not accepted the documents holding that it did not show that there was any arrangement C regarding returnability of gunny bags which would justify the exclusion of cost of gunny bags from the cost of soda ash; analysed the proposition of law stated in K. Radha Krishnaiah D E F G v. lnspectorofCentral Excise and others5 and opined thus:- "As we read the decisions in K. Radha Krishnaiah (supra) and Mahalakshmi Glass Wolks (P) Ltd. (supra), the Court was of the view that there must be an arrangement to the effect that the packing material must be returnable to the seller by the buyer. In such a case actual return would not have to be established. The reason for this is obvious. From the section it appears that if the packing material is obliged to be returned to the seller, the seller does not in fact transfer the title in the packing material to the buyer. The seller retains the property in the packing material. In such circumstances irrespective of the actual return of the packing material by the buyer to the seller, the seller, not having effect the sale of packing material, was not required to include the cost of packing material in the cost of excisable goods. In the present case, there was no obligation on the part of the buyers to 2 1988 (Supp) sec 601 3 (2005) 3 sec 484 4 (2005) 3 sec 489 H 5 (1987)2SCC457 M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] return the gunny bags and the assessee-seller clearly indicate that only ifthe gunny bags are actually returned . would the buyers be entitled to a deduction of the value···· of the gunny bags. Therefore value of the gunny bag's0 ; formed part of the prices and were otherwise includible'- < in the value of the goods. There would be a deduction of the sale price only if the gunny bags were returned by the' ' customers to the assessee. The Tribunal rightly came to the conclusion that there was in fact no such arrangement between the appellant and its customers that the packing material shall be returned. The letters show request, recommendation and urging of the customers by the assessee, all of which were open to the customers concerned to either accept or reject. If we were to hold that such an arrangement would allow the appellant to exclude the cost of the packing material from the value of the goods as a matter of course and irrespective of the customers returning the gunny bags, it would run contrary to the language of the section and the decisions in K. Radha Krishnaiah (supra) and Mahalakshmi Glass Works (P) Ltd. (supra). The basis for making an exception in the statute in respect of durable and returnable packing material would also cease to justify such an exception. "We may, also note at this stage that the appellant has· also contended and in fact it had only claimed a reduction in the value of the soda ash cin the basis of gunny bags ·actually returned. Nevertheless on the basis of the'. decision in Triveni Glass Ltd. (supra), it contends that·· irrespective of the actual return of the gunny bags, the· · Tribunal was bound to exclude the cost of the gunny bags from the value of the soda ash in all cases where there was an arrangement to return the packing materials as a matter of law." 1017 A B c D E F G H 1018 SUPREME COURT REPORTS [2015] 8 S.C.R. A After so stating, the three-Judge Bench proceeded to observe as follows:- "The decision in Triveni Glass Ltd. (supra) does appear to suggest that even if there is no obligation on the part B of the buyer to return the packing material, butthere is an obligation on the part of the seller to accept the packing material if the buyer chooses to return it, then in all cases the cost of the packing material must be excluded from the cost of the excisable goods. This view is, in our C opinion, contrary to the ratios laid down in the cases of K. Radha Krishnaiah (supra) and Mahalakshmi Glass Woms (P) Ltd. (supra). 5. In view of the aforesaid it referred the matter to be D placed before the larger Bench by order dated March 23, 2006. E F G H The Constitution Bench vide order dated 4.8.2010 passed the following order:- "In view of paragraphs 12and17 ofthejudgmentofThreeJudge Bench of this Court in the case of Triveni Glass Limited vs. Union of India and Ors., reported in 2005(3) SCC 484, we are of,the view that the assumption made in the referral order dated 23'd March, 2006 to the effect that the decision of this Court in Mahalakshmi Glass Works (P) Limited vs. Collector of Central Excise, Bombay, reported in 1988 (Supp) SCC 601, is erroneous. On the contrary, the judgrnent of this Court in Triveni Glass Limited (supra) in turn follows the judgment in Mahalakshmi Glass Works (P) Limited (supra). For the above reasons, the order of reference dated 23rd March, 2006, is set aside and consequently, the civil appeals will be heard by the appropriate Bench in accordance with law. All arguments on merits on both sides are kept open." M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF 1019 CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] 6. In view of the aforesaid chronology of events, I am A required to adjudge whether the finding recorded by the tribunal is justified in the backdrop of the letters issued by the assessee~ The tribunal, as is noticeable, has held that there has been no arrangement between the manufacturer and their customers to return the durable packing and, therefore, the claim put forth B by the assessee that the value of gunny bags used for packing soda ash manufactured by them should be excluded in finding out the assessable value is untenable. 7. It is submitted by Mr. Ravinder Narain, learned C counsel for the appellant that the controversy has to be appreciated regard being had to the applicability of the word "value" as employed in Section 4(4)(d)(i) of the Act in relation to excisable goods and the interpretation placed by this Court on various authorities in the backdrop of the letters that have D been brought on record. It is also his submission that the concept of durability and returnability has to be understood on the bedrock of the propositions laid down by the decisions of this Court. Additionally, it is canvassed by him that once it is established that there has been an arrangement, the authorities E can be asked to appreciate the other documents, regard being had to the period in question to find out whether the arrangement was in vogue during that period. 8. The aforesaid submissions have been seriously F controverted by Mr. Mukul Rohtagi, learned Attorney General, on the foundation that the letters cannot form the basis of an arrangement and they are fundamentally self-serving documents. : 9. Sectior:i 4(d) which defines "value" reads as follows:- "(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 G H 1020 SUPREME COURT REPORTS [2015] 8 S.C.R. A exceptthe cost of the packing which is of a durable nature . and is returnable by the buyer to the assessee." 10. Section 4(d)(i) uses the word "returnable". The said word fell for consideration before a two-Judge Bench in K. B Radha Krishnaiah (supra). While interpreting the said term, the Court held thus:- "Does it mean physically capable of being returned or does it postulate an arrangement under which the c packing is returnable. While interpreting this word, we must bear in mind that what Section 4(4) (cf)(1) excludes from computation is cost of packing which is of a durable nature and is "returnable by the buyer to the assessee". The packing must be one which is returnable by the buyer D to the assessee and obviously that must be under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in that event, the words "by the buyer to the assessee" need not have E found a place in the section; they would be superfluous. What is required for the purpose of attracting the applicability of the exclusionclause in Section 4(4)(cf)(1) is that the packaging must be returnable by the buyer to the assessee. The question which has to be asked in F 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." G 11. In Maha/akshmi Glass Wor.ks (supra), the assessee-appellant have been paying duty on the value of the glass bottles including the cost of gunny bags or the cartons in which these are packed at the time of sale. It had been paying H duty on the glass bottles on the basis of assessable value which MIS. TATA CHEMICALS LTD. v. THE COLLECTOR OF 1021 CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] included the costs of packing material, namely, the gunny bags A and the cartons. It was contended before the adjudicating authority by the assessee that the glass bottles are normally sold by it in the packing consisting of gunny bags which are durable and returnable and in several cases the gunny bags are returned by the buyers and reused by the appellant again B for packing the glass bottles. It was also brought to the notice of the said authority that only when the customers ask for delivery in cartons instead of gunny bags, the appellant deliver the glass bottles packed in cartons which are durable and returnable. When the assessee submitted a price list in regard C to the glass bottles manufactured by it for approval by showing separately the price at which such goods· were actually sold in the course of "whole-sale trade" and "the cost of packing", Superintendent of Central Excise returned to the assessee D the price list duly approved but noting therein that price should be inclusive of the cost of packing and the packing charges in terms of Section 4(4)(d)(i) of the Act. On the basis of the said communication, the assessee paid the duty under protest and, thereafter, lodged claims for refund. When it did not receive E any payment or any intimation, the litigation commenced. When the matter arrived before the tribunal, the tribunal relied on the authority in K. Radha Krishnaiah (supra) and opined thatthere was no clause about the returnability of the cartons and gunny bags. This Court, in appeal, while relying upon the principle in F K. Radha Krishnaiah case·ruled that:- "As noted above, this Court has considered the meaning of the expression "returnable" in the section in K. Radha Krishnaiah case. This Court held that so far as the question of durability is concerned, there cannot be such controversy about it, but a question has been raised as to what is the meaning and connotation of the word "returnable". Does it mean physically capable of being returned or does it postulate an arrangement under which G H 1022 A B c SUPREME COURT REPORTS (2015] 8 S.C.R. the packing is returnable? While interpreting this word, we must bear in mind that what Section 4(4)(d)(i) excludes from computation is cost of packing which is of a durable nature and is "returnable by the buyer to the assessee". The packing must be one which is returnable by the buyer to the assessee and obviously that must be under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in that event, the words "by the buyer to the assessee" need not have found a place in the section, they would be superfluous." After so stating, the Court dismissed the rtppeal as there have been no evidence of the agreement that the cartons D and gunny bags were returnable. 12. In Hindustan Polymers (supra), a three-Judge Bench was dealing with the concept of value of excisable goods under Section 4(4)(d)(i). Sabyasachi Mukharji, J. (as E His Lordship then was) opined that:- "The contention that the value of packing materials including those supplied by the buyer, has to be included in the value of the goods, is repugnant to the very scheme F of Section 4. It overlooks the use of the expression "cost" in relation to packing in the crause (1) of Section 4(4)(d) of the Act. The word "cost" has a definite connotation, and is used generally in contradistinction to the expression "value". Thus, fhe clear implication of the use G of the word "cost" is that only packing cost of which is incurred by the assessee i.e. the seller, is to be included. The use of the expression "cost" could not obviously be by way of reference to packing for which the cost is incurred by the buyer. It has to be borne in mind that such H a provision would make the provision really unworkable, MIS. TATA CHEMICALS LTD. v. THE COLLECTOR OF CENTRAL EXCiSE, AHMEDABAD [DIPAK MISRA, J.] since in making the assessment of the seller, there is no machinery for ascertaining the "cosf' of the packing which might be supplied by the buyer. Such a contention further overlooks the scheme of clause (1) whereunder durable pa~king returnable by the buyer has to be excluded. It would create an absurd situation if durable packing supplied by the assessee and returnable to the assessee is not to be included in the assessable value but a durable packing supplied by the buyer to the assessee and returnable to the buyer is made a part of the assessable value." Ranganathan, J., in his concurring opinion, expressed the view thus:- "' -~. "In construing Section 4(4)(d)(i), all that has to be seen is whether the goods are delivered in packed condition. If this question is answered in the affirmative, then, in respect of the goods so sold, the cost of packing.whether incurred by the manufacturer or by the supplier, has to be automatically included in the assessable value if necessary, by addition to the sale price, except only where the p~cking is of durable nature and returnable to the manufacturer. He reminded us of the oft-quoted truism that, in tax matters, one has to look at what is said and that there is no question of any intendment, implication, equity or liberality in construing the taxing provision. I agree with Mukharji, J. that this contention cannot be accepted. The principle referred to by the learned Attorney General is unexceptionable but the words of a statute have to be read in the context and setting in which they occur. The proper interpretation to be placed on ~he words of Section 4(4)(d)(i) has been explained in the judgment of my learned Brother and I am in full agreement with him on this· point." 1 r ')I 1023 A B c D E F G H 1024 SUPREME COURT REPORTS [2015] 8 S.C.R. A · And again:- "Where the manufacturer supplies his own container or drum but does not charge the customer therefor, then the price of the goods will also include the cost of the B container. There will be no question of separate addition to the sa)e price nor can the assessee claim a deduction of the cost of packing from the sale price except where the container is a durable one and is returnable to the manufacturer. If the manufacturer supplies the drums and C charges the customers separately therefor, then, under Section 4(4)(d)(i), the cost of the drums to the buyer has to be added to the price except where the packing is of durable nature and is to be returned to the manufacturer. If on the other hand, the manufacturer asks the customer D to bring his own container and does not charge anything therefor then the cost (or value) of the packing cannot be "notionally" added to, or subtracted from, the price at which the goods have been sold by the manufacturer." E Verma, J., in his concurring opinion, ruled that:- "The "cost of such packing" referred in Section 4(4) (d)(1) does not include within its ambit the cost of packing not incurred by the manufacturer when the packing is supplied F by the buyer and not the manufacturer. This construction of the expression "cost of such packing" in Section 4(4)(d)(i) of the Act clearly excludes in these matters the question of its addition to the price of goods recovered by the manufacturer from the buyer for determining the G "value" in relation to the excisable goods for computing the duty payable on it." 13. Learned counsel for the appellant has commended me to the authority in Triveni Glass Limited (supra). In the H said case, a three-Judg~ Bench has held thus:- MIS. TATA CHEMICALS LTD. v. THE COLLECTOR OF CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] "We have considered the submission of the parties. In our view, the law laid down by this Court in Mahalakshmi Glass Works (P) Ltd. 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 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 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 durable and returnable packing whose cost is not to be included in the value of glass sheets." The principle stated therein has been followed in Triveni Glass Ltd. v. Commissioner of Central Excise, Guntut8. 1025 A B c D E F 14. From the aforesaid proposition of law, it is graphically clear that there has to be an arrangement for the return of the packing material. In the case at hand, the tribunal has ruled, after referring to the letters, that there has been no arrangement. The said finding has been seriously challenged· G by Mr. Ravinder Narain, learned counsel for the appellanl on the foundation that the letters clearly spell out the arrangement; •"'ltl ·~· that there has been responses by the dealers and that the 6 Civil Appeal Nos. 4852-4853 of 2005 H 1026 SUPREME COURT REPORTS (2015] 8 S.C.R. A benefits were availed accordingly. To appreciate the factual controversy, it is appropriate to reproduce the relevant paragraphs from the letter dated 15.12.1970:- 4. At this stage, it will be relevant to recall several attempts B that we have made in the past to encourage and promote the cyclic use of jute bags and to introduce cheaper and alternative packing materials like cloth, plastics, etc. Unfortunately, these attempts have so far met with only limited and interrupted success. In order to eliminate or C to reduce the cost of packing materials, we were strongly motivated by the consumer interest because the packing materials can count for nearly 10% of the bulk price of Soda Ash and were guided by the fact that in several developed countries as much as 90% of the Soda Ash D is sold in bulk. In terms of the national interest, another powerful incentive lay in the need for conserving the jute supplies both for the domestic demand from the agricultural sector and for export. E F G H xxxxx xxxxx xxxxx 6. Until the bulk movement of Soda Ash becomes more sidle possible and acceptable, we would strongly urge our customers to reclaim the used bags and return the sound ones back to our Works at Mithapur for reuse. Such cyclic uses of bags, in the interim, would once again result in substantial benefit to the consumer as there will be no cost of packing material involved. Our distributors throughout the country will offer assistance, at nominal charge, for organizing this operation as a customer service. 7. On such occasions when either the bulk movement of the material or the reuse of the bags is not possible, the customers will be offered free choice of any of the two following courses:- M/S. TATA CHEMICALS LTD. v. THE COLLECTOR OF 1027 · CENTRAL EXCISE, AHMEDABAD [DIPAK MISRA, J.] (a) They can send their own packing materials-jute cloth, A plastic etc. -to our Works at Mithapur for use in packing_ the bulk Soda Ash. (b) They can authorise Tata Chemicals to use, on their behalf, packing materials from their stocks at actual cost s accruing at the point of packing Soda Ash. )()()()()( )()()()()( )()()()()( ""b I 9. If and when and at the customer's own option, the use of packing material is involved in connecting the bulkc priced Soda Ash to the customer, we will separately bill the following charges in addition to ex-Works bulk prices arrived at under (8) above: A Cost of packing material B. Charges for branding I ) Packing and stitching if ) Rs ./Tonne P (note 1) 3 (note 2) D and when necessary ) E . C. "Refundable" excise contingency R (note 3) NOTE 1: When the customer accepts deliveries in bulk and/or furnishes his own packing material (used or new) the value of P will obviously be zero. If Tata Chemicals F are requested to furnish new packing material on the customer's account, then P will equal the actual cost of packing material that Tata Chemicals incur at the point of packing - on the basis of c.urrent stocks of packing materials with Tata Chemicals, the value of P for Light G Soda Ash is estimated at Rs.46.00 and Dense and Medium Dense Soda Ash ant Rs.52.00." Note 3 We have been legally advised on good authority that the ad valorem excise duty at 10% sh