Colgate Palmolive India Ltd. vs CCE

1. This appeal is directed against the judgment and order dated 22-11-1994 rendered by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, by which the value of the larger corrugated cartons used for packing purposes came to be included for determining tax liability. The only question which was urged before us was in relation to the tooth powder and no other part of the decision was questioned. The relevant part of the finding recorded by the Collector (Appeals) omitting the one relating to soap reads as under: "The appellant's representative first explained the manner in which their products are packed. They explained that in respect of tooth powder, their clients pack one dozen tooth powder tins in a small carton. These one dozen cartons are thereafter packed into the larger corrugated cartons. Depending upon the size of the tooth powder tin, the larger cartons contain a varied number of one dozen packages.... The appellants submitted that their clients were only claiming a deduction in respect of cost of the larger cartons and this carton was only used for safe transportation of the tooth powder.... It was explained that if one dozen packs are placed in a truck, such a truck would contain over 3000 of such packs and the small cartons in which they are placed would not take the weight and would disintegrate, the tins would get dented and scratched and would become unmarketable.... The packing, therefore, is only for the purpose of safety in transport."

The Tribunal after considering the above observation of the Collector, however, proceeded to observe as under: "From the explanation given by the appellants themselves for the packing in larger cartons for the goods, as brought out in the extract from the Collector's (Appeals) order, quoted above, it is evident that such packing in the larger cartons cannot be stated to be merely for safety of transport after clearance from the factory gate. As there is no such clearance from factory gate, the goods are to be taken to their own depots. The extract from the Collector's (Appeals) order would also indicate that the nature of the packing in this case is such that it cannot be said to be only for the purpose of protection of the goods during transit. It is apparent that such packing will be necessary in order to put the goods, namely, tooth powder ... in the condition in which they are generally sold in the wholesale market. Therefore, it is reasonable to hold that the degree of packing in this case is one which would be normal packing for the goods in order to avoid any damage to the product as...."

From the above observations it would appear that there was a lack of proper perception and a proper understanding of the order passed by the Collector (Appeals).

2. The position in law has now been clarified by this Court in Govt. of India v. Madras Rubber Factory Ltd., After considering the decisions in Union of India v. Bombay Tyre International Ltd., and, Union of India v. Godfrey Philips India Ltd., and Geep Industrial Syndicate Ltd. v. Union of India, (1992) 61 ELT 328 (SC) this Court proceeded to lay down the test to be applied for the purpose of deciding whether or not the packing charges are includible in the value of the product for the purposes of determining the tax liability. This Court stated as under: "The test is: whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded."

In the instant case, therefore, it is necessary to reach a definite conclusion whether the larger cartons in which smaller cartons containing tooth powder tins were packed were the ones in which ordinarily in the course of wholesale trade the sale was effected to the wholesale buyer. To put it differently, whether such larger carton packing was necessary for putting the excisable article in the condition in which it was generally sold in the wholesale market at the factory gate. A finding on this question of fact would determine whether the cost of such packing has to be included or excluded. It is for this limited purpose that we are required to remit the matter to the Tribunal. We, therefore, set aside the order of the Tribunal and remit the matter back to the Tribunal to reach a fresh conclusion keeping the aforesaid test in mind for the purpose of determining whether or not the cost of the larger cartons is required to be added or excluded from the cost of the commodity for determining the assessable value for the purpose of tax liability. The Tribunal may dispose of the matter on the existing material on record unless it considers it necessary to call upon the assessee to produce any particular document in its power, possession and custody. The appeal will stand allowed accordingly with no order as to costs.

3. The bank guarantee and deposit, if made, and alive, shall be kept alive till the disposal of the appeal. As the matter is a fairly old one and is even otherwise a short one, the Tribunal may expedite the disposal of the appeal.