M/S. Essel Propack Ltd vs Commnr. Of Central Excise, Mumbai

M/S ESSEL PROPACK LTD. ...APPELLANT

VERSUS

COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III ...RESPONDENT

ORDER

These appeals are filed under Section

35L(b) of the Central Excise Act, 1944 (for short

"the Act"), against the order dated 30th January,

2003 of the Customs, Excise & Gold (Control)

Appellate Tribunal (for short "the Tribunal"), West

Zonal Bench at Mumbai.

The appellant manufactured plastic tubes in

its factory and supplied the same to M/s Colgate

Palmolive (I) Ltd. (for short "Colgate"). After

considering the reply to the show cause notices,

the Commissioner of Central Excise, Mumbai III,

passed an order dated 17th July, 1997, confirming

the demand of excise duty amounting to

Rs.54,30,713/- and imposing a penalty of

...2/-

:2:

Rs.41,00,000/- under Rule 173-Q of the Central

Excise Rules, 1944 and also directing the appellant

to pay interest at the rate of 20% under Section

11-AB of the Act, on delayed payment of duty for

the relevant periods, saying that the plastic caps,

which were put on the plastic tubes, were not

included in the assessable value of the plastic

tubes manufactured and cleared from the factory of

the appellant.

Aggrieved, the appellant filed appeals

before the Tribunal and by the impugned order, the

Tribunal confirmed the demand of duty and modified

the penalty and interest imposed by the

Commissioner. The reason given by the Tribunal in

the impugned order is that this Court in Union of

India versus J.G. Glass Industries Ltd.,[1998 (97)

E.L.T. 5 (S.C.)], had held that printing carried

out on plain glass bottles in a different factory

would not amount to "manufacture" under Section

2(f) of the Act, but, if manufacture of bottles and

printing thereon are carried out within the same

factory, then the ultimate product, which happens

to be excisable item at the factory gate, is the

printed bottle. Applying the decision of this

...3/-

:3: Court in J.G. Glass Industries Ltd. (supra), the

Tribunal took the view that where the plastic caps

are fitted to the tubes before removal from the

appellant's factory, duty is to be paid on the

total value of the tubes including the value of the

plastic caps.

Mr. A.R. Madhav Rao, learned counsel

appearing for the appellant, submitted that the

plastic caps, which are fitted to the tubes

manufactured and removed from the appellant's

factory, are not actually manufactured by the

appellant in its factory and these are being

supplied by Colgate to the appellant and are fitted

to the tubes before removal of the same from the

factory of the appellant. He relied upon the

decision in Metal Box of India Ltd., Calcutta

versus Collector of Central Excise, Calcutta [1983

(13) E.L.T. 956 (C.E.G.A.T)], in which the Tribunal

has held that where the caps made of plastic had

been separately manufactured for the aluminium

collapsible tubes and were not part of the

manufacturing process of Metal Box of India

Limited, such caps have to be treated separately

while charging the weight based portion of the duty

...4/-

:4: of excise on aluminium as envisaged in Item 27 of

the Central Excise Tariff. He submitted that

although an appeal was preferred against the

aforesaid decision of the Tribunal to this Court,

the appeal was dismissed on 20th November, 1989, as

reported in Collector versus Metal Box of India

Ltd. [1990 (45) E.L.T. A33(S.C.). He submitted

that in Col. Tubes (P) Ltd. versus Collector [1994

(72) E.L.T. 342 (Tribunal)], the Col. Tubes (P)

Ltd., which was manufacturing aluminium collapsible

tubes, was clearing its product from its factory

along with a plastic cap manufactured elsewhere and

the Tribunal, by a majority decision, held that

cost of plastic cap, a bought-out item and labour

charges for fixing it are not includible in the

assessable value of the aluminium collapsible tube

under Section 4 of the Act. He submitted that the

Collector, Central Excise preferred an appeal to

this Court, but the appeal was dismissed following

its decision in Collector versus Metal Box of

India Ltd. (supra).

Mr. Rao further submitted that considering

these authorities, in the very case of the

appellant, for a subsequent period, the Tribunal

...5/-

:5:

has now taken a view that the caps, not being

integral part of a toothpaste tube, cannot be

included in the assessable value of the toothpaste

tube removed by the appellant from the factory.

He submitted that in its decision, for a

later period, the Tribunal has distinguished the

case of the appellant from the case in J.G. Glass

Industries Ltd. (supra), saying that in that case

printing on the bottles was integral to the bottles

whereas in the case of the appellant, the cap was

not integral to the tubes but was only an

accessory.

Ms. Aruna Gupta, learned counsel appearing

for the respondent, on the other hand, submitted

that it is not clear from the facts as found by the

Tribunal whether the plastic caps are manufactured

in the factory premises of the appellant or are

being supplied by Colgate and in the absence of any

finding on this aspect, it is difficult for this

Court to take the view that the plastic caps were

not manufactured in the factory of the appellant

and were supplied by Colgate and, therefore, were

not an integral part of the tube and could not be

includible in the assessable value of the tubes.

...6/-

:6:

We have considered the submissions made by

learned counsel for the parties and we find that

the consistent view of the Tribunal as well as

this Court has been that if the caps are

manufactured separately and not in the same factory

in which the tubes are being manufactured, the caps

cannot form integral part of the assessable value

of the tubes, manufactured and cleared from the

factory. This is the view that the Tribunal and

this Court have been taking in Metal Box of India

Ltd., Calcutta (supra) and C

ol.

Tubes (P) Ltd.

(supra). Thus, if in the present case, the caps

are not manufactured in the factory of the

appellant but are being supplied by the customers

of the appellant, the value of the caps will not

form part of the assessable value of the tubes

manufactured by the appellant.

On a reading of the reply to the show cause

notice in the present case, we find that the

appellant has stated in Para 3.3 that the appellant

manufactures tubes on orders received from their

customers and whenever the customers order, the

appellant fixes plastic caps to the tubes and in

...7/-

:7:

such cases the value of the tubes fixed with caps

are also included in the assessable value of tubes,

but in case such caps are supplied by the customers

free of cost, such tubes are cleared without

including the value of the caps in the assessable

value of the tubes. The Commissioner has not

recorded any clear finding as to whether for the

tubes that were cleared by the appellant during the

relevant periods in respect of which show cause

notices were issued, the caps were supplied free of

cost by the customers of the appellant and such

caps were fitted to the tubes manufactured in the

factory of the appellant. As we have already

held, in respect of the tubes for which caps have

been supplied by the customers free of cost, the

assessable value of the tubes will not include the

value of the caps. The Commissioner, therefore,

will have to record a clear finding as to whether

for the tubes cleared during the three relevant

periods, the caps were supplied by the customers of

the appellant free of cost and accordingly pass a

fresh order.

...8/-

:8:

In the result, the appeals are allowed to

the extent indicated above; the impugned order of

the Tribunal as well as the original order passed

by the Commissioner are set aside. The matter is

remanded to the Commissioner for fresh decision in

accordance with the observations made in this

order. No costs.

...................

(A.K. PATNAIK, J.)

...................

(ANIL R. DAVE, J.) NEW DELHI NOVEMBER 09, 2011