HINDUSTAN POLYMERS ETC. ETC. vs. COLLECTOR OF CENTRAL EXCISE, ETC. ETC.

CIVIL APPEAL No. 4339/1986Supreme Court[1989] 3 S.C.R. 97423 August 1989Bench: 3 JudgesAuthor: SABYASACHI MUKHERJI, S. RANGANATHAN, J.S. VERMA23 pages
AI SummaryAllowed

What were the facts?

The appellant company, Hindustan Polymers, manufactures and sells fusel oil and styrene monomer. These goods are sold in bulk, often delivered in road tankers. In some instances, particularly for styrene monomer (10% of sales), the goods were supplied in drums provided by the customers, for which the appellant charged nothing. The revenue authorities sought to include the value of these customer-supplied drums in the assessable value of the goods. The Assistant Collector included the drum value, but the Collector (Appeals) allowed the appellant's appeal. The Customs, Excise and Gold (Control) Appellate Tribunal then allowed the Revenue's further appeal, holding that since the goods were delivered in packed condition in non-returnable containers, the value of the drums should be included.

What did the Supreme Court hold?

The Supreme Court allowed the appeals. It held that the value of drums supplied by the buyer, for which the manufacturer charged nothing, cannot be included in the assessable value of the goods. The Court reasoned that Section 4(4)(d)(i) of the Act, which refers to the 'cost' of packing, implies the cost incurred by the assessee (the seller). The cost of packing supplied by the buyer and not charged for by the manufacturer cannot be notionally added to the price. The Court found that the drums were not necessary for the manufacture of fusel oil or styrene monomer, nor were they essential for their general marketability in the wholesale trade, as these goods were primarily sold in bulk and delivered in tankers. The manufacture was complete before the goods were placed in drums, which were used solely to facilitate transport in smaller quantities. The Court also noted that the drums were not returnable. The Court found it unnecessary to decide wider propositions regarding secondary packing or the correctness of prior judgments, as the interpretation of Section 4(4)(d)(i) was sufficient to dispose of the appeals.

What were the issues?

1. Whether, under Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, the value of drums supplied by the buyer should be included in the assessable value of the manufactured goods (fusel oil/styrene monomer) when the manufacturer does not charge for these drums. Assessee's arguments: The appellant contended that only necessary secondary packing, essential for placing the article in the condition sold in the wholesale market at the factory gate, is includible. Since fusel oil/styrene monomer is sold in bulk and capable of being so sold, drums were not necessary. Furthermore, excise duty is on manufacture, and the appellant did not manufacture or purchase the drums, so their cost should not be included. The provision does not contemplate including the cost of packing supplied by a customer at their own cost. Revenue's arguments: The Revenue argued that Sections 3 and 4 of the Act necessitate the inclusion of drum values. Section 4(4)(d)(i) is clear, and taxing statutes must be interpreted literally. The percentage of sales in drums is irrelevant. While manufacture is the taxable event, the measure of levy is not restricted to manufacturing cost. If goods are delivered in packed condition, the cost of packing, whether by manufacturer or supplier, must be included unless the packing is durable and returnable.

Which sections of the Income-tax Act were involved?

Section 2(f),Section 3,Section 4(4)(d),Section 4(4)(d)(i)

AI-generated summary — verify with the full judgment below

HINDUSTAN POLYMERS ETC. ETC. • A A v. COLLECTOR OF CENTRAL EXCISE, ETC. ETC. AUGUST 23, 1989 B [SABYASACHI MUKHARJI, S. RANGANATHAN AND ~ J.S. VERMA, JJ.] t Central Excises and Salt Act, 1944: Sections 2(f}, 3, 4(4}(d), 35(L)(b) & First Schedule Tariff Item No. 68-Fusel oil/Styrene -- Monomer-Drums supplied by buyer-Value of drums-Whether to be l excluded from 'assessable value'. c The appellant company /assessee manufactures and sells fusel oil/ -{, styrene Monomer falling under Tariff Item No. 68 of the 1st Schedule to the Central Excises and Salt Act, 1944. The said fusel oil/styrene Monomer is sold in bulk and generally delivered to the customers at the D appellant's factory in road tankers. Some times it is supplied in drums brought by the rnstomers who are not charged anything for those drums. In the case of Styrene Monomer, the finding is that the supply was in tankers to the extent of 90% and only 10% of the sales were made in drums. j E Two notices were issued to the appellant to show cause as to why the value of the drums should not be included in the assessable value of the goods. In reply, the appellant contended that as the drums were

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 2(f)

All 33 judgments and leading authorities on Section 2(f) →

Recent GST High Court judgments

Search GST case law →