REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5043-5045 OF 2003

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