2004 (12) TMI 425 - AT - Central Excise

Summary

Issues:
Challenge to the rejection of deduction for the value of durable and returnable bags under Section 4(4)(d)(i) by the Commissioner (Appeals).

Analysis:
The appellants contested the correctness of the OIA No. 439/2002-C.E., dated 16-7-2002, where the Commissioner (Appeals) denied their request for deduction related to the value of durable and returnable bags as per Section 4(4)(d)(i). Despite citing numerous judgments from the Apex Court and the Tribunal to support their claim, the Commissioner distinguished them and ruled against allowing the deduction, stating that the appellants were not eligible for such deductions. The appellants based their argument on invoices clearly indicating the receipt of packing material, specifically gunny bags, which were returnable.

The learned Counsel argued that the price list filed by the appellants differentiated prices for goods supplied in loose and packed conditions, including returnable containers. They contended that since the goods in question were transferred in durable and returnable bags, the price listed for Alumina in returnable bags should apply. The invoices issued by the appellants also highlighted the returnable nature of the goods. The Commissioner's decision, based on the inapplicability of Notification No. 313/77, was deemed incorrect as the appellants were invoking Section 4(4)(d)(i) of the C.E. Act, which allowed exclusion of the cost of returnable packing material. The Counsel also emphasized that the demand was revenue neutral due to available Modvat credit and referenced relevant case law supporting the exclusion of returnable packing costs.

The learned JDR supported the Commissioner's decision, arguing that the appellants failed to provide sufficient evidence regarding the return of packing material, thus disqualifying them from claiming a deduction for its cost.

Upon careful review, the Tribunal found that the appellants had adequately described the packing material as gunny bags and its returnable nature in the invoices. Therefore, in line with Section 4(4)(d)(i) of the C.E. Act, the appellants were not obligated to include the packing cost in the goods' value. The Tribunal relied on the precedent set by the Larger Bench judgment in Srichakra Tyres Ltd., affirmed by the Supreme Court, to support this decision. Additionally, the Tribunal dismissed the lower authorities' argument that the packing material's eventual decay after repeated use should negate the deduction claim, emphasizing that such material becoming waste or scrap over time does not invalidate the appellants' right to seek a deduction. The Tribunal concluded that the demands were unjustified, deemed the impugned order as improper, and allowed the appeal with any necessary consequential relief.