2005 (1) TMI 513 - AT - Central Excise

Summary

Issues:
Whether the cost of gunny bags used for packing cement should be included in the assessable value of cement for the purpose of duty assessment.

Analysis:
The central issue in this case revolves around determining whether the cost of gunny bags used for packing cement by the respondents should be part of the assessable value of cement for duty assessment purposes. The lower appellate authority had ruled in favor of the respondents, stating that the cost of the gunny bags need not be included as they were returnable. However, the Revenue appealed this decision, arguing that unless packing material is explicitly returnable under an agreement between the manufacturer and the buyer, its cost should be included in the assessable value of the product.

During the hearing, the learned JDR representing the Revenue reiterated the grounds of the appeal, emphasizing the absence of a formal agreement between the respondents and their buyer regarding the returnability of the gunny bags. The JDR relied on previous legal precedents, including a Tribunal decision and a Supreme Court judgment, which held that in the absence of a clear agreement on returnability, the cost of packing material should be included in the assessable value. The JDR also cited another Supreme Court case where the concept of "returnable" was examined, highlighting the importance of a formal arrangement between the parties for the goods to be considered returnable.

In its analysis, the Tribunal found that the authorities cited by the JDR supported the position that in the absence of a documented agreement between the respondents and their buyer regarding the returnability of the gunny bags, the cost of such bags should indeed be included in the assessable value of cement. The Tribunal noted that the lower appellate authority had not provided evidence of any agreement on returnability, nor had the respondents presented any contrary legal precedent. Therefore, the Tribunal concluded that the cost of the gunny bags should have been included in the assessable value of cement during the disputed period.

Consequently, based on the legal principles established in previous Supreme Court judgments and the absence of any agreement on returnability between the parties in this case, the Tribunal set aside the lower appellate authority's decision and allowed the Revenue's appeal. The judgment highlights the significance of formal agreements between manufacturers and buyers regarding the returnability of packing material in determining its inclusion in the assessable value for duty assessment purposes.