2006 (7) TMI 468 - AT - Central Excise

Summary

Issues:
1. Duty liability on packing charges recovered from customers.
2. Applicability of previous court decisions on the case.
3. Exclusion of packing cost due to durable and returnable nature.
4. Requirement of arrangement for taking back packing material.

Analysis:

Issue 1: Duty liability on packing charges recovered from customers
The appellants, engaged in manufacturing synthetic resins in liquid form supplied in metal barrels, charged an extra amount as packing charges but did not pay duty on it, claiming the packing was durable and returnable. However, investigation revealed no instance of customers returning the barrels, leading to a demand for duty on the packing cost. The Deputy Commissioner confirmed the duty demand and imposed a penalty, which was upheld in appeal.

Issue 2: Applicability of previous court decisions
The advocate for the appellants argued that their case aligns with the Bombay High Court decision in Wipro Products Ltd. v. U.O.I. and a Tribunal decision in the case of EID Parry (India) Ltd. The essence was that the actual return of packing is not crucial, but the seller's arrangement to accept returns if buyers choose to do so should suffice.

Issue 3: Exclusion of packing cost
The J.D.R contended that since no packing was returned in this case, the cost cannot be excluded, citing the Supreme Court decision in Mahalakshmi Glass Works (P) Ltd. v. Collector of C. Ex. However, the Tribunal found the Mahalakshmi case inapplicable, as the absence of an arrangement for return was the basis for disallowance in that case, unlike the present appeal. The Tribunal concurred with the Commissioner's determination that the packing was durable and returnable, despite concerns about the minimal cost per packing.

Issue 4: Requirement of arrangement for taking back packing material
The Tribunal acknowledged the need for a practical arrangement for taking back packing material to validate its returnable nature. While expressing doubts about the viability of the current arrangement, the Tribunal decided to waive the pre-deposit of duty and stay its recovery pending further examination of the arrangement during the final hearing, as the case was deemed consistent with the Bombay High Court and Tribunal decisions cited.

In conclusion, the Tribunal's decision focused on the interpretation of previous court rulings, the nature of the packing charges, and the necessity of a functional arrangement for the return of packing material to determine the duty liability in this case.