2009 (4) TMI 723 - AT - Central Excise

Valuation - cost of reusable containers - value of bottles and crates - recovery of - includibility - removal as such -

Summary

Issues:
Department's appeal against Commissioner (Appeals) order dated 6-3-07 regarding recovery of value of glass bottles and crates, treated as inputs, by the respondent.

Analysis:
The appeal concerned the Department challenging the Commissioner (Appeals) order regarding the recovery of value of glass bottles and crates by the respondent, a manufacturer of Beverages. The respondent had taken deposits to ensure the safe return of empty bottles and crates, treating them as input for which Cenvat credit was claimed. The original authority held that the recovery of Rs. 8,99,035/- on returned bottles constituted a sale, imposing a demand of Rs. 1,46,722/- along with penalties. However, the Commissioner (Appeals) dropped the proceedings.

The Department argued that the recovery of value for unreturned bottles and crates amounted to a sale, as these were considered inputs for which credit was taken. On the other hand, the respondent contended that the bottles and crates were for repeated use, citing the fragile nature of glass bottles and the arrangement for deposit recovery as not constituting a sale. Reference was made to a Supreme Court decision on a similar matter.

The Tribunal examined the submissions and emphasized that the glass bottles and crates were intended for repeated use, with clear arrangements for their return. The primary products sold were beverages, not the containers. The recovery for broken bottles did not equate to a sale of the containers. The Tribunal also referred to a relevant Circular stating that the cost of reusable containers should be amortized and included in the product cost, clarifying that the returnable deposit was not an additional consideration for sale.

In light of the Circular and the original authority's findings that the value of bottles and crates was included in the beverage value, the Tribunal deemed the Commissioner (Appeals) decision reasonable and acceptable. Consequently, the Department's appeal was dismissed for lacking merit.

This detailed analysis highlights the key arguments, legal interpretations, and relevant precedents considered in the judgment, providing a comprehensive overview of the case and its resolution by the Appellate Tribunal CESTAT, NEW DELHI.