1984 (6) TMI 223 - AT - Central Excise

Issues Involved:
1. Exclusion of cost of packing from the assessable value of goods.
2. Interpretation of "returnable" packing material.
3. Determination of primary vs. secondary packing.
4. Refund claim based on the Deputy Collector's order.

Issue-wise Detailed Analysis:

1. Exclusion of Cost of Packing from the Assessable Value of Goods:
The primary issue in this appeal is whether the appellants' claim for exclusion of the cost of packing from the assessable value of the goods is tenable. The appellants, manufacturers of biscuits, argued that the cost of packing materials, specifically large containers and wooden cases, should not be included in the assessable value. However, the Deputy Collector had previously adjudicated that the cost of non-returnable packing materials, such as card-board cartons and tin containers, should be included in the assessable value. The Assistant Collector and Appellate Collector upheld this view, rejecting the appellants' refund claim.

2. Interpretation of "Returnable" Packing Material:
The appellants contended that the term "returnable" should mean "capable of being returned" and not necessarily "actually returned." They argued that proving the actual return of packing materials was not required to claim a refund. However, the lower authorities and the Tribunal disagreed, stating that "returnable" implies an agreement between the buyer and the seller for the return of packing materials. The Tribunal referred to a Full Bench judgment of the Gujarat High Court, which supported this interpretation, and noted that there was no evidence of any such agreement between the appellants and their buyers.

3. Determination of Primary vs. Secondary Packing:
The appellants argued that the cost of secondary packing, used only for protecting goods during transit, should not be included in the assessable value. They distinguished between primary packing (essential for the product) and secondary packing (for transportation). However, the Tribunal found that the large containers and wooden cases used by the appellants were essential for marketing the biscuits and thus constituted primary packing. The Tribunal referred to the Supreme Court's judgment in Union of India & Others v. Bombay Tyre International Ltd., which held that no deduction is permissible for the cost of packing necessary for selling the excisable article in the wholesale market at the factory gate.

4. Refund Claim Based on the Deputy Collector's Order:
The appellants filed a refund claim based on the Deputy Collector's order, which they interpreted as excluding the cost of "returnable" packing materials from the assessable value. The Assistant Collector and Appellate Collector rejected the refund claim, stating that the Deputy Collector's order did not grant a refund or imply that the cost of non-returnable packing materials should be excluded. The Tribunal upheld this view, noting that the appellants had failed to provide evidence of any agreement for the return of packing materials and that the packing in question was essential for marketing the biscuits.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellants' arguments. It held that the cost of essential packing materials, necessary for marketing the biscuits, should be included in the assessable value. The Tribunal also emphasized the need for an agreement between the buyer and the seller for packing materials to be considered "returnable." The refund claim was rightly rejected by the lower authorities, and the appeal was dismissed accordingly.

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