2011 (3) TMI 1569 - AT - Central Excise

Summary

Issues:
Central Excise duty demand on goods supplied with free packing material.

Analysis:
The appeal challenged the Order-in-Appeal issued by the Commissioner of Central Excise, Pune, regarding the inclusion of the cost of free-of-cost packing material in the assessable value of liquid glucose manufactured by the appellant. The appellant, a manufacturer of liquid glucose, did not add the cost of MS/HDPE barrels supplied free-of-cost by buyers to the transaction value of the goods. The jurisdictional Assistant Commissioner confirmed the duty demands raised through show cause notices, which were also upheld by the Commissioner (Appeals). The appellant sought a stay citing precedents like Grasim Industries v. Commissioner of Central Excise and Commissioner of Central Excise v. Grasim Industries Ltd.

The appellant argued that the judgments in the cited cases supported their position, emphasizing that the consideration received indirectly in the form of free packing material should not be included in the assessable value. On the contrary, the Departmental Representative contended that the cost of packing material supplied by customers should be included in the assessable value as per Section 4(1)(a) of the Central Excise Act read with Rule 6 of the Central Excise Valuation Rules. The Tribunal noted the legal position that any consideration received by the assessee, directly or indirectly from the buyer, must be included in the assessable value for excise duty purposes. The packing material, being supplied in connection with the sale of goods, constitutes a consideration affecting the price, even if provided free-of-cost by the buyers.

The Tribunal distinguished the cited case laws, stating that the issue of including charges for durable and returnable containers in the assessable value was pending before a Larger Bench of the Hon'ble Apex Court. The definition of transaction value and Rule 6 of the Valuation Rules were crucial in determining that the value of materials consumed, including packing materials, should form part of the assessable value. Consequently, the Tribunal held that the appellant failed to establish grounds for a complete waiver of the pre-deposit of the confirmed amounts. The appellant was directed to make a pre-deposit of 50% of the duty within four weeks, with the balance amount, interest, and penalty being waived upon compliance, and recovery stayed during the appeal's pendency.