2016 (10) TMI 1174 - AT - Central Excise

Valuation - includibility - cost of such packing material received free of cost - Revenue issued a show cause in terms of Rule 6 of Central Excise Valuation Rules, 2000, alleging that the cost of such packing material supplied free of cost is to be treated as additional consideration flowing from the buyer to the assessee in relation to sale of the goods - Held that - The jars and containers are meant only for carrying the excisable goods manufactured by the respondents. Clearly, these cartons do not render the excisable goods to be marketable and are meant only for transportation. The issue of inclusion of cost of packing material was examined by this Tribunal in the case of CCE, Indore v. Grasim Industries Ltd. 2014 (4) TMI 650 - CESTAT NEW DELHI , where it was held that if some goods are marketable without being put into the containers, the cost of containers including their testing charged would not be includible in the assessable value - In the present case, the PET containers are marketable without being put in the corrugated cartons and hence the ratio of above judgment is applicable in the present case. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Inclusion of cost of packing material in transaction value for excisable goods.
- Applicability of penalty waiver based on case laws and period of demand.
- Interpretation of Section 4 for determining assessable value of goods.

Analysis:

Issue 1: Inclusion of cost of packing material
The case involved a dispute regarding the inclusion of the cost of packing material in the transaction value of excisable goods. The appellant argued that the packing material received free of cost from the buyer should not be considered in the value of goods as it was solely meant for transportation and did not render the goods marketable. The Tribunal referred to previous judgments and held that the cost of packing material should only be included if it contributes to the value of the goods or is necessary to make the goods marketable. Since the PET containers were marketable without being packed in corrugated cartons, the Tribunal ruled in favor of the respondent, stating that the cost of cartons should not be included in the assessable value of goods.

Issue 2: Penalty waiver and case laws
The Revenue argued for the imposition of a penalty based on the extended period of demand and cited case laws to support their stance. They contended that the penalty should not have been dropped by the Commissioner (Appeals) as the period in question was after a specific date. However, the Tribunal disagreed with the Revenue's argument and upheld the dropping of the penalty, citing the applicability of previous judgments and the nature of the levy of Central Excise duty. The Tribunal found that the penalty waiver was justified in this case.

Issue 3: Interpretation of Section 4 for assessable value
The Tribunal analyzed the provisions of Section 4 for determining the assessable value of goods. By referring to relevant case laws and legal principles, the Tribunal concluded that the cost of packing material should only be included in the assessable value if it is necessary to make the goods marketable. The Tribunal's interpretation of Section 4 emphasized the importance of strict construction when extending the levy of Central Excise duty beyond the manufactured article itself. Based on this interpretation, the Tribunal ruled in favor of the respondent and allowed the cross-objections with consequential relief.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue and upheld the decision to exclude the cost of packing material from the assessable value of goods, citing relevant case laws and legal principles to support their judgment.