2010 (7) TMI 498 - AT - Central Excise

Waiver of pre-deposit - Valuation - The appellants are engaged in the manufacture of liquid glucose - A show cause notice was issued to the appellant on the ground that the appellant had failed to add the cost of M.S./HDPE barrels received free-of-cost from the buyers for packing the product manufactured by the appellant to the transaction value of the said product. The cost of the packing material supplied free-of-cost to the assessee would amount to an additional consideration flowing from the buyer to the assessee in relation to the goods sold - The entire value of such barrels has to be considered at every occasion of supply of such barrels to the assessee - Only proportionate cost will have to be included in the transaction value for each consignment of liquid glucose - Prima facie case has been made out for waiver of the amount demanded - The liability to be calculated by applying the principle of amortised cost - The appellant shall be liable to deposit an amount of Rs. 2,75,000/- out of the total amount demanded

Summary

Issues:
1. Interpretation of Rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 regarding inclusion of cost of packing material in transaction value.
2. Application of amortised cost in determining the cost of barrels supplied free-of-cost by buyers.
3. Consideration of Notification No. 313/77-C.E. and Rule 6 of the said Rules in levying duty.
4. Calculation of duty liability based on the cost of barrels supplied free-of-cost.
5. Determination of transaction value and inclusion of proportionate cost of barrels in assessable value.

Analysis:
The case involved a dispute regarding the inclusion of the cost of M.S./HDPE barrels supplied free-of-cost by buyers in the transaction value of liquid glucose manufactured by the appellant. The appellant contested a show cause notice alleging contravention of Rule 6 of the Central Excise Valuation Rules. The adjudicating authority upheld the notice, leading to an appeal that was dismissed by the Commissioner (Appeals).

The appellant argued that Rule 6 did not apply to the case and, if applicable, the cost of barrels should be determined based on amortised cost. Reference was made to a Tribunal decision supporting this argument. On the other hand, the respondent relied on Notification No. 313/77-C.E. and Rule 6 to justify the duty liability imposed by the lower authorities.

The appellant presented a statement showing the clearance of liquid glucose packed using the free-of-cost barrels, indicating a differential duty liability. The Tribunal analyzed the concept of transaction value and the application of Rule 6, concluding that the cost of barrels could be considered an additional consideration from the buyer to the assessee. However, it was determined that only the proportionate cost of the barrels for each consignment should be included in the transaction value, not the entire value of the barrels.

The Tribunal found a prima facie case for waiving a portion of the amount demanded, requiring the appellant to deposit a specified sum based on the principle of amortised cost. Upon compliance, the remaining amount demanded was waived until the appeal's disposal, with a deadline set for the deposit.

In conclusion, the Tribunal's decision focused on the correct interpretation of Rule 6, the application of amortised cost, and the determination of transaction value concerning the cost of packing material supplied free-of-cost by buyers.