2010 (10) TMI 312 - AT - Central Excise

Demand - Classification - Valuation - Transaction value - it was noticed that the appellants were not including the cost of drums supplied by the buyers of malto dextrine syrup in the assessable value while determining the duty liability - It further proceeds to enumerate the factors elements which are to be included in addition to the price to determine the assessable value as the law contemplates by section 4 of the Act - Undoubtedly, such collection of charges by the dealer could also be to the advantage of the dealer to discharge post sales obligations/liability arose under contract of sale - The expression transaction value is the guiding principle in the process of ascertaining the assessable value of a product - Being so, the contention that the value of the packing material supplied by the buyer of malto dextrine syrup w.e.f. 1-7-2000 would not form part of the assessable value cannot be accepted Regarding the benefit of the exemption Notification No. 313/1977-C.E., dated 8-11-1977 - Merely because both the products are classifiable under the same chapter heading, it does not permit the Tribunal or the statutory authorities to expand the scope of exemption notification Regarding the limitation - The investigation carried out by the department revealed for the first time on perusal of the invoices on 12-7-2002 that the appellants had not included the cost of the drum supplied by the buyers of the malto dextrine in the assessable value of the final product Regarding penalty - the various decisions delivered by the different Benches of the Tribunal were contrary to the view taken by the Larger Bench of the Tribunal on the point of concept of the transaction value - Appeal is partly allowed

Issues Involved:
1. Inclusion of the cost of packing materials supplied by buyers in the assessable value for duty liability.
2. Applicability of exemption Notification No. 313/1977-C.E. to malto dextrine syrup.
3. Justification for invoking the extended period of limitation.
4. Imposition of interest and penalty.

Issue-wise Detailed Analysis:

1. Inclusion of the Cost of Packing Materials:
The primary issue was whether the cost of packing materials supplied by buyers should be included in the assessable value for duty liability. The appellants argued that prior to 1st July 2000, the law was settled by various decisions that such costs could not be included. They cited several cases to support their argument, including Jauss Polymers Ltd. v. CCE, Meerut and Hindustan Polymers v. Collector of C. Ex. However, the Tribunal held that the introduction of the "transaction value" concept in Section 4 of the Central Excise Act, 1944, effective from 1st July 2000, changed this position. The Tribunal referenced the Larger Bench decision in Maruti Suzuki India Ltd. v. CCE, Delhi-III, which clarified that the transaction value includes any amount the buyer is liable to pay in connection with the sale. Therefore, the cost of packing materials supplied by buyers must be included in the assessable value post-1st July 2000.

2. Applicability of Exemption Notification No. 313/1977-C.E.:
The appellants claimed that Notification No. 313/1977-C.E. exempted liquid glucose from duty liability, and since malto dextrine syrup was classifiable under the same chapter sub-heading, it should also be exempt. The Tribunal rejected this argument, stating that the notification specifically refers to liquid glucose and not to malto dextrine syrup. The Commissioner (Appeals) correctly relied on the Supreme Court decision in CCE v. Rukmani Pakkwell Traders, which emphasized that the scope of an exemption notification cannot be expanded beyond its clear terms.

3. Justification for Invoking the Extended Period of Limitation:
The appellants contended that the extended period of limitation should not have been invoked. The Tribunal found that the authorized signatory of the appellants admitted in his statement on 12-5-2003 that the practice of non-inclusion of the cost of packing materials was not disclosed to the department. This non-disclosure was first revealed during the investigation on 12-7-2002. Hence, the department was justified in invoking the extended period of limitation.

4. Imposition of Interest and Penalty:
Regarding the imposition of interest, the Tribunal noted that the statutory provisions were clear and supported by Apex Court decisions, thus upholding the interest. However, on the issue of penalty, the Tribunal acknowledged that there were conflicting decisions by different Benches of the Tribunal regarding the concept of transaction value. Given this uncertainty, the Tribunal found that imposing a penalty was not justified. Consequently, the penalty and the demand prior to 1st July 2000 were quashed.

Conclusion:
The appeal was partly allowed. The Tribunal quashed the imposition of the penalty and the demand for the period before 1st July 2000. However, it upheld the inclusion of the cost of packing materials in the assessable value post-1st July 2000, the applicability of the extended period of limitation, and the imposition of interest.

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