2011 (8) TMI 40 - SC - Central Excise

Demand - whether the cost of packing charges expended/incurred by the appellant-company is liable to be included in the assessable value of the motorcycles manufactured by the appellant-company - It is also established from records that Rs.190/- is being charged as packing charges by the appellant and, therefore, the said amount which was collected as packing charges must have been passed on to the buyers - Held that the packing which is given by the appellant-company to their motorcycles is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate and, therefore, such cost is liable to be included in the value of the goods and the cost of such packing cannot be excluded - Appeal is dismissed

Issues Involved:
1. Whether the cost of packing charges incurred by the appellant-company is liable to be included in the assessable value of the motorcycles manufactured by the appellant-company.

Detailed Analysis:

Issue 1: Inclusion of Packing Charges in Assessable Value

Background:
The appellant-company, a manufacturer of motorcycles, did not include the value of packing charges in the assessable value of motorcycles. These motorcycles were cleared from the factory to various depots in packed condition during the period from April 1999 to December 1999. The appellant charged Rs.190/- per vehicle as packing charges and declared this in their price declaration while claiming abatement for the same.

Legal Proceedings:
A show cause notice was issued to the appellant for disallowing the abatement of Rs.190/- and demanding differential duty and cess. The Assistant Commissioner of Central Excise disallowed the abatement and upheld the demand, referencing the Supreme Court decision in *Government of India v. Madras Rubber Factory Limited* and a Tribunal order in *Commissioner of Central Excise, Jaipur v. Eicher Limited*. The appellant's appeal to the Commissioner of Central Excise (Appeals) and subsequently to the Tribunal was rejected, leading to the present appeal before the Supreme Court.

Legal Provisions:
The relevant provision is Section 4 of the Central Excise Act, 1944, which defines the valuation of excisable goods for charging duty. Specifically, Section 4(4)(d)(i) includes the cost of packing in the assessable value, except for packing of a durable nature that is returnable by the buyer.

Arguments:
- Appellant's Argument: The cost of packing should not be included in the assessable value as it is meant to prevent damage during transportation and is not the price at which goods are ordinarily sold. They cited precedents like *Union of India v. Bombay Tyre International Ltd.*, *Union of India v. Godfrey Philips India Ltd.*, and *Hindustan Polymers v. Collector of Central Excise*.
- Respondent's Argument: The cost of packing is includable as per the settled law in *Government of India v. Madras Rubber Factory Limited*. The appellant has been passing the packing charges to the buyers, making it includable in the assessable value.

Court's Analysis:
The Court referred to Section 4(4)(d)(i) and noted that the cost of packing is includable in the assessable value if the goods are delivered in packed condition at the time of removal. The Court cited *Bombay Tyre International Ltd.*, which distinguished between primary and secondary packing, and *Godfrey Philips India Ltd.*, which included packing for protection during transportation in the assessable value. The Court emphasized the decision in *Madras Rubber Factory Ltd.*, which clarified that the cost of packing necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is includable in the assessable value.

Conclusion:
The Court concluded that the packing provided by the appellant was necessary for the condition in which motorcycles are sold in the wholesale market at the factory gate. Thus, the cost of such packing is includable in the assessable value. The findings of the lower authorities and the Tribunal were upheld, and the appeal was dismissed.

Final Judgment:
The appeal was dismissed, confirming that the cost of packing charges is to be included in the assessable value of the motorcycles, with each party bearing their own costs.

← Previous Next →