2016 (5) TMI 380 - SC - Central Excise

Valuation - Includability - Whether the cost of packing material is to be treated as the component of transaction valuation under Section 4 of the Central Excise - Tribunal by relying upon the judgment of this Court in the case of K. Radha Krishnaiah vs. Inspector of Central Excise and Others 1986 (11) TMI 46 - SUPREME COURT OF INDIA , Mahalakshmi Glass Works (P)Ltd. Vs,. Collector of Central Excise 1988 (7) TMI 59 - SUPREME COURT OF INDIA and Triveni Glass Ltd. vs. Union of India and Ors. 2005 (2) TMI 130 - SUPREME COURT OF INDIA found to the effect that the packing material which was used was durable and returnable by the buyer. Therefore, the cost of packing material should not be included in the transaction value - Apex Court do not find any merit in the appeal, hence, dismissed the appeal.

Summary

Issues:
1. Inclusion of cost of packing material in transaction valuation under Section 4 of the Central Excise Act.

Analysis:
The Supreme Court dealt with the issue of whether the cost of packing material should be included in the transaction valuation under Section 4 of the Central Excise Act. The respondent, a company engaged in the manufacture of Filament Yarn, was not including the cost of packing material while declaring the value of goods. The department issued a show cause notice to the respondent, demanding the inclusion of packing material cost in the valuation. The adjudicating authority upheld the demand, leading the respondent to appeal before the Commissioner. After a series of appeals and remands, the Commissioner (Appeals) finally allowed the respondent's appeal, a decision upheld by the CESTAT as well.

The Supreme Court considered the nature of the packing material used by the respondent, noting that it was durable and returnable by the buyer. Based on this finding, the Court concluded that the cost of such packing material should not be included in the transaction valuation. The Court referenced previous judgments to support its decision, including K. Radha Krishnaiah vs. Inspector of Central Excise and Others, Mahalakshmi Glass Works (P) Ltd. vs. Collector of Central Excise, and Triveni Glass Ltd. vs. Union of India and Ors.

Ultimately, the Court found no merit in the appeal and dismissed it, affirming the decision of the Commissioner (Appeals) and the CESTAT. The judgment clarified the treatment of packing material costs in the valuation of goods for excise duty purposes, emphasizing the importance of considering the nature and returnability of the packing material in such assessments.