2016 (6) TMI 439 - AT - Central Excise

Valuation - Computation of assessable value - whether cost of the Plastic containers supplied by the Buyers is includible in the assessable value of the product manufactured by the party? - Held that - On going through the orders passed by the Asstt. Commissioner and the Commissioner (Appeals), we find that the Asstt. Commissioner has relied upon the precedent decisions of the higher authorities in dropping the demand. The Appellate Authority has not disputed the fact that the said decisions relied upon by the Asstt. Commissioner fully apply in respect of the valuation of the goods where the packing materials itself is being supplied by the customers, but has decided not to follow the same on the ground that the provisions of Section 4 were amended w.e.f. 1.7.2000. The very same decisions stand considered by the Tribunal in a recent decision in the case of Commissioner of Central Excise Vs. Grasim Industries Ltd. 2014 (4) TMI 650 - CESTAT NEW DELHI wherein 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 - Decided in favour of assessee

Summary

Issues:
1. Inclusion of cost of packing materials supplied by buyers in the assessable value of the product manufactured.
2. Applicability of Section 4 provisions and Valuation Rules in determining the assessable value.
3. Interpretation of judicial precedents and their relevance in the case.

Analysis:
1. The main issue in this case was whether the cost of plastic containers supplied by buyers should be included in the assessable value of the product manufactured by the appellant. The Revenue contended that even when customers brought their own containers, the amortized cost should be added to the assessable value. The Original Adjudicating Authority referred to various judicial precedents, including cases like M/s. Packart Glass Vs. CCE and M/s. Hindustan Polymers Vs. CCE, where it was held that the cost of packing supplied by the buyer cannot be included in the value. Based on these precedents, the proceedings against the party were dropped.

2. The Revenue appealed the decision, arguing that changes in Section 4 provisions necessitated a different interpretation. The Commissioner (Appeals) held that bringing packing material by customers amounts to flow back of money to the manufacturer, indicating that price was not the sole consideration. Therefore, the provisions of Section 6(3)(i) of the Valuation Rules, 2002 would apply. The Appellate Authority reversed the Original Adjudicating Authority's decision, leading to the present appeal.

3. The Tribunal analyzed the orders passed by the Asstt. Commissioner and the Commissioner (Appeals). While the Appellate Authority cited amendments to Section 4 as a reason for a different interpretation, the Tribunal referred to a recent decision in Commissioner of Central Excise Vs. Grasim Industries Ltd. The Tribunal held that the principles laid down by the Supreme Court in earlier judgments were applicable even after the amendment to Section 4 in 2000. The Tribunal emphasized that the nature of the levy of Central Excise duty had not changed, and the cost of containers need not be included if the goods were marketable without them. Consequently, the Tribunal set aside the Appellate Authority's decision and restored the Original Adjudicating Authority's order, allowing the appeal with consequential relief to the appellant.