2017 (2) TMI 1061 - AT - Central Excise

Valuation - packing charges - durable and returnable packaging - Held that - it is settled law that packing cost of durable and returnable packing is not includible in the assessable value. The terms regarding charges of ₹ 2 per kg and refund of the same in the event of return of metal barrels by the customer are known to the customer - it is been settled position that even though physically the durable and returnable packing is not returned still cost of the same cannot be included in the assessable value. The only requirement is that there should be a condition between the manufacturer, supplier and the customer that if the durable and returnable packing is returned, the assessee has under obligation to refund the amount of packing, which is not in dispute in the present case - the packing charge of ₹ 2 per kg collected by the appellant from their customer is not includible in the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the packing charges on account of durable and returnable packing are includible in the assessable value for excise duty calculation.

Analysis:
The case involved the appellant, engaged in manufacturing excisable goods, charging an additional amount of ?2 per kg as packing charges for metal barrels, which were durable and returnable. The dispute arose when the department contended that this amount should be included in the assessable value for excise duty calculation, leading to a differential duty demand, penalty, and interest. The appellant argued that the charges for durable and returnable packing should not be included in the assessable value, especially since the amount would be refunded upon returning the packing material. The appellant cited several precedents to support their argument.

In the absence of representation from the appellant, the Tribunal considered the submissions and legal precedents. The Tribunal noted that the appellant's practice of charging ?2 per kg for durable and returnable packing, with a refund provision upon return, was well-known to customers. Relying on the cited judgments, the Tribunal confirmed that the cost of such packing should not be included in the assessable value, even if the packing material was not physically returned. The crucial aspect was the clear agreement between the parties that the charges were refundable upon return of the packing material. Therefore, the Tribunal concluded that the packing charges collected by the appellant were not includible in the assessable value for excise duty calculation.

In light of the established nature of the transaction and the terms between the appellant and the customers, where the charges for durable and returnable packing were refundable upon return, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The judgment highlighted the importance of the agreement between the parties regarding the refundable nature of the packing charges in determining the assessable value for excise duty calculation.