2017 (5) TMI 132 - AT - Central Excise

Valuation - cost of packing material received free of cost - corrugated cartons - includibility - whether in terms of Rule 6 of Central Excise Valuation Rules, 2000, the cost of such packing material supplied free of cost is to be treated as additional consideration flowing from the buyer to the assessee in relation to sale of the goods, and to be included in assessable value? - Held that - the respondents have been receiving the packing material viz. corrugated cartons from their buyer on free of cost basis for use in packing of PET bottles/jars manufactured by them. The jars and containers are meant only for carrying the excisable goods manufactured by the respondents. Clearly, these cartons do not render the excisable goods to be marketable and are meant only for transportation - the PET containers are marketable without being put in the corrugated cartons and the ratio of judgement in the case of CCE, Indore Vs. Grasim Industries Ltd. 2014 (4) TMI 650 - CESTAT NEW DELHI is applicable in the present case where it was held that he cost of only that packing would be includible in the assessable value which is necessary to make the goods marketable and this principle would be applicable while interpreting the provision of Section 4. 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 - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Inclusion of cost of packing material in transaction value for excisable goods.
2. Applicability of penalty waiver for extended period.
3. Interpretation of Section 4 of Central Excise Act regarding marketability of goods without specific packing material.

Analysis:
1. The appeal involved a dispute regarding the inclusion of the cost of packing material in the transaction value of excisable goods. The case revolved around the respondents receiving corrugated cartons free of cost from the buyer for packing PET bottles/jars. The Revenue contended that the cost of such packing material should be considered as additional consideration in the transaction value. The Commissioner (Appeals) confirmed the duty but dropped the penalty. The Tribunal analyzed relevant case laws and held that if goods are marketable without specific packing, the cost of containers need not be included in the assessable value. As the PET containers were marketable without the corrugated cartons, the Tribunal allowed the cross objections and dismissed the Revenue's appeal.

2. The issue of penalty waiver for the extended period was raised by the Revenue. The argument was based on the similarity of elements between the extended period and Section 11AC. The Revenue cited case laws to support their position, emphasizing that penalties were waived only for periods before July 1, 2000. However, the Tribunal found that the penalty could be dropped if the goods were marketable without specific packing material, as per the interpretation of Section 4 of the Central Excise Act. Therefore, the penalty waiver was deemed applicable in this case, leading to the dismissal of the Revenue's appeal.

3. The interpretation of Section 4 of the Central Excise Act regarding the marketability of goods without specific packing material was crucial in this judgment. The Tribunal referenced previous judgments to establish that the cost of packing material should only be included in the assessable value if it contributes to the value of the goods or is necessary to make them marketable. The Tribunal's analysis focused on whether the goods could be sold without the specific packing material provided by the buyer. As the PET containers were deemed marketable without the corrugated cartons, the Tribunal concluded that the cost of the cartons should not be included in the transaction value. This interpretation aligned with the principles laid down by the Apex Court in prior cases and guided the Tribunal's decision to allow the cross objections and dismiss the Revenue's appeal.