2017 (10) TMI 1170 - AT - Central Excise

Valuation - includibility - whether the cost of durable packing material supplied by the buyer can be added to the assessable value of the goods supplied by the assessee? - Held that - the said issue is covered in favor of the assessee by the decision of this Tribunal in the matter of CCE, Indore V. Grasim Industries ltd. 2014 (4) TMI 650 - CESTAT NEW DELHI , where it was held that the testing charges of those containers would be includible in the value along with the cost of such containers if the containers are of durable and returnable nature, the amortized cost of the container including testing charges during the period of use would be includible in the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the cost of durable packing material supplied by the buyer can be added to the assessable value of the goods supplied by the assessee.

Analysis:

1. Background: The case involved an assessee who was a manufacturer of chemicals under specific chapters of the Central Excise Tariff Act, 1985. The department raised an objection during audit proceedings regarding the inclusion of the value of containers supplied by the buyer, who was a sister concern of the assessee.

2. Show Cause Notice: The department issued a show cause notice invoking the extended period of limitation for the recovery of duty amounting to ?6,10,631, along with interest and penalty under Rule 25 read with Section 11AC of the Act. The Additional Commissioner, Central Excise, adjudicated the notice confirming the allegations and proposals. The Commissioner (Appeals) partially upheld the Order-In-Original, sustaining a demand of duty of ?1,28,525 and imposing a penalty of ?15,000.

3. Legal Issue: The main issue in the appeal was whether the cost of durable packing material supplied by the buyer could be added to the assessable value of the goods supplied by the assessee. The Tribunal referred to previous decisions, including CCE, Indore v. Grasim Industries Ltd., to support the assessee's position. The goods manufactured by the assessee were marketable without the need for containers, as per the test of marketability established by the Supreme Court in previous cases.

4. Decision: The Tribunal, based on the precedent and legal principles, set aside the impugned orders and allowed the assessee's appeal. The Revenue's appeal, regarding the dropped demand on the basis of limitation, was rejected. The decision was made in accordance with the established legal precedents and principles.

5. Conclusion: Both appeals were disposed of accordingly, with the assessee's appeal being allowed and the Revenue's appeal being rejected. The judgment clarified the treatment of packing material in the assessable value of goods and upheld the legal position established by previous decisions and Supreme Court rulings.