2017 (11) TMI 1456 - AT - Central Excise

Valuation - includibility - cost incurred on account of packing material used for packing from bulk pack to retail pack at job-worker s end - job work charges - Held that - there is no dispute that the appellant while clearing the goods in bulk paid the duty on the value which is the sale value charged to the ultimate customer even after packing of the goods at the job-workers end - any cost before sale of the goods clearly stands included in the overall transaction value charged to the customers - even though there is a cost at the job-workers end in respect of packing material and packing activities, the same cannot be loaded further on the transaction value and cannot be demanded duty there upon. Further inclusion not required - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of packing material cost and job charges in the assessable value of goods.
2. Liability of duty on goods cleared by the appellant.

Analysis:
1. The appellant, engaged in manufacturing excisable goods, cleared goods to a job worker for packing, re-packing, labeling, and re-labeling. The job worker, a small-scale unit not registered as a Central Excise assessee, then cleared the re-packed goods to customers without paying Central Excise duty. The department contended that the cost of packing material and job charges should be added to the assessable value of goods cleared by the appellant, leading to a demand for differential duty and penalty under Section 11AC. The Commissioner (Appeals) upheld the demand, prompting the appellant to appeal to the Tribunal.

2. The appellant argued that they had already paid duty on the value charged for the sale of the packed goods to customers, with no additional amount collected. They maintained that the job worker's activities constituted manufacturing under Chapter Note 5 of Chapter 38, suggesting any demand should be against the job worker, not the appellant. The Revenue, represented by the Assistant Commissioner, reiterated the findings of the impugned order.

3. The Tribunal examined the submissions and noted that the duty was paid based on the sale value to customers, even after packing by the job worker. Therefore, any costs incurred before the sale were already included in the transaction value. Consequently, the Tribunal concluded that the duty paid by the appellant on the ultimate sale value was correct and legal, precluding the addition of packing costs and job charges to the assessable value. As a result, the differential duty demand was dismissed, and the appeal was allowed.

Judgment:
The Tribunal set aside the impugned order, ruling in favor of the appellant, and no further duty was deemed payable.