2017 (12) TMI 211 - AT - Central Excise

Valuation - includibility - bought out items supplied along with plastic jars - whether the value of the bought out item i.e. cap which is also supplied along with the plastic jars manufactured in the appellant s factory is to be included in the transactional value of the jar for payment of excise duty? - Held that - It is a matter of common sense that the plastic bottle becomes complete only with the addition of the cap. Instead of saying that the bought out items have been supplied with the manufactured goods, it will be more appropriate to say that complete plastic bottles were supplied by the appellant to their sister units. In terms of section 4 of the Central Excise Act, duty is required to be paid on the value of the goods supplied. The plastic bottle is of no use without the cap. Hence the cap is not an optional accessory but an essential part of the plastic container - In the case of Sidhartha Tubes Ltd., 2005 (12) TMI 91 - SUPREME COURT OF INDIA , the Hon ble Apex Court has taken the view, that the value of sockets which were essential for functioning of pipes as it joins the pipes to each other will be includible in the assessable value of pipes. Appeal dismissed - decided against appellant.

Summary

Issues:
Valuation of goods for excise duty - Inclusion of value of bought out bottle caps in transactional value.

Analysis:
The appeal in this case was filed against Order-in-Appeal no.138/2016 dated 17.06.2016 concerning the valuation of goods for excise duty. The appellant, engaged in manufacturing edible oil and related products, also produced plastic containers for packing the oil. A portion of these containers, along with bought out bottle caps, was supplied to their sister concern. The Department, during an audit, noted that the costing of the plastic body did not incorporate the value of the bought out bottle caps. Consequently, differential duty was demanded, leading to the present appeal.

During the hearing, the appellant's counsel argued that the bought out bottle caps, though supplied with the manufactured items, should not be included in the duty payment valuation. The counsel cited various decisions to support this argument, emphasizing that the bottle becomes complete only with the cap attached. On the other hand, the Department justified the impugned order, asserting that duty should be paid on the complete bottle's value, considering both the body and the cap. They relied on the case of Sidhartha Tubes Ltd. to support their stance.

Upon reviewing the case laws and arguments presented, the Tribunal deliberated on whether the value of the bought out bottle caps should be included in the transactional value for excise duty payment. The Tribunal noted that the plastic bottle is incomplete without the cap, making the cap an essential part of the container. Unlike the cases cited by the appellant, where bought out items were optional, in this instance, the cap was deemed necessary for the plastic container's functionality.

Drawing parallels with the Sidhartha Tubes Ltd. case, where essential sockets were included in the assessable value of pipes, the Tribunal concluded that the cost of the cap should be considered in the plastic container's value for duty payment. Applying the test of essentiality, the Tribunal upheld the impugned order, rejecting the appeal.

In conclusion, the Tribunal found that the cap's value should be included in the assessable value of the plastic containers, as it was an essential component for the functionality of the product. The decision was pronounced in the open court on 26.10.2017.