2018 (7) TMI 1713 - AT - Central Excise

Valuation - inclusion of packing material supplied by customer in assessable value - overriding effect of rule 6 of Valuation Rules on Rule 4 - whether the value of packing material supplied by the customer should be included in the assessable value of the goods manufactured by the appellant? - Held that - The value of packing material consumed in the production of goods shall be included in the transaction value - The packaging of goods is carried out only after the final product is manufactured. The packaging material cannot be consumed and loses its identity in the manufacture of final product, therefore, the term used consumed in the production means only for packing of final product - the contention of appellant that the packing material which supplied by customer free of cost was used after the manufacture of final product i.e. Metal Container and not consumed in the manufacture is incorrect. Whether Rule 6 can overriding the effect on the section 4? - Held that - The authority of Rule 6 is flowing from section 4(1)(b) only, therefore, it cannot be said that Rule 6 has overriding effect on the section - in terms of section 4 read with Rule 6 of valuation Rules, 2000, the packing material supplied free of cost by the customer is includable in the transaction value (Assessable Value) and the same will be chargeable to excise duty. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
Whether the value of packing material supplied by the customer should be included in the assessable value of the goods manufactured by the appellant during the period from Feb 2007 to September 2007.

Analysis:
The judgment dealt with the issue of whether the value of packing material supplied by the customer should be included in the assessable value of the goods manufactured by the appellant, a Metal Container manufacturer, during the period from February 2007 to September 2007. The appellant did not appear despite multiple notices, leading to the appeal being disposed of based on available records and grounds presented. The Assistant Commissioner representing the Revenue reiterated that, as per the Valuation Rules 2000, packing material supplied free of cost by the customer should be included in the assessable value. The appellant argued that the Valuation Rule cannot override the requirement under section 4 that only the transaction value paid or payable for the goods should be considered as the assessable value. The relevant section 4 of the Act was cited, emphasizing that the transaction value should be the assessable value if the price is the sole consideration for the sale. However, in other cases, the value should be determined as prescribed.

The judgment further delved into the specifics of Rule 6 of the Central Excise Valuation Rules 2000, which states that in cases where the price is not the sole consideration for sale, the value of goods should include the transaction value and the money value of any additional consideration. The rule clarifies that the value of materials, including packaging materials, used in the production of goods should be included in the assessable value. The appellant's argument that the packing material was used after the manufacture of the final product and not consumed in the manufacturing process was rejected. The Tribunal emphasized that packaging occurs after the final product is manufactured and that the interpretation provided by the appellant was incorrect. It was clarified that the term "consumed in the production" refers specifically to the packing of the final product.

Regarding the contention that Rule 6 cannot override the effect of section 4, the judgment highlighted that Rule 6 derives its authority from section 4(1)(b) and does not have an overriding effect on the section. Therefore, the Tribunal concluded that, in line with section 4 read with Rule 6 of the Valuation Rules 2000, the packing material supplied free of cost by the customer should be included in the transaction value (Assessable Value) and is subject to excise duty. The decision of the Ld. Commissioner (Appeals) was upheld, affirming that the cost of packing material should be part of the assessable value, leading to the dismissal of the appeal.

In conclusion, the judgment provided a detailed analysis of the legal provisions, emphasizing the inclusion of packing material value in the assessable value as per the relevant rules and section 4 of the Act. The decision highlighted the importance of statutory provisions in determining the assessable value of goods for excise duty purposes.