2007 (11) TMI 154 - AT - Central Excise

Manufacturers of Nylon Filament Yarn - durable packing materials like paper cartons and paper tubes are used for packing product before its clearance from the factory - where the packing material was durable and the arrangement between the seller and the buyer was for return of the material by the buyer, the cost of the material would be excluded from the assessable value of the excisable goods under Section 4(4)(d)(i), whether or not there was actual return of the packing material

Summary

Issues:
- Appeal filed by Revenue challenging abatement of cost of packing material in assessable value.
- Dispute over returnable paper tubes not being returned to buyers.
- Interpretation of Section 4(4)(d)(i) of the Central Excise Act.
- Applicability of previous Supreme Court judgments on similar issues.

Analysis:
1. The appeal was filed by the Revenue against manufacturers of "Nylon Filament Yarn" claiming abatement of the cost of packing material in the assessable value. The manufacturers used durable packing materials like paper cartons and tubes, declaring them as returnable in invoices. The original authority disallowed the abatements, leading to a demand for differential duty. The Commissioner (Appeals) reversed the decision on the inflexibility of the cost of paper tubes. The issue in this appeal was the dropping of demand of duty on the cost of paper tubes.

2. The Revenue argued that since the paper tubes were not returned and their cost not reimbursed to buyers, the manufacturers were not entitled to claim abatement. Reference was made to a Tribunal's decision and the Supreme Court's judgment in Tata Chemicals Ltd. v Collector. The manufacturers contended that the actual return of packing material is not crucial under Section 4(4)(d)(i), emphasizing the durability and returnability of the material. Citing previous Supreme Court cases, they maintained that the arrangement between seller and buyer for return of packing material sufficed, regardless of actual return.

3. The manufacturers relied on Supreme Court judgments in K. Radha Krishaiah v. Inspector of Central Excise and Mahalakshmi Glass Works (P) Ltd. v Collector, highlighting the importance of durability and returnability of packing material, irrespective of actual return. They argued that the invoices' declaration of the paper tubes as returnable reflected the buyer-seller arrangement. The Apex Court's rulings in similar cases were cited to support their position.

4. The Tribunal carefully considered the submissions and found that the paper tubes were durable and returnable as declared in the invoices. The sanctity of statutory documents like invoices was emphasized. The court reiterated the Supreme Court's stance that durable packing material, with an arrangement for return, should be excluded from the assessable value, regardless of actual return. The decision in Tata Chemicals case was deemed consistent with previous rulings and had no impact on the present case.

5. The Tribunal upheld the impugned order based on the rulings in K. Radha Krishaiah and Mahalakshmi Glass Works cases, dismissing the Revenue's appeal. The explicit reasoning behind the Apex Court's ruling in Tata Chemicals case was acknowledged. The judgment was pronounced in open court, affirming the application of previous legal precedents to the present case.