1977 (1) TMI 45 - HC - Central Excise

Valuation - Method of marketing or delivery - Precedent - High Court decision- Interpretation - Favourable to subject

Summary

Issues:
Determining whether the cost of packing dry cell batteries should be considered as part of the assessable value for the purpose of levy of Central Excise duty.

Analysis:
The case involved petitions under Article 226 of the Constitution to decide if the cost of packing dry cell batteries should be included in the assessable value for excise duty. The petitioner, a public limited company manufacturing dry cell batteries, argued that the cost of packing materials should be excluded from the assessable value. The Central Excise authorities contended that the cost of packing should be included as it makes the goods marketable. The relevant provisions of the Central Excises and Salt Act, 1944 were considered, including Section 4 which determines the value of articles for excise duty purposes.

The court referred to a previous judgment stating that the value of goods for excise duty should only include manufacturing cost and profit, not post-manufacturing costs. The petitioner argued that the manufacture of dry cell batteries is complete before packing. The court cited decisions from High Courts of Maharashtra and Karnataka where packing costs were excluded from assessable value for glassware, emphasizing that completion of manufacture is the key factor.

The court held that the method of marketing or delivery cannot determine assessable value once manufacturing is complete. The possibility of goods being sold without packing is relevant. The court favored an interpretation favorable to the subject in a taxing statute. As two High Courts had interpreted similarly, the court quashed the additional excise duty demands on the petitioner and directed a refund for the period in question. Each party was directed to bear their own costs.