1986 (7) TMI 91 - HC - Central Excise

Summary

Issues:
1. Determination of assessable value of soaps manufactured by petitioner for another company.
2. Whether the price at which goods are supplied represents wholesale cash price.
3. Consideration of costs of outer folding corrugated boxes in assessable value.

Detailed Analysis:
1. The case involved a dispute regarding the assessable value of soaps manufactured by the petitioner company for another entity. The agreement between the parties specified the terms of manufacture and sale of soaps, including the brand name "DETTOL" and the specifications set out in the agreement. The agreement allowed the other party to reject goods not meeting the specified standards, with costs of any damage to be borne by the petitioners.

2. The Assistant Collector issued a show-cause notice questioning the assessable value determination, suggesting it should be based on the price to an independent buyer rather than the agreed price between the parties. The Assistant Collector concluded that the agreed price did not represent the wholesale cash price and did not meet the conditions of normal price under Section 4 of the Central Excises & Salt Act.

3. The petitioner argued that the agreement was at arm's length and the goods were manufactured by them, not on behalf of the other party. Citing a Supreme Court decision, the petitioner contended that the price at which goods were supplied represented the wholesale cash price and should be accepted as the assessable value for excise duty purposes. Additionally, the petitioner sought deduction of costs of outer folding corrugated boxes from the assessable value, relying on another Supreme Court decision regarding similar deductions for packaging costs.

4. The court agreed with the petitioner's arguments, finding that the goods were manufactured by the petitioner and the agreed price represented the wholesale cash price. The court also held that the costs of outer folding corrugated boxes should be deducted from the assessable value, following the precedent set by the Supreme Court in a similar case involving packaging costs for a different product.

5. Consequently, the court ruled in favor of the petitioner, allowing the petition and discharging the bank guarantee furnished. No costs were awarded in the case.