1997 (4) TMI 78 - SC - Central Excise

Whether the goods are usually wrapped for making them marketable? Held that - The value of the goods as defined in Section 4(4)(d)(i) is the normal price which means the price at which such goods will be ordinarily sold by the assessee to a buyer in course of wholesale trade. The duty will have to be levied on the packed goods at the time of removal from the factory. The goods together with packaging will have to be valued at that point of time on the basis of the wholesale price at which such packed goods are to be sold. It is only the duty payable on the packed goods which will have to be deducted from the wholesale price of the packed goods. Without any special rule or notification to that effect, the duty already paid on the packing material cannot be deducted at the time of clearance of the goods. Thus value of the wrapping paper along with the duty paid on the wrapping paper will have to be included in the value of the wrapped goods which are to be cleared. Appeal allowed.

Summary

Issues:
1. Inclusion of wrapping paper value in the assessment of excise duty.
2. Applicability of the principle laid down by Sabyasachi Mukharji, J.
3. Claiming relief on duty paid for internally manufactured wrapping paper.
4. Interpretation of Section 4(4)(d)(i) and (ii) of the Central Excise Act.

Analysis:

1. The Supreme Court addressed the issue of including the value of wrapping paper in the assessment of excise duty. Referring to previous judgments, the Court emphasized that if wrapping paper is used to put goods in a marketable condition for sale in the wholesale market, its value must be added to the goods being sold. The Court highlighted that the purpose of packing is crucial in determining its inclusion in the value of goods for excise duty assessment.

2. The principle established by Sabyasachi Mukharji, J. in previous cases was applied to the current scenario. The Court reiterated that if goods are usually wrapped for marketability in the wholesale market, the value of the wrapping paper must be considered part of the goods' value. The focus was on whether the goods are generally sold wrapped in the wholesale market, rather than the specific purpose of the packing.

3. The manufacturer argued for relief on duty paid for internally manufactured wrapping paper. However, the Court clarified that while the value of packing must be included, the duty already paid on the wrapping paper cannot be deducted from the wholesale price of the goods. Section 4(4)(d)(i) and (ii) of the Central Excise Act were referenced to explain that duty paid on inputs or packing materials cannot be deducted at the time of goods clearance.

4. The interpretation of Section 4(4)(d)(i) and (ii) was crucial in determining the valuation of goods for excise duty. The Court clarified that the duty payable on packed goods at the time of removal from the factory must be included in the wholesale price of the goods. Without a specific rule or notification, the duty already paid on packing material cannot be deducted during goods clearance. The Tribunal's decision was deemed erroneous, and the Court ruled in favor of including the value of wrapping paper and duty paid on it in the assessment of wrapped goods for excise duty.