1995 (8) TMI 75 - SC - Central Excise

Whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold? Held that - In the instant case, it is necessary to reach a definite conclusion whether the larger cartons in which smaller cartons containing tooth powder tins were packed were the one in which ordinarily in the course of wholesale trade the sale was effected to the wholesale buyer. To put it differently, whether such larger carton packing was necessary for putting the excisable article in the condition in which it was generally sold in the wholesale market at the factory gate. A finding on this question of fact would determine whether the cost of such packing has to be included or excluded. It is for this limited purpose that we are required to remit the matter to the Tribunal. The appeal will stand allowed accordingly

Summary

Issues:
1. Inclusion of the value of larger corrugated cartons for determining tax liability.
2. Interpretation of the test for deciding whether packing charges are includible in the value of the product for tax purposes.

Analysis:
1. The appeal challenged the decision of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the inclusion of the value of larger corrugated cartons used for packing tooth powder tins for determining tax liability. The Collector (Appeals) noted that the packing was primarily for the safety of transport to prevent damage to the product during transit. However, the Tribunal disagreed, stating that the packing was necessary to maintain the goods in the condition in which they are generally sold in the wholesale market. The Supreme Court found a lack of proper perception in the Tribunal's understanding of the Collector's order and remitted the matter back to the Tribunal for a fresh conclusion based on the test laid down in previous judgments.

2. The Supreme Court referred to the test established in previous cases to determine whether packing charges should be included in the value of the product for tax purposes. The test requires assessing whether the packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. The Court emphasized that if the packing is essential for the wholesale trade sale, its cost should be included in the value of the goods; otherwise, it should be excluded. The Court directed the Tribunal to apply this test to determine whether the cost of the larger cartons used for packing tooth powder tins should be added or excluded from the assessable value for tax liability. The Court instructed the Tribunal to expedite the disposal of the appeal and maintain any bank guarantee or deposit until the appeal's final resolution.