2003 (9) TMI 87 - SC - Central Excise

Valuation (Central Excise) - Packing - whether the cost of cartons and labels supplied by customers is to be included in the assessable value of the plastic pet jars manufactured by the appellant - Held that - if the manufacturer asks the customer to bring his own container and does not charge anything therefor, packing cost cannot be added to the price at which the goods are sold by the manufacturer - That position in law has not been eroded at all. The Tribunal was not justified in adopting the test which did not arise for consideration in the context of the facts arising in this case - decided in favour of assessee.

Summary

Issues:
1. Inclusion of cost of cartons and labels in the assessable value of plastic pet jars.

Analysis:
The primary issue in this appeal before the Supreme Court was whether the cost of cartons and labels supplied by customers should be included in the assessable value of the plastic pet jars manufactured by the appellant. The Tribunal had previously dismissed the appellant's appeal, relying on the decision in Government of India v. Madras Rubber Factory Ltd., which emphasized the necessity of packing charges in the assessable value based on whether the packing was essential for selling the goods in the wholesale market. The appellant contended that as per the precedent set in Hindustan Polymers v. Collector of Central Excise, if the manufacturer did not charge the customer for packing, the cost of packing should not be added to the sale price.

The appellant's counsel argued that the Tribunal's adoption of the test from the Madras Rubber Factory case was unwarranted, citing the ruling in Hindustan Polymers case to support their position. The Court referred to the analysis in Hindustan Polymers case, particularly the three scenarios outlined by Justice Ranganathan, which clarified that if the manufacturer did not charge for packing or supplied returnable containers, the packing cost should not be added to the sale price. The Court emphasized that if the manufacturer did not charge the customer for bringing their own container, the packing cost should not be notionally added or subtracted from the sale price.

In conclusion, the Court held that the test applied by the Tribunal was incorrect in the context of the facts of this case. Referring to the precedence set in Hindustan Polymers case, the Court set aside the Tribunal's order and quashed the demand raised, allowing the appeal in favor of the appellant. The judgment reaffirmed the principle that if the manufacturer does not charge the customer for packing, the packing cost should not be included in the sale price, maintaining consistency with established legal interpretations in similar cases.