2005 (8) TMI 136 - HC - Central Excise

Summary

Issues involved:
Challenge to appellate order on inclusion of packing material cost in assessable value under Central Excise Act.

Analysis:
1. Issue of inclusion of packing material cost in assessable value: The petitioner, engaged in the sale of excisable commodities in liquid form packed in "M.S. Barrels," contested the inclusion of the cost of packing materials in the assessable value. The contention was based on the interpretation of Section 4(4)(d)(i) of the Central Excise and Salt Act, supported by relevant case laws. The petitioner argued that the barrels were durable and returnable as per the invoice clause, thus excluding their cost from the assessable value. The Revenue, however, supported the view taken by CEGAT, asserting that the exclusion clause applied in this case. The court analyzed the legal position, emphasizing the requirement of an agreement between the buyer and seller for the packing material to be returnable, irrespective of its physical capability for return. The court found that the petitioner's invoice clause established both durability and returnability of the barrels, entitling them to exclude the packing material cost from the assessable value.

2. Judicial Interpretation and Precedents: The judgment referred to the interpretation of the term "returnable" in Section 4(4)(d)(i) by the Supreme Court in previous cases. It highlighted that the exclusion of packing material cost depends on the existence of an agreement for return between the buyer and seller, beyond the mere physical capability of the packing to be returned. The court cited specific cases to support this interpretation, emphasizing the importance of contractual arrangements for returnability. The judgment reiterated that the applicability of the exclusion clause hinges on the presence of a mutual agreement for the return of packing material, as evidenced by the invoice clause in the present case.

3. Conclusion and Decision: After considering the arguments and legal precedents, the court allowed the writ petition, quashing the appellate order passed by CEGAT. The court held that the petitioner was entitled to exclude the cost of packing material from the assessable value based on the durable nature and returnability of the barrels, as per the agreement reflected in the invoice clause. The decision underscored the significance of contractual arrangements for returnability in determining the applicability of the exclusion clause under the Central Excise Act.