1986 (1) TMI 307 - AT - Central Excise

Summary

Issues:
1. Interpretation of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 regarding exclusion of packing cost from assessable value.
2. Allowance of deduction for the phased cost of gas cylinders in the sale price of compressed oxygen gas.
3. Determination of whether the recovery of cylinder cost by the respondents is a single recovery or double recovery.

Analysis:

1. The appeal considered the interpretation of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, which allows exclusion of packing cost from the assessable value of goods if the packing is durable and returnable. In this case, the respondents cleared compressed oxygen gas packed in cylinders. The main issue was whether the deduction of Rs.1/- per cubic meter of gas, representing the phased cost of the cylinder, should be allowed for exclusion from the sale price of the gas. It was undisputed that the gas cylinders were durable and returnable.

2. The respondents argued that they never recovered the initial purchase price of the gas cylinders from customers in a lump sum but only collected a small security deposit. They calculated the Rs.1/- deduction to cover the maintenance charges and the cost of the cylinder itself spread over its life span. The financial charges included represented the interest on the difference between the purchase price and the security deposit. The respondents' method aimed to recover the total cylinder cost in installments over its life span, ensuring it was not a double recovery over the initial purchase price. The Tribunal examined previous judgments favoring this approach and upheld the impugned order based on the same reasoning.

3. The Tribunal referenced two previous judgments in favor of the respondents' method of recovery, emphasizing that it was a single recovery spread over the cylinder's life span. The department's reliance on a different case where cans were held non-returnable due to lack of agreement for return was deemed distinguishable. Ultimately, based on the precedent set by earlier decisions, the Tribunal upheld the impugned order and dismissed the appeal, affirming that the recovery method employed by the respondents was valid and not a double recovery.

In conclusion, the Tribunal's decision centered on the interpretation of the law regarding exclusion of packing cost, the allowance of deductions for cylinder costs, and determining the nature of recovery by the respondents, ultimately upholding the method as a valid single recovery approach.