1991 (6) TMI 143 - AT - Central Excise

Summary

Issues:
1. Includibility of the cost of 'Metal tin containers' in the assessable value of 'Vanaspati'.

Detailed Analysis:

Issue 1: Includibility of the cost of 'Metal tin containers'
The dispute in this case revolves around whether the cost of 'Metal tin containers' used for packaging Vanaspati should be included in the assessable value of the product for excise duty purposes. The appellants had initially included the value of metal containers in the assessable value but ceased doing so after a Supreme Court judgment. The department issued show cause notices to recover excise duty on the metal containers. The main question was whether the cost of durable and returnable metal containers should be part of the assessable value of Vanaspati.

The relevant legal provision, Section 4(4)(d)(i) of the Act, states that the cost of packing, except for durable and returnable packing, should be included in the assessable value of goods. The Supreme Court in Radhakrishaiya v. Inspector of Central Excise clarified that for packing to be excluded, it must be returnable by the buyer to the seller under an arrangement. The actual return or extent of return is not relevant; what matters is the obligation of the seller to accept and refund the amount if the buyer chooses to return the packing.

Furthermore, the Tribunal in C.C.E. v. E.I.D. Parry (India) Ltd. highlighted the norms for returnability of durable containers, emphasizing the need for an arrangement or contract between the buyer and seller for return, irrespective of the actual return. The mode of return is also immaterial as long as the buyer can return the packing and the seller is obliged to accept it.

In this case, the invoices contained an endorsement indicating the returnability of the containers, creating an arrangement between the manufacturer and the buyer. The endorsement specified that the containers should be returned to the factory at the buyer's cost, and the cost of the container would be refunded. This arrangement satisfied the test of durability and returnability as per legal precedents. Therefore, the Tribunal allowed the appeals and set aside the Collector's orders, holding that the cost of metal containers should not be included in the assessable value of Vanaspati.

In conclusion, the judgment clarified the criteria for excluding the cost of durable and returnable containers from the assessable value of goods, emphasizing the need for a contractual arrangement between the buyer and seller for returnability, regardless of the actual return or mode of return.