1992 (10) TMI 161 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of packing charges in assessable value.
2. Returnability and durability of gunny bags.
3. Ex-factory price determination.
4. Marketability of cement without packing.

Detailed Analysis:

1. Inclusion of Packing Charges in Assessable Value:
The appellants filed price lists excluding the packing charges of gunny bags. The Assistant Collector included these charges in the assessable value, a decision confirmed by the Collector. The Collector reasoned that packing was essential for the sale of cement, making it part of the manufacturing cost. The appellants argued that the cost of gunny bags should not be included as the cement could be sold without packing. The Tribunal initially ruled in favor of the appellants, but the Bench later reconsidered, referencing the Supreme Court's decision in Ponds India, which emphasized circumstances under which packing costs should be included.

2. Returnability and Durability of Gunny Bags:
The appellants contended that gunny bags were returnable and thus their cost should not be included in the assessable value. They cited the Cement Control Order and various court decisions supporting this view. The Tribunal noted that under Section 4(4)(d)(i) of the Central Excises & Salt Act, 1944, the cost of durable and returnable packing is excluded from the assessable value. The Tribunal referred to the Supreme Court's interpretation in K. Radha Krishaiah, which required an arrangement for the return of packing. The Tribunal found that the Cement Control Order and Releasing Orders implied such an arrangement, supported by evidence of actual returns and collection agents.

3. Ex-factory Price Determination:
The appellants argued that the ex-factory price, as fixed under the Cement Control Order, should determine the assessable value, excluding packing costs. The Tribunal agreed, citing the Supreme Court's judgment in Indian Oxygen, which held that the ex-factory price should be the assessable value when fixed under statutory provisions. The Tribunal noted that the Cement Control Order fixed cement prices without including packing costs, aligning with the statutory definition of "value" under Section 4.

4. Marketability of Cement Without Packing:
The appellants claimed that packing was not necessary to make cement marketable, as it was sold in bulk. The Tribunal referenced the Supreme Court's decision in Bombay Tyres International, which stated that packing costs are includible only if necessary for marketability at the factory gate. The Tribunal found that special cement was indeed sold in bulk without packing, making packing costs unnecessary for marketability. This finding was supported by previous Tribunal decisions and confirmed by the Supreme Court.

Conclusion:
The Tribunal concluded that the cost of gunny bags should not be included in the assessable value of cement. It found that the Cement Control Order and Releasing Orders provided for the return of gunny bags, making them returnable packing. The ex-factory price fixed under the Cement Control Order should be the assessable value, excluding packing costs. The Tribunal also upheld that packing was not necessary for the marketability of special cement, as it was sold in bulk. The Tribunal directed the Revenue Authorities to provide consequential relief to the appellants.