1998 (9) TMI 227 - AT - Central Excise

Summary

Issues:
1. Inclusion of packing material cost in assessable value for duty calculation.
2. Contention regarding the necessity of packing material for marketability at the factory gate.
3. Rejection of appellant's contentions by Assistant Collector and Collector (Appeals).
4. Lack of clarity on the nature of packing material used and its necessity.

Analysis:
1. The appellant, engaged in manufacturing Magnetic Floppy Diskettes, faced a dispute regarding the inclusion of packing material cost in the assessable value for duty calculation. The appellant had not included the cost of packing materials in the assessable value and had not paid the duty on the packing cost element, leading to show cause notices being issued for demand of differential duty.

2. The appellant contended that the packing material was as per the buyer's specification and supplied by the buyer at their cost, arguing that the cost of such material should not be part of the assessable value. They also argued that the Diskettes were marketed in unpacked condition, making packing unnecessary for marketability at the factory gate. However, the Assistant Collector and Collector (Appeals) rejected these contentions, emphasizing that the packing was essential for marketing the goods.

3. The appellant's counsel clarified that the cost of packing material was initially borne by the appellant but later recovered from the buyer, indicating that the packing material was not provided free of cost by the buyer. Despite the appellant's arguments regarding the nature of packing material and its necessity, the original order lacked crucial details on the packing material used and its indispensability for marketability at the factory gate.

4. Due to the lack of clarity on the nature and necessity of the packing material used, the appellate tribunal found the impugned order unsatisfactory and remanded the case for fresh consideration. The tribunal highlighted the need for a detailed examination of the packing material used, especially as per the purchase orders, to determine its significance for marketability at the factory gate. The appellant was granted an opportunity to present necessary records and for a personal hearing during the fresh adjudication.