2001 (4) TMI 500 - AT - Central Excise

Issues Involved:
1. Determination of assessable value under Section 4 of the Central Excise Act for pesticides.
2. Inclusion of packing costs in the assessable value.
3. Applicability of depot prices for assessing duty.
4. Whether repacking constitutes manufacture.
5. Correctness of the Assistant Commissioner's order.
6. Applicability of Section 4(1)(a) or 4(1)(b) of the Act.
7. Time-barred nature of the demand.
8. Remand for de novo consideration.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value:
The primary issue in these appeals is the determination of the assessable value under Section 4 of the Central Excise Act for levying excise duty on pesticides manufactured by the respondents. The pesticides were cleared in bulk from the factory to their repacking units and then sold in smaller packs from depots.

2. Inclusion of Packing Costs:
The Assistant Commissioner included the cost of packing in the assessable value, citing Supreme Court judgments in UOI v. Bombay Tyre International Ltd. and MRF Ltd. He argued that the pesticides are generally sold in small packages, and the cost of these packings should be included in the assessable value.

3. Applicability of Depot Prices:
The Assistant Commissioner adopted the depot prices for assessing the duty, arguing that the goods are marketed only in small packs and the depot prices are the only normal prices available. However, the Commissioner (Appeals) set aside this order, stating that the value should be determined at the time and place of removal, not at the depot.

4. Repacking as Manufacture:
The Assistant Commissioner rejected the contention that repacking does not amount to manufacture, relying on the decision in Bharat Packaging Corporation v. C.C.E. However, the Commissioner (Appeals) held that repacking at Velachery and Ambattur was not incidental or ancillary to manufacturing and thus did not amount to manufacture.

5. Correctness of the Assistant Commissioner's Order:
The Assistant Commissioner's order was challenged on the grounds that it incorrectly held repacking as manufacture and wrongly adopted depot prices for valuation. The Commissioner (Appeals) found that the goods should be valued in the condition they are at the time of removal from the factory, not at the depot.

6. Applicability of Section 4(1)(a) or 4(1)(b):
The Commissioner (Appeals) held that the value should be determined under Section 4(1)(a), while the Assistant Commissioner had applied Section 4(1)(b) read with Rule 4 of the Central Excise (Valuation) Rules. The Tribunal found that there was no factory gate price for pesticides in bulk or small packings, making Section 4(1)(a) inapplicable.

7. Time-barred Nature of the Demand:
The respondents argued that the demand was time-barred. However, the Tribunal found that the show cause notices were issued within the six-month period specified in Section 11A(1) of the Central Excise Act, thus rejecting the time-bar argument.

8. Remand for De Novo Consideration:
There was a difference of opinion between the Members. One Member (Technical) held that the appeals should be allowed and the cross objections rejected, while the other Member (Judicial) suggested remanding the matter for de novo consideration to verify the existence of factory gate sales and correctly apply valuation rules. The third Member (Technical) agreed with the remand, leading to the final order to set aside the impugned order and remand the matter to the original authority for de novo consideration.

Final Order:
In light of the majority view, the impugned order was set aside, and the matter was remanded to the original authority for de novo consideration to determine the correct assessable value and apply the appropriate valuation rules.

← Previous Next →