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2015 (8) TMI 403 - SC - Central ExciseValuation of goods - Inclusion of cost of returnable gunny bags used for packing the excisable goods - whether the price of the gunny bags should be included in the assessable value of the soda ash for the purpose of levy of excise under the Act - Dissenting Judgment. As per Justice Dipak Misra - letters spell out an arrangement between the assessee and the buyers. The tribunal has not accepted the stand of the appellant on the ground that it is not an arrangement and on that basis has remanded the matter to the adjudicating authority for computation of the actual amount of duty payable by the appellant. Once the existence arrangement and choice to return the packing material for reuse are established for the period in question in view of the second decision in Triveni Glass Limited (2005 (2) TMI 130 - SUPREME COURT OF INDIA), the packing cost would not be included. If the assessee succeeds in establishing the choice mentioned in the documents which I have accepted to be an arrangement, and is prevalent during the relevant period i.e. 1981 to 1985, the appellant shall be given the benefit. If he fails to establish the same, the adjudicating authority shall look into the consideration the actual return as has been directed in 2014 (9) TMI 149 - SUPREME COURT - Decided in favour of assessee. As per Justice V. Gopala Gowda - appellant has already charged for the value of the gunny bags from the customers by adding the same to the cost of soda ash. The fact that some of the customers of the appellant have returned the gunny bags out of several ones already sold between the period of 1971 to 1988, does not entitle it to get the benefit of exclusion of the cost of all the gunny bags which were not even returned to the appellant. - burden to prove that the value of the gunny bags is not inclusive and not excisable with the value of the soda ash, lies on the appellant and it has miserably failed to do so as is clear from the facts and circumstances of the case that the soda ash are sold in bulk in the gunny bags at the factory gate to the wholesale market and such packing is indispensible for the transport and preservation of soda ash. - appellant has also failed to establish an arrangement as per Section 4(4)(d)(i) of the Act. Mere suggestion of the same in the above dated letters, regarding the return of used gunny bags to the appellants by the buyers does not establish the terms and conditions that are prerequisites for establishing an arrangement of return of the gunny bags to the appellant. - appellant is bound to include the cost of the gunny bags that are provided by it in the overall value of the soda ash as per the provisions of the Act. - Therefore, the tribunal has rightly rejected the claim of the appellant so far as the exclusion of the cost of packing material with the value of soda ash is concerned and hence, it is liable to pay the tax liability for the same - Decided against assessee.
Issues Involved:
1. Assailability of the Tribunal's judgment regarding the exclusion of the cost of gunny bags from the assessable value of soda ash. 2. Whether there was an arrangement between the manufacturer and buyers for the return of durable packing materials. 3. Applicability and interpretation of Section 4(4)(d)(i) of the Central Excise Act, 1944. 4. Determination of the inclusion or exclusion of the cost of packing material in the assessable value of goods. 5. Examination of evidence and documents submitted by the appellant regarding the arrangement for the return of packing materials. Issue-wise Detailed Analysis: 1. Assailability of the Tribunal's Judgment: The appellant questioned the judgment and order dated 6.9.2000 passed by the Customs, Excise and Gold Control (Appellate) Tribunal, New Delhi, which did not accept the letters dated 15.12.1970, 01.02.1971, and 02.04.1971, claiming an arrangement for the return of durable packing (gunny bags) for reuse. The Tribunal opined that the assessee's effort to establish such an arrangement was unsustainable and unacceptable. 2. Arrangement Between Manufacturer and Buyers for Return of Durable Packing Materials: The controversy required a detailed examination of the background facts, focusing on the period from 1970 to 1985. The dispute initially related to the payment of excise duty on the value of soda ash after excluding post-manufacturing expenses. The matter was remanded by the Supreme Court for reconsideration. For the period 1970-75, the claim of the assessee for exclusion of the cost of packing in determining the value of goods for excise duty was rejected. The Supreme Court's judgment on 21.8.2014 indicated that the Tribunal had not addressed the issue of excise duty on packing materials supplied by the buyer. 3. Applicability and Interpretation of Section 4(4)(d)(i) of the Central Excise Act, 1944: Section 4(d)(i) defines "value" in relation to excisable goods and includes the cost of packing except for durable and returnable packing. The term "returnable" was interpreted by the Supreme Court in K. Radha Krishnaiah v. Inspector of Central Excise, emphasizing that the packing must be returnable under an arrangement between the buyer and the assessee. The Tribunal held that there was no such arrangement in the present case. 4. Determination of Inclusion or Exclusion of Cost of Packing Material: The Supreme Court examined various decisions, including Mahalakshmi Glass Works (P) Ltd. v. Collector of Central Excise and Hindustan Polymers v. Collector of Central Excise, which highlighted the necessity of an arrangement for the return of packing materials. The Tribunal's interpretation of the letters from the appellant as not constituting an arrangement was challenged. The Supreme Court noted that an arrangement could be oral or written and must be genuine. 5. Examination of Evidence and Documents Submitted by the Appellant: The appellant provided letters and responses from buyers indicating an arrangement for the return of packing materials. The Supreme Court emphasized that the existence of an arrangement and the choice to return packing materials must be established for the relevant period (1981-1985). If the arrangement and choice were proven, the cost of packing materials would not be included in the assessable value of soda ash. Separate Judgments: Per Dipak Misra, J.: The judgment concluded that the letters did spell out an arrangement between the assessee and the buyers. The matter was remanded to the adjudicating authority to ascertain whether the buyers continued to have a choice to return the packing material for reuse. The Tribunal's orders were set aside, and the appeals were allowed. Per V. Gopala Gowda, J.: Justice Gopala Gowda dissented, emphasizing that the appellant failed to establish an arrangement for the return of gunny bags. He highlighted that the letters did not constitute an express arrangement and that the appellant had already charged for the value of the gunny bags. The concurrent findings of the Tribunal were upheld, and the appeals were dismissed.
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