Valuation (Central Excise) - Maintenance and service charges in respect of durable and returnable packing - Central Excise - 2/88-CX.1

Valuation (Central Excise) - Maintenance and service charges in respect of durable and returnable packing Government of India Ministry of Finance (Department of Revenue) New Delhi Circular No. 2/88-CX.1 Dated 2-2-1988 [From F. No. 6/78/86-CX.1] Subject : Deduction of certain charges recovered in relation to durable and returnable containers - Instructions regarding. Consequent upon the decision of the Supreme Court in the case of Bombay Tyre International in 1983, a suggestion was received for reconsidering Board's instructions contained in F. No. 6/73/79-CX.1, dated the 10th May, 1982 relating to maintenance and service charges in respect of durable and returnable containers. The matter has since been examined by the Board and it has been decided that the said instructions dated 10-5-1982 are still very much relevant and do not need any review. These instructions are therefore, reiterated. 2. It has also come to the notice of the Board that some assessees are charging so called "retention charges" in respect of durable and returnable containers, generally, as a penalty for retaining such containers beyond a prescribed period by the buyer of the goods. This issue was raised before the CEGAT and vide Order No. 495/85-A, dated 10-7-1985 in the case of Collector of Central Excise, Indore v. M/s. Premier Oxygen and Acetylene Co. (P) Ltd., Gwalior, the Tribunal has held that such retention charges are deductable to arrive at the assessable value in terms of the provisions of Section 4(4)(d) of the Central Excises Salt Act, 1944. This decision of the Tribunal has not been accepted by the Board and an SLP has since been filed before the Supreme Court on 15th March, 1986 contesting the said decision - inter alia on the following grounds :- (i) Retention charges are directly relatable to the cost of manufacture and form an integral element of selling price of the goods; (ii) Retention charges are not in lieu of packing charges and should therefore form part of the manufacturing cost of the commodity; and (iii) The interest and the depreciation relating to the value of the durable containers are taken into consideration while determining the price of commodity. 3. The Board therefore desires that such 'retention charges' of durable and returnable containers should be included in the assessable value so as to be consistent with the stand taken by the Department in the said SLP. In respect of disputes, if any, in this regard, demand may be raised and kept pending till the Supreme Court decides the matter. 4. The receipt of this circular may please be acknowledged.