2016 (5) TMI 380 - SC - Central Excise

Supreme Court: Packing material cost excluded from excise duty valuation.

C.C.E., Chennai Versus M/s SRF Ltd., Manali

C.C.E., Chennai Versus M/s SRF Ltd., Manali - 2016 (335) E.L.T. 195 (SC) Issues:1. Inclusion of cost of packing material in transaction valuation under Section 4 of the Central Excise Act.Analysis:The Supreme Court dealt with the issue of whether the cost of packing material should be included in the transaction valuation under Section 4 of the Central Excise Act. The respondent, a company engaged in the manufacture of Filament Yarn, was not including the cost of packing material while declaring the value of goods. The department issued a show cause notice to the respondent, demanding the inclusion of packing material cost in the valuation. The adjudicating authority upheld the demand, leading the respondent to appeal before the Commissioner. After a series of appeals and remands, the Commissioner (Appeals) finally allowed the respondent's appeal, a decision upheld by the CESTAT as well.The Supreme Court considered the nature of the packing material used by the respondent, noting that it was durable and returnable by the buyer. Based on this finding, the Court concluded that the cost of such packing material should not be included in the transaction valuation. The Court referenced previous judgments to support its decision, including K. Radha Krishnaiah vs. Inspector of Central Excise and Others, Mahalakshmi Glass Works (P) Ltd. vs. Collector of Central Excise, and Triveni Glass Ltd. vs. Union of India and Ors.Ultimately, the Court found no merit in the appeal and dismissed it, affirming the decision of the Commissioner (Appeals) and the CESTAT. The judgment clarified the treatment of packing material costs in the valuation of goods for excise duty purposes, emphasizing the importance of considering the nature and returnability of the packing material in such assessments.