1985 (1) TMI 63 - HC - Central Excise

Supreme Court excludes buyer-supplied packing material from excise value, dismisses challenge to Act

The Supreme Court upheld the petitioner's argument that packing material supplied by buyers should not be included in the assessable value of excisable ... Valuation - Glass and glassware - Writ jurisdiction - Show Cause Notice Issues involved: Challenge to constitutional validity of Section 4(4)(d)(i) of the Central Excise and Salt Act, 1944 and show cause notice issued by Assistant Collector regarding inclusion of packing material cost in assessable value.Judgment Summary:The petitioner, a glass manufacturing company, challenged the constitutional validity of Section 4(4)(d)(i) of the Act and a show cause notice issued by the Assistant Collector regarding the inclusion of packing material cost in the assessable value of excisable goods. The respondents justified the Act and the notice.The Supreme Court in a previous case ruled that Section 4(4)(d)(i) of the Act was within the legislative competence of the Union Parliament, rejecting the challenge. The petitioner argued that packing material supplied by buyers should not be included in the assessable value of the goods.The Court examined the facts and held that the packing materials were supplied by buyers and not manufactured or purchased by the petitioner. It was established that the excise duty is primarily on the production or manufacture of goods, and the value of the article must be the criteria for levying excise duty.The Court upheld the petitioner's contention that packing material supplied by buyers should not be included in the assessable value of the goods. Referring to previous rulings, the Court emphasized that the cost of packing material of durable nature and returnable by the buyer should be excluded from the value as per the Act.Based on the discussion, the Court quashed the impugned show cause notice and directed any refund application by the petitioner to be examined and decided by the authority. The writ petition was dismissed regarding the challenge to the validity of Section 4(4)(d)(i) of the Act.In conclusion, the Court dismissed the writ petition challenging the Act, quashed the show cause notice, and directed parties to bear their own costs.