Brand name exemption and transit packing charges do not defeat small scale relief or inflate assessable value

Small scale exemption under Notification No. 175/86-C.E. was not denied merely because fan guards carried the buyer's monogram on a component supplied for manufacture, since the goods were not marketed as branded goods but used as an intermediate product in further manufacture. Packing charges for transit to the buyer's outstation factory were also excluded from assessable value because such packing was only for transportation and was not the ordinary factory-gate packing in which the goods were normally sold. The notification benefit and valuation treatment were therefore applied in favour of the assessee.

---

---

Issues: (i) whether fan guards manufactured for another concern and fitted with a monogram supplied on a component provided by the buyer were disentitled to small scale exemption under Notification No. 175/86-C.E., as amended; and (ii) whether packing charges for transportation were includible in the assessable value of the fan guards.

Issue (i): whether fan guards manufactured for another concern and fitted with a monogram supplied on a component provided by the buyer were disentitled to small scale exemption under Notification No. 175/86-C.E., as amended

Analysis: The exemption denial was based on the presence of the buyer's brand name on the central disc used in manufacture. The manufacture, however, was not of branded goods for sale in the market under that name, but of an intermediate product used captively in the manufacture of the buyer's final product. The settled view applied was that where the item bearing another's brand name is not marketed as such but is used in further manufacture, the notification bar is not attracted.

Conclusion: The benefit of Notification No. 175/86-C.E., as amended, could not be denied on the ground of the buyer's brand name. The issue was decided in favour of the assessee.

Issue (ii): whether packing charges for transportation were includible in the assessable value of the fan guards

Analysis: The packing in question was undertaken only for transportation to the buyer's outstation factory and was not the manner in which the goods were ordinarily sold at the factory gate. Packing meant only to safeguard goods during transit, and not necessary packing for making the goods marketable in the form in which they were normally sold, was not part of assessable value.

Conclusion: Packing charges were not includible in the assessable value. The issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded on the substantive valuation and exemption issues, while the point relating to free-supplied materials was not pressed.

Ratio Decidendi: Goods bearing another's brand name are not denied small scale exemption if they are not marketed under that brand but are used as inputs in further manufacture, and packing undertaken only for transportation does not form part of assessable value unless it is the packing in which the goods are ordinarily sold at the factory gate.

---