1991 (2) TMI 225 - AT - Central Excise

Appeals allowed, cases remanded for inclusion of packing costs, post-manufacturing expense deductions reconsidered.

The Tribunal allowed the appeals and remanded the cases to the Assistant Collector with specific directions to determine the includibility of secondary ... Valuation - Post-manufacturing expenses Issues Involved:1. Includibility of post-manufacturing expenses in the assessable value.2. Includibility of the cost of packing in the assessable value.Issue-wise Detailed Analysis:1. Includibility of Post-Manufacturing Expenses in the Assessable Value:The appellants, manufacturers of soaps, detergents, toothpastes, cosmetics, and toilet preparations, filed price-lists claiming deductions for post-manufacturing expenses on the basis that the assessable value under Section 4 should be determined by manufacturing cost and manufacturing profit. The Assistant Collector rejected this claim, and the Appellate Collector upheld the rejection. The appellants sought a remand for fresh consideration of these deductions in light of the Supreme Court judgment in Bombay Tyre International (1983 (14) E.L.T. 1896).The Tribunal directed the Assistant Collector to reconsider the eligibility of deductions for post-manufacturing expenses in accordance with the principles established in Bombay Tyre International, which emphasizes that the assessable value should include only those expenses necessary for placing the excisable goods in the condition in which they are generally sold in the wholesale market at the factory gate.2. Includibility of the Cost of Packing in the Assessable Value:The core issue was whether the cost of packing should be included in the assessable value of the excisable goods. The appellants argued that the cost of packing necessary for safe transport should be excluded, while packing necessary for marketability should be included.The Tribunal referenced multiple Supreme Court judgments to elucidate the principles governing the includibility of packing costs:- Bombay Tyre International (1983 (14) E.L.T. 1896): The Supreme Court held that the cost of secondary packing necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate should be included in the assessable value.- Godfrey Philips India Ltd. (1985 (22) E.L.T. 306 (SC)): The majority opinion reiterated that only the cost of packing necessary for marketability at the factory gate is includible. The dissenting opinion suggested including all packing costs, regardless of their purpose.- Geep Industrial Syndicate (Civil Appeals No. 642-45 of 1982): This judgment followed the majority view in Godfrey Philips, emphasizing the necessity of packing for marketability.- Hindustan Polymers (1989 (43) E.L.T. 165 SC): The court held that the cost of containers supplied by the customer is not includible if the goods are marketable without such containers.- Ponds India Ltd. (1989 (44) E.L.T. 185 (SC)): The judgment reaffirmed that only the cost of packing necessary to make the goods marketable should be included in the assessable value.The Tribunal concluded that the consistent view of the Supreme Court is that only the degree of secondary packing necessary for marketability at the factory gate should be included in the assessable value. The Assistant Collector was directed to inquire whether the secondary packing is necessary for marketability and include the cost accordingly.Conclusion:The Tribunal allowed the appeals and remanded the cases to the Assistant Collector with specific directions:- To determine the includibility of secondary packing costs based on their necessity for marketability at the factory gate.- To reconsider the eligibility of post-manufacturing expense deductions in light of the principles established in Bombay Tyre International.This comprehensive analysis ensures that the assessable value of excisable goods is determined accurately, adhering to established legal principles.