1995 (2) TMI 226 - AT - Central Excise

Tribunal excludes capsule cost from biscuit value under Notification No. 34/83-C.E.

The Tribunal allowed the appeal, determining that the cost of the capsule, as part of the KOT container, is eligible for exclusion from the value of the ... Inclusion of packing cost in assessable value under Section 4(4)(d) - exemption under Notification No. 34/83-C.E. - exclusion of cost of metal container - capsul as part of metal container / composite container - trade practice and nature of packing in determining componenthood - genuine cost of components - question of fact - construction of exemption notifications - strictness and liberal operationCapsul as part of metal container / composite container - exemption under Notification No. 34/83-C.E. - exclusion of cost of metal container - trade practice and nature of packing in determining componenthood - Whether the capsul fitted over the lid of the KOT metal container forms part of the metal container so as to render its cost eligible for exclusion from the assessable value of the biscuits under Notification No. 34/83-C.E., dated 1-3-1983. - HELD THAT: - The Tribunal held that for goods delivered in packed condition Section 4(4)(d) includes the cost of packing in the value except where packing is of a durable, returnable nature, and the exemption operates by reference to the cost of the metal container in which biscuits are packed at removal. The physical nature and commercial practice relevant to a food product packed in large-capacity metal KOT containers were considered: the capsul is a raised cover protecting the depressed lid and, given the purpose of protecting brittle food in transit and accepted trade practice, cannot be treated as a mere additional accessory. Reliance was placed on the principle that packing forming part of the container, when the container is cleared fitted with that packing, is includible in the container's cost for the purposes of valuation. Precedents and dictionary definitions were used to show that the term 'container' is wide enough to encompass the capsul. The Tribunal observed that the assessment of the precise quantum of cost was a factual matter for the revenue to decide and that the exemption must be given full effect once applicability is established; however, quantum and genuineness of the cost were not decided on merits by the Tribunal. [Paras 6, 7, 8, 12]The cost of the capsul forms part of the cost of the KOT metal container and, therefore, the cost of the KOT container inclusive of the capsul is eligible for exclusion from the value of the biscuits under Notification No. 34/83-C.E.; appeal allowed on this issue.Genuine cost of components - question of fact - inclusion of packing cost in assessable value under Section 4(4)(d) - Whether the actual cost of the capsul (and its genuineness) is to be determined in relation to inclusion/exclusion from the assessable value. - HELD THAT: - The Tribunal noted that what constitutes the cost of the capsul is a question of fact. Although the capsul is held to be part of the container for exemption purposes, the determination of the correct and genuine cost (including inquiries and verification of purchase or manufacture prices) falls to the Revenue to decide on the available material. The Tribunal expressly declined to adjudicate on the quantum or genuineness of the costs in the present proceeding. [Paras 8, 9]Remitted to the Revenue for factual determination of the genuine cost of the capsul and any consequential adjustment; the Tribunal did not decide quantum.Final Conclusion: The appeal is allowed to the extent that the capsul fitted on the KOT container is part of the metal container and its cost is eligible for exclusion from the value of the biscuits under Notification No. 34/83-C.E.; determination of the genuine/actual cost of the capsul is left to the Revenue for factual inquiry and computation. Issues Involved:1. Inclusion of the cost of the capsule in the assessable value of biscuits.2. Interpretation of Notification No. 34/83-C.E. regarding exemption.3. Definition and scope of the term 'metal container' under the Central Excise Tariff.Issue-wise Detailed Analysis:1. Inclusion of the cost of the capsule in the assessable value of biscuits:The primary issue revolves around whether the cost of the capsule, fitted over the lid of the KOT container, should be included in the assessable value of the biscuits. The Revenue contended that the capsule was an additional fitment and not part of the metal container, thus its cost should be included in the value of the biscuits. Conversely, the appellant argued that the capsule was an integral part of the KOT container and its cost should not be added to the biscuits' assessable value. The Tribunal, after considering the arguments and relevant case law, concluded that the capsule was necessary for protecting the lid and maintaining the integrity of the biscuits during transit, thus forming part of the metal container.2. Interpretation of Notification No. 34/83-C.E. regarding exemption:Notification No. 34/83-C.E. exempted biscuits from excise duty equivalent to the duty on the value of metal containers in which the biscuits were packed. The Tribunal had to determine if the capsule's cost fell under this exemption. It was noted that the exemption notification should be construed strictly, but once applicable, full effect should be given. The Tribunal referred to various Supreme Court judgments emphasizing that exemption provisions, once applicable, should be interpreted liberally to give full play to the exemption. The Tribunal concluded that the cost of the capsule, being part of the metal container, was eligible for exclusion from the value of the biscuits under the exemption notification.3. Definition and scope of the term 'metal container' under the Central Excise Tariff:The term 'metal container' was not explicitly defined in the notification, but reference was made to the definition under Item No. 27 of the old Central Excise Tariff, which included various forms of containers. The Tribunal also considered dictionary definitions and previous case law to interpret the term. It was concluded that the term 'metal container' was broad enough to include the capsule as part of the container. The Tribunal emphasized that the capsule, being essential for the protection and integrity of the biscuits, should be considered part of the metal container, thus its cost should not be included in the assessable value of the biscuits.Conclusion:The Tribunal allowed the appeal, holding that the cost of the capsule forms part of the cost of the KOT container. Consequently, the cost of the KOT container, inclusive of the capsule, is eligible for exclusion from the value of the biscuits under Notification No. 34/83-C.E. The Tribunal emphasized that the exemption notification should be applied liberally once it is determined to be applicable, and the cost of the capsule should not be added to the assessable value of the biscuits.