Exclusion of Special Packing Cost from Assessable Value for Excise Duty

The Tribunal held that the cost of special packing (7-Ply double-faced corrugated boxes) should not be included in the assessable value of "Lacto Calamine Lotion" for excise duty purposes. Additionally, the demand raised by the Revenue was deemed time-barred as there was no willful suppression of facts with intent to evade duty. The majority decision set aside the impugned order, allowing the appeals with consequential relief to the appellants.

---

---

Issues Involved:
1. Inclusion of special packing costs in the assessable value of goods.
2. Applicability of the extended limitation period for raising the demand.

Issue-wise Detailed Analysis:

1. Inclusion of Special Packing Costs in the Assessable Value:

The primary issue was whether the cost of special packing, specifically 7-Ply double-faced corrugated boxes, should be included in the assessable value of "Lacto Calamine Lotion" for excise duty purposes. The appellants contended that this special packing was not necessary for putting the goods in the condition in which they are generally sold in the wholesale market at the factory gate. They argued that the primary packing in 3-Ply double-faced corrugated boxes was sufficient for this purpose, and the special packing was only to avoid damage during transit, as requested by the wholesale buyer, M/s. Duphar Interfran Ltd.

The Tribunal examined the facts and legal precedents, including the test laid down by the Supreme Court in the case of Union of India v. Bombay Tyre International Ltd., which states that the cost of packing must be included in the assessable value if it is necessary for putting the goods in the condition in which they are generally sold in the wholesale market at the factory gate. The Tribunal found no evidence that the special packing was necessary for the wholesale market and concluded that the cost of the 7-Ply double-faced corrugated boxes should be excluded from the assessable value.

2. Applicability of the Extended Limitation Period:

The second issue was whether the demand raised by the Revenue was time-barred. The appellants argued that the demand for the period from 1984-85 to August 1989 was issued beyond the six-month limitation period prescribed under Section 11A of the Central Excises and Salt Act, 1944. They contended that there was no suppression of facts or intent to evade duty, as they had been regularly submitting price lists, gate passes, and RT-12 returns, which were duly assessed by the Department.

The Tribunal considered the legal precedents, including the Supreme Court's judgment in the case of Cosmic Dye Chemical v. Collector of Central Excise, which held that misstatement or suppression of facts must be willful with intent to evade duty to attract the extended limitation period. The Tribunal found that the appellants had a bona fide belief, supported by several Supreme Court judgments, that the cost of special packing was not includible in the assessable value. Therefore, the Tribunal held that the demand was time-barred as there was no willful suppression of facts with intent to evade duty.

Separate Judgments:

Judgment by the Judicial Member (G.P. Agarwal):
The Judicial Member concluded that the cost of special packing should not be included in the assessable value and the demand was time-barred. He emphasized that the special packing was not necessary for the wholesale market and that the appellants had a bona fide belief that the cost was not includible.

Judgment by the Technical Member (P.K. Kapoor):
The Technical Member disagreed, holding that the cost of special packing should be included in the assessable value. He argued that the special packing was necessary for delivering the goods to customers and that the appellants had deliberately suppressed facts to evade duty, justifying the extended limitation period.

Final Order by the Majority (S.L. Peeran):
The third member, S.L. Peeran, agreed with the Judicial Member, concluding that the cost of special packing was not includible in the assessable value and the demand was time-barred. He emphasized the lack of evidence that the goods were sold in the wholesale market with the special packing and the bona fide belief of the appellants based on legal precedents.

Final Decision:
As per the majority, the Tribunal held that the cost of special packing (7-Ply double-faced corrugated boxes) is not includible in the assessable value and the demand was time-barred. The impugned order was set aside, and the appeals were allowed with consequential relief to the appellants.

---