1998 (7) TMI 285 - AT - Central Excise

Tribunal excludes straw cost from duty calculation, citing optional nature and convenience aspect.

The Tribunal ruled in favor of the appellant, holding that the cost of straw supplied with fruit drinks should not be included in the assessable value for ... Valuation Issues:1. Whether the cost of straw supplied along with fruit drinks should be included in the assessable valueRs.2. Whether the straw is an integral or component part of the carton of fruit drinkRs.3. Whether the appellant's contention regarding the optional supply of straw to wholesale buyers is validRs.Issue 1: Assessable Value of Fruit DrinksThe dispute in this case revolves around whether the cost of straw supplied along with fruit drinks should be included in the assessable value for duty calculation. The appellant, engaged in the manufacture of fruit drinks, was filing price lists and clearing goods on payment of duty. A show cause notice was issued alleging suppression of facts with intent to evade duty due to the separate charge for straw not included in the assessable value. The Collector of Central Excise confirmed the demand and imposed a penalty, which the appellant challenged.Issue 2: Integral Nature of StrawThe key contention was whether the straw is an integral or component part of the carton of fruit drink. The appellant argued that the straw was not essential for consuming the drink as the carton itself provided alternative methods of consumption, either by using the straw or by pouring the contents after cutting the carton. The Tribunal noted that the department did not claim the drink could only be consumed using the straw, and the indication on the carton supported the appellant's argument. The appellant's assertion of optional supply to wholesale buyers further reinforced the case for the straw not being integral to the product.Issue 3: Optional Supply to Wholesale BuyersThe appellant contended that the supply of straw was optional to wholesale buyers, and not all cartons were accompanied by straws. The Tribunal observed conflicting statements by the Collector regarding the frequency of straw supply with cartons. The appellant's evidence and the indication on the carton supported the claim that straw was supplied based on the buyers' preference, strengthening the argument for the straw's non-integral nature. The Tribunal referenced previous decisions involving accessories versus component parts to support the conclusion that the straw was not a component of the main product.In conclusion, the Tribunal set aside the impugned order and allowed the appeal, ruling that the cost of straw should not be included in the assessable value of fruit drinks. The judgment emphasized the optional nature of straw supply, the alternative consumption methods provided on the carton, and the convenience aspect of the straw, establishing it as a non-integral part of the product.