2001 (7) TMI 342 - AT - Central Excise

Including Customer-Supplied Carton Cost in Assessable Value of Manufactured Goods

The Tribunal held that the cost of cartons supplied by customers should be included in the assessable value of plastic pet jars manufactured by M/s. Jauss ... Manufacture - Valuation - Penalty Issues:Whether the cost of cartons and labels supplied by customers is to be included in the assessable value of plastic pet jars manufactured by M/s. Jauss Polymers Ltd.Analysis:The appeal filed by M/s. Jauss Polymers Ltd. raised the issue of whether the cost of cartons and labels provided by their customers should be considered in the assessable value of the plastic pet jars they manufacture. The appellant argued that the cost of packing material supplied by customers should not be included in the assessable value, citing a Supreme Court decision that emphasized the distinction between 'cost' and 'value.' The appellant contended that only packing costs incurred by the assessee should be included. Additionally, they argued that affixing labels is not a manufacturing process and is not essential for the completion of the product. They relied on previous tribunal decisions and Supreme Court judgments to support their argument.In contrast, the respondent submitted that cartons were the normal packing for the pet jars manufactured by the appellants and that the cost of labels should be included in the assessable value as affixing labels is incidental to the manufacture of jars. The respondent referenced a Supreme Court decision that highlighted how processes adding to the intrinsic value of a product should be included in the assessable value. They also cited another case where excise duty was payable on printed bottles, including printing charges.The Tribunal considered the arguments from both sides and referred to a Supreme Court decision that laid down a test for including packing charges in the assessable value. The test focused on whether the packing was necessary for selling the excisable article in the wholesale market at the factory gate. The Tribunal found that cartons were the ordinary packing for the pet jars in wholesale trade, making the cost of cartons includible in the assessable value. They disagreed with the appellant's argument regarding labels, stating that affixing labels was essential for marketing the product. The Tribunal also addressed the penalty and reduced it based on the circumstances of the case, ultimately allowing the appeal partly.In conclusion, the Tribunal ruled that the cost of cartons supplied by customers should be included in the assessable value of the pet jars manufactured by M/s. Jauss Polymers Ltd. However, they agreed to reduce the penalty imposed on the appellants.