2023 (4) TMI 765

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.... that the cost of the packing material received free of cost by the appellant from their buyers should have formed part of the transaction value for the purpose of payment of central excise duty. The department is of the view that the additional consideration has flown back to the manufacturer from their buyers in the form of free supply of the corrugated boxes resulting in under invoicing of the excisable products in terms of the provision of Clause (a) of Sub-section (1) of Section 4 of the Central Excise Act, as the price does not seem to be sole consideration of the sale as the appellant has received packing material namely corrugated boxes from their buyers free of cost. The packing materials were essential part of the goods as without the packing material the goods could not have been cleared from the factory and sold. The department has taken a stand that since the price was not the sole consideration for sale, the value for charging duty was to be determined in accordance with the manner as prescribed under Rule 6 of the Central Excise Valuation (Determination of price on excisable goods) Rule, 2000 and accordingly, eight show cause notices were issued to the appellant for ....

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.... be the value determined in such manner as may be prescribed. 2[Explanation.-For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.]" 10.1 From the above section 4 it can be seen that only in cases where the transaction value is sole consideration such transaction value shall be the Assessable Value for charging of Excise Duty. However, in the present case apart from the transaction value the packing material supplied Free of Cost by the customer was also used by the appellant. The value of such packing material was not included. When any Excisable product is manufactured and cleared the value of such goods shall be the total value of the goods in the form it is cleared from the factory of the Assessee. It is immaterial that whether a part of the mat....

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....tion of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit. Illustration 1. - X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2. - A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 lakhs. A takes 50% of the price as advance against these goods and....

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....s judgments of the Hon'ble Supreme Court in the case of JAUSS polymers Ltd., Hindustan Polymers Ltd. 1989 (43) E.L.T. 165(SC), the cost of packing material supplied Free of Cost by the buyer was not included in the Assessable Value. The legislature to overcome the judgment of the Hon'ble Supreme Court on the issue of inclusion of cost of packing material amended the Section 4 and made new Valuation Rules of 2000 according to which no scope was left for interpretation of the issue which was existing prior to 1.07.2000. Therefore, after introduction of amended Section 4 and New Central Excise Valuation Rules, 2000 the law is very clear that in case where the packing material is supplied Free of Cost by the buyer to the assessee the cost thereof is includable in the Assessable value. 12. As regard the heavy reliance placed on the Hon'ble Supreme Court Judgment which are with reference to the New amended Section 4 from 1.07.2000. We find that in case of TVS Motors Co. Ltd. the issue was related to Pre-Delivery Inspection and after sale service charges. These chargers were not collected, the same was incurred by the manufacturer of Motor Vehicle after clearance of the goods. Th....

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....ed from the judgment that the Hon'ble Supreme Court in Para 18 referring to the Bombay Tyres International Ltd. on principle agreed that the Cost of primary packing needs to be included. This provision was not under dispute even in the old Section 4. In the present case there is no dispute that the corrugated box even though supplied by the buyer was used as primary packing. For this reason also the judgment of Hon'ble Supreme Court of Grasim would not adversely affect the revenues case. As regards the judgment in the case of Innovative Tech Pack Ltd., decided by this tribunal, we find that the entire case was decided on the fact that the packing material was meant only for transportation of manufactured goods to the buyer and it is not necessary for rendering the said goods marketable. In the present case, since the box was used as a primary packing it would not be said that it is used only for transportation of the goods. Moreover in some of the supplies the appellant's units are located within the premises of the customer i.e. M/s. AMUL despite that the Metal Containers were packed and supplied in corrugated box. Therefore, the corrugated box used for packing of Metal Containers....