1993 (3) TMI 317 - AT - Central Excise

Summary

Issues Involved:

1. Inclusion of HPCL's notional profit margin in the assessable value of steel drums.
2. Inclusion of transportation charges in the assessable value.
3. Inclusion of the cost of wrapping material in the assessable value.

Issue-wise Detailed Analysis:

1. Inclusion of HPCL's Notional Profit Margin:

The appellants, M/s. Vijay Tanks and Vessels Pvt. Ltd., manufactured steel drums from materials supplied by HPCL. The dispute arose when the Department issued a Show Cause Notice proposing to add a 10% notional profit margin of HPCL to the assessable value of the drums. The Assistant Collector justified this addition, and the Collector (Appeals) upheld it, reasoning that the notional profit margin of HPCL should be included as it would have been part of the price if HPCL sold the drums.

However, the appellants argued that the addition of this notional profit margin was unwarranted as their fabrication charges already included their manufacturing cost and profit. They cited several legal precedents, including the Supreme Court's decision in Ujagar Prints v. Union of India, which clarified that only the manufacturer's profit, not the customer's profit, should be included in the assessable value.

Upon review, the Tribunal agreed with the appellants, noting that the steel drums were not sold by the appellants to HPCL at a normal price in the course of wholesale trade. Therefore, the case did not fall under the main definition of Section 4(1)(a) of the Act. The Tribunal concluded that the assessable value should be determined based on the manufacturer's cost and profit, excluding the customer's notional profit margin.

2. Inclusion of Transportation Charges:

The transportation charges pertained to the transport of steel sheets from the railway siding to the appellants' factory. The Assistant Collector included these charges in the assessable value, which was upheld by the Collector (Appeals). The appellants contended that these charges were borne by them and included in their fabrication charges, not billed separately to HPCL.

The Tribunal found no evidence that the transportation charges were claimed separately from HPCL and concluded that these charges were already included in the fabrication charges. Therefore, the Tribunal ruled that the transportation charges should not be added again to the assessable value.

3. Inclusion of Cost of Wrapping Material:

The wrapping material used for the steel sheets was included in the cost of the steel sheets. The Assistant Collector included the cost of this wrapping material in the assessable value, which was confirmed by the Collector (Appeals). The appellants argued that the cost of the wrapping material was already accounted for in the cost of the steel sheets.

The Tribunal agreed with the appellants, noting that the cost of the wrapping material was already included in the cost of the steel sheets as per the Chartered Accountant's Certificate. Therefore, the cost of the wrapping material should not be added again to the assessable value.

Conclusion:

The Tribunal set aside the order of the Collector (Appeals) and allowed the appeal, ruling that the 10% notional profit margin of HPCL, transportation charges, and the cost of wrapping material should not be included in the assessable value of the steel drums. The Tribunal provided consequential relief to the appellants.