1996 (10) TMI 299 - AT - Central Excise

Summary

Issues:
Determining eligibility for deduction of the cost of durables and returnable packing from the assessable value.

Analysis:
The judgment revolves around the issue of whether the cost of durables and returnable packing collected through collecting agents is eligible for deduction from the assessable value. The appellants contended that they filed price lists under protest, indicating that the cost of durables and returnable containers should be deductible. The dispute arose from the fact that the bags were not directly returned to the appellants but were resold by the buyers to third-party collecting agents who then sold them back to the appellants. The appellate authority held that without a specific arrangement for return between the appellants and the buyers, no deduction was permissible.

The appellant's representative argued that there was indeed an arrangement for return as indicated in the invoice mentioning, "Empty gunnies are returnable through bag collecting agents." Reference was made to a previous decision by a Larger Bench of the Tribunal, emphasizing that actual return of containers was not necessary, but an agreement between buyers and sellers for return sufficed. The respondent contended that there was no such arrangement in this case, as the bags were sold by buyers to agents and then to the appellants without a direct return agreement.

The Tribunal, after considering both sides, relied on previous decisions and held that no actual return of containers was required. It was sufficient to have an arrangement for return between buyers and sellers. The Tribunal emphasized that the bags need not be collected in the strict sense, but an arrangement for return was essential. Citing a decision by the Apex Court, the Tribunal concluded that the cost of gunny bags should not be included in the assessable value, as there was an arrangement for return between the appellants and the buyers. Consequently, the appeal was allowed, and the appellants were entitled to a refund for the amount paid under protest.

In summary, the judgment clarifies that the presence of an arrangement for return between buyers and sellers suffices for considering packing material as returnable, even if the bags are not physically returned. The decision emphasizes the importance of the arrangement over the actual return of goods, ultimately entitling the appellants to a deduction from the assessable value and a refund for the amount paid under protest.