1998 (2) TMI 332 - AT - Central Excise

Summary

Issues Involved:
1. Whether the plastic cannula (nozzle) supplied with the Hadensa Medicament is a part or an accessory.
2. Whether the value of the plastic cannula should be included in the assessable value of the medicament.

Issue-wise Detailed Analysis:

1. Whether the plastic cannula (nozzle) supplied with the Hadensa Medicament is a part or an accessory:

The appellants manufactured Hadensa Medicament in cream form, marketed in a cardboard box containing a separately packed plastic cannula. The instructions provided indicated that the cannula should be attached to the tube for application. The appellants argued that the cannula was not indispensable for the medicament's use and thus should not be included in its assessable value. They cited several judgments supporting the non-inclusion of accessories in the assessable value.

The department, however, contended that the cannula was an essential part of the medicament, drawing parallels to previous judgments where essential items were included in the main article's value. The Tribunal considered the distinction between parts and accessories, noting that parts are essential for the main product's function, while accessories are not. The Tribunal referred to the Bombay High Court's judgment in Koron Business Systems Ltd., which distinguished between essential parts and accessories based on their necessity for the main product's operation.

The Tribunal examined the pathology and clinical features of haemorrhoids, emphasizing that internal haemorrhoids require careful and hygienic application of medicament, for which the cannula is essential. The instructions provided with the medicament did not offer an alternative to using the cannula, indicating its indispensability. The Tribunal concluded that the cannula was a part of the medicament, not merely an accessory.

2. Whether the value of the plastic cannula should be included in the assessable value of the medicament:

The appellants claimed abatement towards the cost of the plastic cannula, which was denied by the Assistant Collector and upheld by the Collector (Appeals). The appellants relied on various judgments to argue that the cannula's value should not be included. The department argued that the cannula, being an essential part, should have its value included in the medicament's assessable value.

The Tribunal considered the arguments and judgments cited by both parties. It noted that the value of essential parts is includible in the main article's value, while accessories' value is not. The Tribunal referred to the Supreme Court's judgment in Shriram Bearings Ltd., which held that the cost of accessories is not includible even if fitted at the time of clearance, whereas the value of bought-out parts is includible.

The Tribunal concluded that the plastic cannula was an essential part of the medicament, necessary for its hygienic application, especially for internal haemorrhoids. Consequently, the value of the cannula should be included in the assessable value of the medicament.

Conclusion:

The Tribunal upheld the impugned order, dismissing the appeal and concluding that the plastic cannula supplied with the Hadensa Medicament is a part of the medicament and its value should be included in the assessable value.