2001 (9) TMI 478 - AT - Central Excise

Summary

Issues: Valuation of products for Central Excise duty - Inclusion of cost of freely supplied packing materials in assessable value - Applicability of settled law and precedent

Valuation of Products for Central Excise Duty:
The judgment concerns the valuation of products for the purpose of levying Central Excise duty at ad valorem rates. The appellant, a manufacturer of Pet bottles, jars, and caps, paid Central Excise duty based on rates specified for goods under Chapter Sub-Heading No. 3923.90 of the Central Excise Tariff Act. The issue raised in the appeal pertains to the inclusion of the cost of freely supplied packing materials in the assessable value of the goods. The impugned orders confirmed a duty demand of over Rs. 68 lakhs, including penalties, based on such valuation.

Inclusion of Cost of Freely Supplied Packing Materials:
The appellants contested the inclusion of the cost of freely supplied packing materials in the assessable value, arguing that it contradicts settled law on the subject. They cited various decisions by the Supreme Court, High Courts, and the Tribunal, including the judgment in Hindustan Polymers v. CCE and the decision in the case of Corner Stone Brands Ltd., to support their position. The appellants emphasized that the cost of packing material supplied free of cost by buyers should not be added to the assessable value of the goods.

Applicability of Settled Law and Precedent:
The Tribunal examined the legal position established through previous judgments, notably the Supreme Court's decision in Hindustan Polymers v. CCE, which clarified that only the cost of packing incurred by the manufacturer and recovered from the buyer is liable to duty, not the cost of packing material freely supplied by buyers. The Tribunal also referenced its own decision in the case of Corner Stone Brands Ltd., which reiterated that the cost of freely supplied packing materials should not be included in the assessable value of goods. The Tribunal distinguished this position from a later decision in Jauss Polymers Ltd. v. CCE, considering it as per incuriam for not acknowledging the earlier precedents.

Conclusion:
The Tribunal held that the binding precedent on the issue is the Supreme Court's decision in Hindustan Polymers v. CCE, as supported by the Tribunal's ruling in the case of Corner Stone Brands Ltd. Accordingly, the duty demand related to the addition of the value of freely supplied packing material was deemed not legally sustainable and set aside. The appellant agreed to pay the duty amount concerning labels and stickers. As most of the duty demand was linked to the cost of freely supplied packing materials, no penalty was imposed in this case. The appeal was disposed of accordingly, with the penalty being set aside based on the legal analysis and precedent cited.

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