Central Excise - Valuation - Includibility of cost of secondary packing - Supreme Court's decision in the case of Collector of Central Excise v. M/s. Pond's India Ltd., Reg - Central Excise - 17/89-CX.1

Central Excise - Valuation - Includibility of cost of secondary packing - Supreme Court's decision in the case of Collector of Central Excise v. M/s. Pond's India Ltd., Reg Circular No. 17/89-CX.1 Dated 10-11-1989 [From F. No. 6/34/89-CX.1] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Valuation - Includibility of cost of secondary packing - Supreme Court's decision in the case of Collector of Central Excise v. M/s. Pond's India Ltd., Reg. I am directed to refer to the Supreme Court's judgment in the case of Collector of Central Excise and Others v. M/s. Pond's India Ltd. [JT 1989 (4) S.C.)] and to enclose a copy of the judgment for your information and necessary action. [Not printed, see 1989 (44) E.L.T. 185 (S.C.)] M/s. Pond's India Ltd. manufacture Talcum powder and face powder packed in tins. These tins are further packed in smaller cartons, a number of which are in turn packed in a bigger carton known as outer carton. The question before the Supreme Court was whether the cost of bigger outer carton was includible in the assessable value of the goods. While disposing of the case the Supreme Court held that "the correct position seems to be that the cost of that much of packings, be they primary or secondary, which are required to make the articles marketable would be includible in the value. How much packing is necessary to make the goods marketable is a question of fact to be determined by application of the correct approach. Packing, which is primarily done or mainly done for protecting the goods, and not for making the goods marketable should not be included. In the instant case, therefore, could the powder be sold in smaller cartons at the wholesale market ? The fact that these were usually sold in the wholesale market would be a good pointer for this question. Having considered the order of the Tribunal, which I have set out herein before, I am of the opinion that the Tribunal was in error in approaching the problem before it by looking at the question whether the goods packed in the smaller cartons could be sold in a wholesale market in the course of wholesale trade at the factory gate without the outer cartons in which the smaller cartons are packed. The question is not whether these goods could be so sold, but the question is whether these goods are so sold usually and as such used to become marketable in such manner. In my opinion, there has been a misdirection by the Tribunal on this aspect of the matter. If the above be the true test, then the judgment and the order of the Tribunal must be set aside and the appeal must be allowed and the matter remanded back to the tribunal to determine afresh this question from the stand point indicated above." (Para 11). 2. From the above it is obvious that the Supreme Court has laid down the ratio to be applied regarding includibility of cost of packing while computing the assessable value. According to the ratio laid down by the Supreme Court in the judgment referred above the cost of that much of packings, be they primary or secondary, which are required to make the articles marketable would be includible in the value. How much packing is necessary to make the goods marketable is a question of fact to be determined by application of the correct approach. Packing which is primarily done or mainly done for protecting the goods and not for making the goods marketable should not be included. 3. The ratio laid down by Supreme Court as above, regarding includibility of the cost of packing may be kept in view by the field formations while computing the assessable value of excisable goods. 4. Please acknowledge receipt of this circular. 5. Hindi version follows.