Central Excise - Valuation - Scope of returnable packing material which is to be excluded from the assessable value - Central Excise - 10/89

Central Excise - Valuation - Scope of returnable packing material which is to be excluded from the assessable value Circular No. 10/89 Dated 31-7-1989 [From F. No. 6/10/89-CX.1] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Central Excise - Valuation - Scope of returnable packing material which is to be excluded from the assessable value. I am directed to say that the exact scope, meaning and interpretation of the words "returnable by the buyer to the assessee" used in Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944 in the context of excluding the cost of packing which is of a durable nature and is "returnable by the buyer to the assessee" have been a subject matter of dispute in many cases and different Courts had given different interpretations. The matter also came up before the Supreme Court in the case of M/s. Radha Krishaiah v. Inspector of Central Excise, Gooty, Others - S.L.P. (Civil) No. 4287 of 1986, decided on 4th November, 1986 [1987 (27) E.L.T. 598 (SC)]. While rejecting the SLP filed by the party, the Supreme Court observed that the excise authorities were right in not excluding the cost of packing in determination of the assessable value of the goods. The Supreme Court laid down the following ratio while rejecting the S.L.P. "The packing must be one which is returnable by the buyer to the assessee and obviously that must be under an arrangement between the buyer and the assessee. It is not the physical capability of the packing to be returned which is the determining factor because, in the event, the words "by the buyer to the assessee" need not have found a place in the section, they would be superfluous. What is required for the purpose of attracting the applicability of the exclusion clause in Section 4(4)(d)(i) is that the packing must be returnable by the buyer to the assessee. The question which has to be asked in each case is : "Is the packing in this case returnable by the buyer to the assessee and obviously it cannot be said that the packing is returnable by the buyer to the assessee unless there is an arrangement between them that it shall be returned." 2. The Board has accepted the said decision of the Supreme Court and desires that the Collectors may review the pending Court cases and appeal(s) and take necessary action either to pursue the cases or to withdraw them in the light of the ratio laid down by the Supreme Court in the case cited above. 3. A copy of the Supreme Court decision, dated 4-11-1986 cited above is enclosed. 4. Please acknowledge receipt.