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M/s Tata Chemicals Ltd. Versus Collector of Central Excise

2016 (4) TMI 288 - SUPREME COURT

Inclusion of value of gunny bags for determination of assessable value of manufactured goods - Arrangement between appellant and buyers of soda ash - Held that:- if an arrangement exists between the seller and the buyer of excisable goods for return of the packing materials by the buyer to the seller, carrying an obligation on the seller to return the value of the packing materials to the buyer on such return, such value is not liable to be included in the assessable value of the finished produc .....

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e parties not found. - Value to be included - Decided against the assessee. - Civil Appeal Nos. 7251-7302 of 2000 - Dated:- 1-4-2016 - Ranjan Gogoi, Arun Mishra And Prafulla C. Pant, JJ. For the Appellant : Mr. Ravinder Narain, Adv. Ms. Mallika Joshi, Adv. Ms. Ruchika, Adv. Mr. Rajan Narain,Adv. For the Respondent : Mr. K. Radhakrishna, Sr. Adv. Mr. Rupesh Kumar, Adv. Mr. Arijit Prasad, Adv. Mr. Jitin Singhal,Adv. Mr. B. Krishna Prasad,Adv. ORDER 1. The claim of the appellant is that there was a .....

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upp) SCC 601 and Triveni Glass Ltd. V. Union of India & Ors. (2005) 3 SCC 484. 2. Paragraphs 5 and 6 of Mahalakshmi Glass Works (P) Ltd.(supra) may be conveniently extracted herein under: 5. The Tribunal noted that the appellant manufactured glass bottles. It delivered these in two types of packing, namely, in open crates and in cartons and gunny bags. So far as the crates were concerned, the same belonged to the appellant. The customer was billed for the cost of glass bottles only. The crat .....

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s case was that these packings were also returnable and in many cases they were actually returned and reused by the appellant. There was no evidence about the durability of the cartons and gunny bags but nothing to show that these were returnable. The position seems to be as follows: The Tribunal has rightly applied the returnability test. In K. Radha Krishnaiah v. Inspector of Central Excise this Court observed that it cannot be said that the packing is returnable by the buyer to the assessee u .....

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nal to the following clause in their standard contract. It read as follows: 6. All packing cases, other than such as may be supplied or paid for by buyer, shall be returnable in good order and condition within 30 days after receipt. 6. The Tribunal was of the view that the above clause related to cases . It could have meant only the crates which belonged to the appellant and for which the customers had not paid anything. The property in the crates having remained with the appellant all along, th .....

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perty, and in addition incur return freight therefor too for nothing. In those circumstances, the Tribunal held that the cartons and gunny bags were not returnable in the accepted sense of the term. The Tribunal further noted that since the statute insisted on the packing being returnable, in addition to being durable, the authorities are bound to see whether the transaction fulfilled the tests of returnability as per the Supreme Court and High Court judgments. 3. Paragraphs 12 and 17 of the jud .....

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is the determining factor but the condition that if the buyer chooses to return the packing the seller is obliged to accept it and refund the stipulated amount. It is held that the question whether the packing is actually returned or not has no relevance. 17. We have considered the submission of the parties. In our view, the law laid down by this Court in Mahalakshmi Glass Works (P) Ltd. is the correct law. There is no necessity that the crates must be actually returned. So long as there is an o .....

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position to use them again. In our view, the High Court was wrong in holding that the wooden crates are not durable or returnable. The answer to the second question therefore has to be in favour of the appellants. It is held that, in view of the specific term in the bills/invoices, the wooden crates are durable and returnable packing whose cost is not to be included in the value of glass sheets. 4. From the above what transpires is that if an arrangement exists between the seller and the buyer .....

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