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2019 (12) TMI 114

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..... hat whether a part of the material contained in the final product to borne the cost. In the present case undisputedly the case of the appellant i.e. Metal Container cleared were packed in the corrugated boxes. Therefore, the value of the Metal Containers duly packed in the corrugated box has to be valued. Since the appellant have charged the value excluding the Cost of packing material the revenue is right in including the Cost of the packing material for a very simple reason that the goods were cleared duly packed in such corrugated boxes. Merely because the corrugated box was supplied by the customer that does not make difference as far as inclusion of cost of packing material required to arrive at the Assessable value - Since the Transaction Value is not the sole consideration as the packing cost was not included the value has to be determined resorting to the Valuation Rules made by authority of Section 4. It is absolutely clear that the said rule was made amongst other circumstances for the purpose of inclusion of Cost of packing material, if it is supplied Free of Charge by the buyer. Therefore, by virtue of the above Rule 6 read with Explanation 1 Clause-iii the value of pac .....

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..... 795 of 2011, Excise Appeal No. 943 of 2011, Excise Appeal No. 1003 of 2010, Excise Appeal No. 10038 of 2017, Excise Appeal No. 10112 of 2014, Excise Appeal No. 10321 of 2017, Excise Appeal No. 10322 of 2017 Excise Appeal No. 10386 of 2013 Excise Appeal No. 10556 of 2015 Excise Appeal No. 10557 of 2015 Excise Appeal No. 10558 of 2015 Excise Appeal No. 10559 of 2015 Excise Appeal No. 11487 of 2016 Excise Appeal No. 11555 of 2016 Excise Appeal No. 11708 of 2015 Excise Appeal No. 13100 of 2014 Excise Appeal No. 13467 of 2014 to Excise Appeal No. 13475 of 2014 ORDER The brief facts of the case are that the appellant are engaged in the Manufacture of Metal Containers falling under Chapter Heading 73 of the Central Excise Tariff Act, 1985. During the course of audit it was noticed that for the purpose of packing of their final product i.e. Metal Container, they are using corrugated boxes which were supplied by their buyers free of cost. However, the cost of such corrugated boxes supplied free of cost by the buyers were not included in assessable value of the final product. The case of the department is that since the packing material i.e. corrugated boxes were supplied free of cost by the .....

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..... In any case there was sufficient material on record that the department to have included this material. At the relevant time it is also mentioned in the declaration that when such material is supplied free the unit does not charge for packing material cost. However, when the packing material is supplied by the unit the value is included therefore, there is no suppression of facts. In this undisputed fact the demand for the longer period in any case is not sustainable . As regard the merit he submits that in the normal course the Metal Containers are sold by packing them on plastic pallets which are returnable. On rare occasions they are also sent on wooden pallets. On some occasions they are also sold loose by merely tying with string. He submits that as per the representative copies of invoices along with lorry receipts the clearances of Metal Containers were made on pallets. He submits that the cans are otherwise marketable by packing the same in a pallet. The marketability of the cans does not depend at all on putting the same in any cartons, the cartons if at all are used primarily when the customers so requires. The cartons are basically used to serve the purpose of the custo .....

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..... evant and it is immaterial whether it is ordinarily supplied. 7. Thus, the entire basis of the demand was that the new Section 4 was different from the old Section 4. In this regard he submits that even after enactment of the new Section 4 the Hon ble Supreme Court in the various judgments it was held that there is no departure from old Section 4 and the judgments given in context with the old Section 4 is to hold the field even for the cases after new Section 4 was enacted. He placed reliance on the following judgments. Commissioner of Central Excise, Indore Vs. Grasim Industries Ltd., 2014 (304) E.L.T. 310 JAUSS Polymers Ltd. Vs. Commissioner of Central Excise, Meerut, 2003 (157) E.L.T. 626 SC Commissioner of Central Excise, Mysore Vs. TVS Motors Co. Ltd. 2016 (331) E.L.T. 3 (S.C.). TATA Motors Ltd. Vs. Union of India, 2012 (286) E.L.T. 161 (Bombay). Commissioner of Central Excise, Delhi-III Vs. Innovative Tech Pack Ltd., 2017 (358) E.L.T. 409 Nova Iron and Steel Ltd., Vs. Commissioner of Central Excise, Raipur, 2016 (343) E.L.T. 660 Goyal M.G. Gases Pvt. Ltd. Vs Commissioner of Central Excise, Ghaziabad, 2014 (309) E.L.T. 327 Commissioner of Central Excise, Allahabad Vs. Indian .....

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..... terial needs to be included in the Assessable Value. He submits that there was no Pari- materia provision of this rule in the Old rules. Therefore, As per Learned Counsel there is no change in the old Section and the new Section 4 is incorrect. As per the specific provision the lower authorities have rightly included the cost of packing material supplied Free of Cost to the customer in the Assessable Value of the appellant s final product. Therefore, the impugned orders are sustainable. 9. We have carefully considered the submission made by both the sides and perused the record. As regard the facts of the case there is no dispute that the appellant are manufacturer of Metal Containers and the same is supplied to AMUL where this Container are used for Manufacture and filling of various products such as milk powder, baby milk powder, Ghee, etc. In the normal course these Metal containers are supplied on pallet used by the appellant for packing of this cans. In some cases M/s AMUL are supplying corrugated boxes Free of Cost wherein, the appellant packed the final product i.e. Metal container and supplied to M/s. AMUL. The revenue included the value of corrugated box in the Assessable .....

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..... he duty payable on such goods.] 10.1 From the above section 4 it can be seen that only in cases where the transaction value is sole consideration such transaction value shall be the Assessable Value for charging of Excise Duty. However, in the present case apart from the transaction value the packing material supplied Free of Cost by the customer was also used by the appellant. The value of such packing material was not included. When any Excisable product is manufactured and cleared the value of such goods shall be the total value of the goods in the form it is cleared from the factory of the Assessee. It is immaterial that whether a part of the material contained in the final product to borne the cost. In the present case undisputedly the case of the appellant i.e. Metal Container cleared were packed in the corrugated boxes. Therefore, the value of the Metal Containers duly packed in the corrugated box has to be valued. Since the appellant have charged the value excluding the Cost of packing material the revenue is right in including the Cost of the packing material for a very simple reason that the goods were cleared duly packed in such corrugated boxes. Merely because the corru .....

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..... a special discount to the buyer who has made the advance deposit. Illustration 1. - X, an assessee, sells his goods to Y against full advance payment at ₹ 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of ₹ 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2. - A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of ₹ 10 lakhs. A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional interest on the advance received shall be added to the transaction value. 10.2 From reading of the above rule it is absolutely clear that the said rule was made amongst other circumstances for the purpose of inclusion of Cost of packing material, if it is supplied Free of Charge by the buyer. Therefore, by virtue of the above Rule 6 read with Explanation 1 Clause-iii the value of packing mate .....

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..... s very clear that in case where the packing material is supplied Free of Cost by the buyer to the assessee the cost thereof is includable in the Assessable value. 12. As regard the heavy reliance placed on the Hon ble Supreme Court Judgment which are with reference to the New amended Section 4 from 1.07.2000. We find that in case of TVS Motors Co. Ltd. the issue was related to Pre-Delivery Inspection and after sale service charges. These chargers were not collected, the same was incurred by the manufacturer of Motor Vehicle after clearance of the goods. Therefore, there is no extra consideration flowing to the manufacturer. On that basis the Hon ble Supreme Court held that the Pre-Delivery Inspection and after Sale Service Charges are not includable in the value. The facts of that case is totally different from the facts of the present case. As in the present case the issue of inclusion of packing material supplied Free of Cost by the buyer is involved. Therefore, the judgment of Hon ble Supreme Court in the case of TVS Motors Co. Ltd being on altogether different facts and the issue shall not apply in the present case. In case of Grasim Industries Ltd. (supra) the Larger Bench of .....

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..... packing material was meant only for transportation of manufactured goods to the buyer and it is not necessary for rendering the said goods marketable. In the present case, since the box was used as a primary packing it would not be said that it is used only for transportation of the goods. Moreover in some of the supplies the appellant s units are located within the premises of the customer i.e. M/s. AMUL despite that the Metal Containers were packed and supplied in corrugated box. Therefore, the corrugated box used for packing of Metal Containers is not for transportation of goods, therefore, the decision of Innovative Tech Pack Ltd. is clearly distinguished. As regards the reliance placed on the Nova Iron and Steel Ltd., we find that in the said judgment it was decided that the cost of packing is not includable only on the basis that the goods otherwise was marketable in the loose form and the fact was also noted that the goods namely sponge iron were being supplied without packing if dispatched through road transport. In the said case the packing was done particularly for dispatch of goods through Railways. In the present case, it is undisputed that in some cases where the custo .....

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