Essel Propack Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/1739/05

(Arising out of Order-in-Appeal No.BR/99/Th-I/2005 dated 15/04/2005 passed by Commissioner of Central Excise (Appeals), Mumbai-IV)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Essel Propack Ltd., Appellant Vs. Commissioner of Central Excise, Respondent Thane

Appearance: Shri.Prasad Paranjape, Advocate for appellant Shri.V.K.Shastri, Asst. Comm. (AR), for respondent

CORAM: Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 25/08/2015 Date of Decision : 25/08/2015

ORDER NO

Per: Raju

1. Essel Propack Limited are manufacturers of multilayered plastics collapsible tubes. During the period 1.4.99 to 30.6.2000 they cleared the product to M/s sunshine cosmetics Limited, Hyderabad, in the special boxes over and above the primary packing per the agreement with the said party. After receiving the material M/s sunshine cosmetics would sell the special packing in the market and remit the sale proceeds to the appellant. The appellant had received Rs.5,96,475/ as such sale proceeds. The appellant have paid excise duty amounting to Rs.1,13,070/- on the said amount received from the buyer. A demand notice was issued to the appellant seeking to include the value of the boxes in the assessable value. The total value of the boxes was ascertain as Rs.13,51,542/- and a duty of Rs.3,06,886/- was demanded on the same. It was alleged that the value of goods cleared by them did not include the cost of packing material as required under clause (d) of subsection (4) of erstwhile Section 4 of the Central Excise act and hence duty was demandable on the said costs. The duty was confirmed by adjudicating authority as well as the appellate authority. The appellants are in appeal against the order of the appellate authority.

2. Learned Counsel for the appellant argued that the special packing was for the purpose of transport of multilayered plastics collapsible tubes, which are fragile in nature, and hence had to be protected during the transport. He, inter-alia, argued that the special packing was in the nature of secondary packing. He argued that cost of secondary packing was not includable in the assessable value in terms of section 4 of the Central Excise act as interpreted by the Apex court in the case of:

i) NATIONAL LEATHER CLOTH MANUFACTURING CO. LTD. (2010 (256) E.L.T. 321 (S.C.))

ii) MARIGOLD PAINTS PVT. LTD (2005 (182) E.L.T. 309 (S.C.)

3. Learned AR argued that the money received from the cost of packing has not been included in the value of the goods and it needs to be included. He relied on the order in appeal.

4. Perusal of order in appeal shows that the appellants had claimed that the special packing provided by them to the buyer is in the nature of secondary packing not includable in the assessable value. In order in appeal the Commissioner has observed that cost of all packing is includable in assessable value. He has not disputed the claim of the appellants that the special packing is in the nature of secondary packing and ordinarily it is not used for other buyers. Since the nature of the special packing, claim to be secondary packing by the appellants, has not been disputed in the order in appeal, it has to be treated as secondary packing. The issue of secondary packing has been dealt by Hon Apex court in case of BOMBAY TYRE INTERNATIONAL LTD. (1983 (14) E.L.T. 1896 (S.C.) where it has observed as follows:

51.?The case in respect of the cost of packing is somewhat complex. The new Section 4(4)(d)(i) has made express provision for including the cost of packing in the determination of value for the purpose of excise duty, inasmuch as the case of the parties is that the new Section 4 substantially reflects the position obtaining under the unamended Act. We shall proceed on the basis that the position in regard to the cost of packing is the same under the Act, both before and after the amendment of the Act. Section 4(4)(d)(i) reads :

(4)?For the purposes of this section -

(d)?value, in relation to any excisable goods, -

(i)?where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee.

Explanation. - In this sub-clause packing means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound."

It is relevant to note that the packing, of which the cost is included, is the packing in which the goods are wrapped, contained or wound when the goods are delivered at the time of removal. In other words, it is the packing in which it is ordinarily sold in the course of wholesale trade to the wholesale buyer. The degree of packing in which the excisable article is contained will vary from one class of articles to another. From the particulars detailed before us by the assessees, it is apparent that the cost of primary packing, that is to say, the packing in which the article is contained and in which it is made marketable for the ordinary consumer, for example a tube of toothpaste or a bottle of tablets in a cardboard carton, or biscuits in a paper wrapper or in a tin container, must be regarded as falling within Section 4(4)(d)(i). That is indeed conceded by learned counsel for the assessee. It is the cost of secondary packing which has raised serious dispute. Secondary packing is of different grades. There is the secondary packing which consists of larger cartons in which a standard number of primary cartons (in the sense mentioned earlier) are packed. The large cartons may be packed into even larger cartons for facilitating the easier transport of the goods by the wholesale dealer. Is all the packing, no matter to what degree, in which the wholesale dealer takes delivery of the goods to be considered for including the cost thereof in the value? Or does the law require a line to be drawn somewhere? We must remember that while packing is necessary to make the excisable article marketable, the statutory provision calls for strict construction because the levy is sought to be extended beyond the manufactured article itself. It seems to us that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be included in the value of the article for the purpose of the excise levy. To that extent, the cost of secondary packing cannot be deducted from the wholesale cash price of the excisable article at the factory gate.

52.?If any special secondary packing is provided by the assessee at the instance of a wholesale buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such packing shall be deducted from the wholesale cash price.

5. Since cost of secondary packing not ordinarily used and given specially at the request of customer, is not includible in the assessable value, the benefit of exclusion of the cost of special packing as a secondary packing has to be allowed to the appellant in terms of Section 4 of the Central Excise act. The appeal filed by the appellants is consequently allowed.

(Pronounced in Court)

(Anil Choudhary) Member (Judicial) (Raju) Member (Technical)

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Appeal No.E/1739/05