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CX – It is a matter of common sense that plastic bottle becomes complete only with addition of cap - value of bought out item i.e. cap supplied along with plastic jars is includible in AV: CESTAT

By TIOL News Service

NEW DELHI, NOV 16, 2017: THE appellant is engaged in the manufacture of different types of edible oil.

For packing the edible oil, the appellant was also manufacturing plastic containers. A part of these containers was cleared to their sister concern.

Along with the containers manufactured in the appellant's factory, the appellant also supplied bottle caps which were procured from outside. The valuation of goods for payment of duty for supply to their sister concern was done on the basis of rule 8 of the CE Valuation Rules, 2000. For this purpose, the appellant submitted costing as per CAS-4 standards.

During Audit, department noticed that the costing of the plastic body did not include value of the bought out bottled caps.

Alleging that the plastic bottle/container was undervalued to the said extent, a differential duty demand was issued and confirmed along with penalty and interest.

The assessee is in appeal and submits that the cap for bottles is a bought out item which has been supplied along with the body of the bottle manufactured in the factory for convenience and its cost is not required to be included for payment of duty. Reliance is inter alia placed on the decision in Neycer India Ltd.- 2015-TIOL-115-SC-CX .

Justifying the impugned order, the AR submitted that the bottle manufactured in the appellant's factory becomes a complete bottle only when the cap is also attached. Inasmuch as since the article supplied to the sister concern is the complete bottle, duty is required to be paid on the value including the body and the cap.

Distinguishing the case laws cited by the appellant, the Bench observed -

“6..., we find that the crux of the issue to be decided is whether the value of the bought out item i.e. cap which is also supplied along with the plastic jars manufactured in the appellant's factory is to be included in the transactional value of the jar for payment of excise duty. It is a matter of common sense that the plastic bottle becomes complete only with the addition of the cap. Instead of saying that the bought out items have been supplied with the manufactured goods, it will be more appropriate to say that complete plastic bottles were supplied by the appellant to their sister units. In terms of section 4 of the Central Excise Act duty is required to be paid on the value of the goods supplied….”

The appeal of the assessee was rejected.

(See 2017-TIOL-4023-CESTAT-DEL)


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