1. Heard both sides. Brief facts of the case as stated by the appellants are as follows: (i) The appellants normally clear dyes falling under chapter subheading No. 3204.29 to their depots in the packsize of 25kgs and 50 kgs. Approximately 95% of the sale from depot is in the said packsize. However, in case of balance 5% as per the requirement of the customer, these goods are packed in the packsize of 10 kgs and 5 kgs before sale. The appellants recover packing surcharge in such cases to meet the expenses for repacking of goods.
(ii) The department had issued Show Cause Notices demanding duty on such packing surcharge recovered from the customer and to levy penalty under Rule 173Q of the Central Excise Rules, 1944.
(iii) The appellants replied to the Show Cause Notice replying that the goods are sold from the depot and as per Rule 7 read with Rule 4 of the Central Excise valuation Rules, 2000, the assessable value of the goods sold from such depot will be the normal transaction value at which such goods are cleared from the depot. Normal transaction value is defined as the price at which greatest aggregate quantity of goods are sold. AS the bulk of the sale from depot is made in the packs of 25 kgs. & 50 kgs., the normal transaction value will be the value at which such quantities are cleared. Also the phrase 'such goods' has been used which is interpreted by the Hon. Tribunal in case of Savita Chemicals 1999 (34) RLT 573 to mean that the goods should remain in the same condition in which it is removed from the factory gate. The Hon'ble Supreme Court upheld the said judgment of the tribunal. As there is no change in the condition of the goods, the goods have remained 'such goods' as were cleared from the factory. So the duty is not leviable on the packing charges recovered from the customers. Also the Addl. Commissioner vide order No. DK/125-128/2000 dated 27.12. 2000 for Show Cause Notice issued demanding duty for the period prior to 1.7.2000 had set aside the demands raised on the appellant company in the similar situation.
(iv) The Assistant Commissioner dropped the SCN proceeding vide order in original No. 69/TH-III/RRB/2001-02 by following the judgment of Savita Chemicals.
(v) The Commissioner of Central Excise, Thane-I in exercise of power under Section 35E directed the Deputy Commissioner to make an application to Commissioner of Central Excise (A) on the grounds, that the place of removal includes depot from where goods are sold and the price charged at which goods are removed after repacking from depot would be correct transaction value, and that reliance on the judgment of Savita Chemicals was misplaced as the facts of the case were entirely different.
(vi) The Commissioner of Central Excise (A) after hearing has set aside the order of the Assistant Commissioner and remanded back the case for de novo consideration inter alia on the grounds that department has not enclosed the copy of SCN so the proceedings are required to be sent back for fresh consideration.
2. The learned advocate for the appellants relies on the decision of Savita Chemicals (cited supra) to contend that the expression 'such goods' in Rule 7 of the Central Excise Valuation Rules, 2000 only refers to goods in larger packs removed from the factory. He also cites Board's circular No. 139/08/2000-CX4 dated 3.1.2001 to stress that value addition outside the factory on account of certain processes not amounting to manufacture is not to be included in the assessable value.
He also cites the decision in the case of ICI India Ltd. v. CCE, Hyderabad in his support.
3. The learned SDR supports the order passed by the lower appellate authority and cites Board's circular No. 354/81/2000-TR4 dated 30.6.2000 which in paragraph 6 states as under: "Transaction Value" includes receipts/recoveries or charges incurred or expenses provided for in connection with the manufacturing, marketing, selling of the excisable goods to be not be part of the price payable for the goods sold. In other words, whatever elements which enrich the value of the goods before their marketing and were held by Hon'ble Supreme Court to be includible in "value" under the erstwhile Section 4 would continue to form part of Section 4 value even under new Section 4 definition. It may also be noted that where the assessee charges an amount as price for his goods, the amount so charged and paid or payable for the goods will form the assessable value. If however, in addition to the amount charged as price from the buyer, the assessee also recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value for valuation and assessment purposes.
Thus if assessee splits up his pricing system and charges a price for the goods and separately charges for packaging, the packaging charges will also form part of assessable value as it is a charge in connection with production and sale of the goods recovered from the buyer.
4. After hearing both sides, we find that the valuation law has undergone a change with effect from 1.7.2000 requiring excise valuation to be done according to transaction value of the goods under assessment. Section 4(1) of the Central Excise Act, 1944 (CEA) stipulates transaction value to be adopted in a case where goods are sold for delivery at the time and place of removal. In this case the goods are not sold when removed from the factory, but are merely transferred to the depot. We are concerned here with those goods which are sold from the depot after repacking into smaller packages. Under Section 4(3)(c)(iii) "place of removal" is defined to mean a depot from where excisable goods are sold after clearance from the factory. Since depot is a place of removal under the law and smaller packages are sold from there only and not from the factory, applying Section 4(1)(a) of CEA, the transaction value of such packages including cost of packing has to be adopted as the assessable value. In our view, since the value can be thus determined under Section 4(1)(a) of CEA, there is no need to take recourse to the Valuation Rules. Interpretation of Rule 7 is also, therefore, not necessary in this case.
5. Accordingly, we order that the extra amount recovered towards cost of packing is to be added to the assessable value but we agree with the lower appellate authority that the value needs to be recalculated by the adjudicating authority treating the amount as 'cum-duty-price'.
Hence, we uphold the remand order and reject the appeal.