The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), sets aside the demand of excise duty alleging that the cost of free supply material has to be included in the assessable value.
The appellants, M/s.Techno Packers is engaged in the manufacture of wooden crates falling under Chapter 44151000 of the Central Excise Tariff Act (CETA), 1985. Based on the intelligence that the appellant was receiving the consumables free of cost and has not included the value of such free materials in the assessable value of the finished product, the documents and records of the appellants were verified.
It was noticed that the appellant was undervaluing their final product by not including the value of the materials mainly thermocol, foam, bell pins and blue ink supplied free of cost by their buyers M/s.Saint Gobain Glass India Pvt Ltd. through gate passes.
Show cause notice was issued to the appellant for the period April 2008 to February 2009 proposing to demand short-paid duty along with interest and imposing penalties. After due process of law, the original authority confirmed the duty along with interest and imposed a penalty. On appeal, the Commissioner (Appeals) upheld the same. Hence the appeal.
On behalf of the appellant, Counsel M. Karthikeyan appeared and argued the matter. The Counsel submitted that the free materials so supplied were affixed on the wooden crates by the appellant and were cleared to their customer on payment of duty on the transaction value. The cost of free materials received by them is not to be included in the assessable value. The delivery challans under which the free materials were supplied were closed after the despatch of the wooden crates.
The Two Member Bench comprising Sulekha Beevi C.S, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “After appreciating the facts and following the decision in the case of International Auto Ltd, we are of the considered view that the demand of duty alleging that cost of free supply material has to be included in the assessable value cannot sustain and requires to be set aside which we hereby do.”
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