By TIOL News Service

NEW DELHI, Feb 28, 2006 : GOOD lord – somebody noticed that there is an age-old notification languishing in Central Excise for all these years although it had become dysfunctional.

Yeah, we are referring to notification 313/77 CE, dated 08.11.1977. This notification is/was in existence till today and will be “culled” from 01.03.2006 by notification 21/2006 CE, along with a host of other unfortunate ones.

This notification grants exemption from so much of the duty of excise as is equivalent to the duty of excise leviable with reference to that part of the value thereof which represents the cost of packing which is durable and is supplied by the buyer to the assessee and is returnable by the assesse to the buyer.

Simply put, by virtue of this notification, if durable packing material is supplied by the buyer, the cost of the same is not includable in the cost of the specified goods which are packed in such durable packing material. These specified goods were glucose, petroleum products, acids, resins, compressed air, etc.

The Supreme Court in the case of M/s Hindustan Polymers vs. UOI, 1989(43)ELT 165(SC) had held that the cost of packing which was supplied by the customer to the assessee could not be included in the assessable value. The court held that the contention that value of packing materials including those supplied by the buyer has to be included in the value of the goods is repugnant to the very scheme of Section 4 and it overlooked the use of the expression “cost” in relation to packing employed in clause (i) of Section 4(4)(d) of the CEA’44.

Things changed with the advent of the concept of Transaction Value from 01.07.2000 for the reason that in such cases where the containers/packing material is supplied by the buyer, the price will not be the sole consideration for sale, and by virtue of rule 6 of the Central Excise Valuation Rules, 2000 the cost of such packing, whether durable or not is to be included in the transaction value of such goods. This has also been clarified in Board Circular 643/34/2002-CX., dated 01.07.2002.

In this scenario, allowing the exemption notification 313/77 CE to co-exist with the new Section 4 of the CEA’44 defied logic.

Fortunately, the redundancy of this notification has been realized too late and is slated for culling tomorrow.