Case: Royal Enfield Vs. Commissioner of Central Excise, Chennai

3. The appellant-company, previously known as M/s. Eicher Limited - unit Royal Enfield Motors, are manufacturing motorcycles falling under Chapter 87 of the Central Excise Tariff Act, 1985. The issue relates to non-inclusion of the value of packing charges by the assessee-company in the assessable value for motorcycles despite the fact that the said motorcycles were cleared by the assessee to the dealers located outside Chennai by sending them to their various depots on stock transfer basis and in packed condition from their factory during the period from April, 1999 to December, 1999.4. At the time of removal from the factory to depot the motorcycles were cleared in fully packed condition. It is also established from records that Rs. 190/- is being charged as packing charges by the appellant and, therefore, the said amount which was collected as packing charges must have been passed on to the buyers. The appellant- company filed price declaration in Annexure-II for the vehicles sold from their depots and therein declared the depot sale price per vehicle and claimed abatement of Rs. 190/- per vehicle towards packing charges.5. A show cause notice dated 4.10.1999 was issued by the respondent to the appellant-company for the period from April, 1999 to September, 1999 directing them to show cause as to why the aforesaid abatement claimed of Rs. 190/- should not be disallowed and as to why a differential duty of Rs. 4,41,043/- and Cess of Rs. 2,228/- should not be demanded. Thereafter, another similar show cause notice dated 24.2.2002 was also issued for a subsequent period, i.e., from October, 1999 to December, 1999 demanding differential duty of Rs. 2,45,602/- and Cess of Rs. 1,279/-.6. The Assistant Commissioner of Central Excise, Chennai `C Division passed an order-in-original disallowing the abatement of Rs. 190/- claimed by the assessee towards the cost of packing and upheld the demand made in the show cause notices. While recording the aforesaid finding and the conclusion, the Assistant Commissioner referred to the decision of this Court in the case of Government of India v. M/s. Madras Rubber Factory Limited reported in 1995 (77) ELT 433 (SC) : (1995) 4 SCC 349  and on another order of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi in the case of Commissioner of Central Excise, Jaipur v. M/s. Eicher Limited reported in 2001 (136) ELT 1029 [Tri. Delhi] in which the Tribunal, in respect of the same assessee, held that the cost of packing is to be included in the assessable value of the motorcycles manufactured by it. Aggrieved by the aforesaid order-in-original of the Assistant Commissioner the appellant-company filed an appeal before the Commissioner of Central Excise [Appeals], Chennai which got rejected by order dated 23.07.2003 while relying on the decision of CESTAT, Delhi in the case of Commissioner of Central Excise, Jaipur [supra].7. Being aggrieved by the said order of the Commissioner of Central Excise [Appeals], Chennai assessee-company filed an appeal before the Tribunal, Chennai which also was rejected by the impugned judgment and order dated 24.11.2009 and, therefore, the present appeal was filed in this Court by the appellant-company on which we heard the learned counsel appearing for the parties.

Court's reasoning:
15. The aforesaid decision was rendered by this Court with respect towhich also were sold at the factory gate in a packed condition for onward easy transportation. In the background of the said case, it was held that the cost of such packing would be included in the assessable value.16. Almost similar are the facts of the present case. The authorities below as also the Tribunal found that the facts of the present case entirely fit in the facts of the aforesaid decision in the case of Madras Rubber Factory Ltd. [supra]. The said three authorities as also the Tribunal on analyzing the records came to a finding that the packing which is given by the appellant-company to their motorcycles is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate and, therefore, such cost is liable to be included in the value of the goods and the cost of such packing cannot be excluded. The aforesaid conclusions are based on cogent reasons and are also supported by a well-reasoned decision of three Judges Bench of this Court.17. Although, the counsel appearing for the appellant-company vehemently submitted that the facts of this case are more akin to the cases of Bombay Tyre International Ltd. [supra] and also to the that of Godfrey Philips India Ltd. & Ors. case [supra] having considered the above situation of facts and law, we are of the considered opinion, that all the aforesaid decisions, which are relied upon by the counsel appearing for the appellant, were taken notice of in the subsequent decision in Madras Rubber Factory Ltd. [supra] and this Court after detailed discussion of such cases has given a very reasoned order which is applicable to the facts of the present case in full force.