2002 (8) TMI 615 - AT - Central Excise

Summary

Issues:
1. Whether the manufacturer and distributor are related persons.
2. Whether advertisement expenses incurred by the distributor should be included for valuation purposes.

Analysis:

Issue 1:
The appeal was filed by the department against the decision of the Commissioner of Central Excise and Customs (Appeals), Ahmedabad, which held that the manufacturer and the distributor were not related persons. The appellate authority ruled that the advertisement expenses incurred by the distributor should not be included for valuation. The agreement between the manufacturer and distributor was entered into on a principal-to-principal basis, where the distributor purchased milk products from the manufacturer for resale. The department argued that the parties were related persons, citing the Supreme Court judgment in Snow White Industrial Corporation v. CCE. However, the senior counsel for the respondent presented evidence showing the shareholding profiles of both companies, indicating no majority shareholding by a specific family. The Tribunal found that the transaction was at arm's length and on a principal-to-principal basis, differing from the Snow White Industrial Corporation case.

Issue 2:
Regarding the advertisement expenses, the department cited various case laws, but the senior counsel for the respondent argued that the expenses were incurred by the distributor after the goods were sold, not by the manufacturer. The Tribunal referenced the judgment in Philips India Ltd., stating that previous case laws were overruled. The Tribunal found no grounds to interfere with the decision, ultimately dismissing the appeal.

In conclusion, the Tribunal dismissed the appeal, ruling that the manufacturer and distributor were not related persons and that the advertisement expenses incurred by the distributor should not be included for valuation purposes. The judgment emphasized the principal-to-principal nature of the agreement and the absence of key features that characterized an agency agreement. The Tribunal's decision was based on a detailed analysis of the evidence and legal precedents cited by both parties.