2006 (3) TMI 664 - AT - Central Excise

Summary

Issues:
1. Valuation of goods sold under an agreement for marketing rights.
2. Inclusion of advertisement and publicity expenses in the assessable value.
3. Time-barred demand and invocation of extended period.

Valuation of Goods Sold under Marketing Rights Agreement:
The case involved M/s. Vadilal Dairy International Ltd. selling ice cream under an agreement with M/s. Vadilal Milk Products Pvt. Ltd. The department contended that as goods were only sold to M/s. Vadilal Milk Products Pvt. Ltd., the sale was not at arm's length, necessitating valuation under specific provisions. The department sought to add advertisement expenses and the marketing rights fee to the valuation, leading to a show cause notice for duty demand, penalties, and confiscation. The appellant argued that the agreement remained unchanged, and the demand was time-barred as it related to a period before the change in duty rates.

Inclusion of Advertisement and Publicity Expenses:
The investigation revealed significant advertisement expenses incurred by M/s. Vadilal Dairy International Ltd. on products of M/s. Vadilal Milk Products Pvt. Ltd. The department sought to include these expenses as additional consideration received by the appellant. The appellant argued that as per the agreement, M/s. Vadilal Milk Products Pvt. Ltd. had discretion over advertising, and expenses incurred by them should not be added to the assessable value. Legal precedents were cited to support this argument.

Time-Barred Demand and Invocation of Extended Period:
The appellant contended that the demand was time-barred as it related to a period before the change in duty rates and the issuance of the show cause notice. The department argued that the extended period was rightly invoked due to alleged suppression of facts. The Tribunal held that the demand was hit by limitation as the agreement was made when duty rates were specific, and the intention to evade duty could not be established. Consequently, the entire demand was deemed time-barred, and the Tribunal did not delve into the merits of the case, ultimately allowing the appeal on grounds of limitation.

This judgment primarily addressed the valuation of goods sold under a marketing rights agreement, the inclusion of advertisement expenses in assessable value, and the time-barred nature of the demand, ultimately ruling in favor of the appellant due to the limitation issue.