2006 (10) TMI 281 - AT - Central Excise

Summary

Issues:
1. Inclusion of credit note amounts in the assessable value for Central Excise Duty.
2. Interpretation of expenses incurred by the appellant and reimbursed by Pepsi Foods Ltd.
3. Applicability of the judgment in U.O.I. v. Bombay Tyre International Ltd. to the present case.

Issue 1: Inclusion of credit note amounts in the assessable value for Central Excise Duty
The appellant, a bottler of Pepsi, was discharging duty on Pepsi bottled by it based on ad valorem terms. During 1994-95, Pepsi Foods Ltd. issued credit notes to the appellant. The impugned order held that the amounts in the credit notes should be included in the assessable value for Central Excise Duty. The order cited the judgment of the Hon'ble Supreme Court in U.O.I. v. Bombay Tyre International Ltd., stating that advertisement and publicity expenses are additional considerations and should be included in the assessable value. The appellant challenged this finding and the consequential duty demand.

Issue 2: Interpretation of expenses incurred by the appellant and reimbursed by Pepsi Foods Ltd.
The appellant argued that the credit notes represented reimbursements for expenses incurred at the instance of Pepsi Foods Ltd., unrelated to the appellant's own advertising or marketing efforts for the soft drinks. Some of the reimbursed costs were incurred in areas where the appellant's products were not sold. On the other hand, the Respondent contended that since the soft drink was of the Pepsi brand, the costs incurred towards its advertisement should be included in the assessable value of the soft drinks.

Issue 3: Applicability of the judgment in U.O.I. v. Bombay Tyre International Ltd.
The summary of the credit notes revealed various expenses related to activities undertaken by Pepsi Foods Ltd., including costs of Pepsi supplied, license fee deposits, and expenses at different locations. The Tribunal noted that the judgment in U.O.I. v. Bombay Tyre International Ltd. pertained to costs incurred by a manufacturer to promote their product, not by a third party like in this case. As the expenses were not connected to the appellant's sales promotion, the judgment was deemed inapplicable. Consequently, the Tribunal found the findings unsustainable, set aside the impugned order, and allowed the appeal with consequential relief to the appellant.