1995 (10) TMI 222 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of Advertisement Expenses in Assessable Value.
2. Inclusion of Royalty Charges in Assessable Value.

Summary:

1. Inclusion of Advertisement Expenses in Assessable Value:
The appellants contended that advertisement expenses should not be included in the assessable value of the soft drink concentrates, arguing that these expenses were incurred for promoting the beverage products made by the bottlers, not the concentrates. They also claimed that no separate amounts were collected for advertisement expenses from the bottlers. The department argued that these expenses enriched the value of the concentrates and promoted their marketability, thus should be included u/s 4 of the Central Excises & Salt Act, 1944. The Assistant Collector and Collector (Appeals) upheld this view, referencing the Supreme Court's decision in Union of India v. Bombay Tyre International. However, the Tribunal found that the department failed to establish that the advertisement expenses should be added to the assessable value of the concentrates. The Tribunal noted that the appellants were already paying duty on the value inclusive of such expenses and that the advertisement expenses were for the soft drinks, not the concentrates. Therefore, the demand on this count was set aside by majority view.

2. Inclusion of Royalty Charges in Assessable Value:
The appellants argued that royalty charges paid by bottlers for using the "Lehar" trademark should not be included in the assessable value of the concentrates, as these charges were for the use of the trademark on the beverage products, not related to the sale of the concentrates. The department contended that the royalty charges were directly linked to the sale of the concentrates, as per the terms of the Franchise Agreement, which required bottlers to purchase concentrates only from the appellants. The Tribunal agreed with the department, finding that the agreement was an indivisible and composite agreement for the sale of concentrates and the grant of a license to use the trademark. Therefore, it was held that the royalty charges were an extra accrual over and above the price collected for the sale of concentrates and were includible in the assessable value. However, for soda water bottles where no concomitant sale of concentrates occurred, the royalty paid was not includible.

Conclusion:
The appeal was partly allowed. The demand for including advertisement expenses in the assessable value was set aside, while the inclusion of royalty charges was upheld, except for soda water bottles.