1991 (12) TMI 140 - AT - Central Excise

Summary

Issues:
Includability of "franchise fees" in the assessable value of "concentrates."

Analysis:
The dispute in this case revolves around whether the "franchise fees" paid for using the "trade mark" should be included in the assessable value of the "concentrate." The appellants argued that the "franchise fee" is distinct and separate from the sale of the "concentrate," citing previous tribunal decisions and the Supreme Court's judgment. They contended that the price at which the "concentrate" is sold should be considered the assessable value. On the other hand, the respondent argued that the "franchise fees" are directly linked to the manufacture of the "concentrate" and should be included in its assessable value.

The key question before the Tribunal was whether the "franchise fees" should be considered part of the assessable value of the "concentrate." The respondent contended that the "goodwill" represented by the "franchise fees" is relevant in determining the assessable value. However, the Tribunal noted that the agreement regarding the use of the trade mark was not provided as evidence. Without evidence of a direct link between the sale of the "concentrate" and the purchase of the trade mark, it was challenging to establish that the two were interlinked.

The Tribunal emphasized the lack of evidence showing that the trade mark added marketability to the "concentrate." Additionally, there was no proof that buyers were unwilling to purchase the "concentrate" without the trade mark. The Tribunal also highlighted the absence of evidence indicating that the sale of the "concentrate" was dependent on the purchase of the trade mark. Without such evidence, it was difficult to conclude that the sale of the "concentrate" and the franchise fee were closely connected.

Moreover, the Tribunal noted that there was no evidence to suggest that separate contracts for the sale of the "concentrate" and the use of the trade mark were a means to depress the price of the "concentrate." The appellants argued that they would have charged the franchise fee if buyers had marketed the soft drinks without purchasing the "concentrate." The Tribunal referenced previous judgments and observed that the principles applied in customs valuation cases were relevant to interpreting the Central Excises and Salt Act, supporting the appellants' argument.

Ultimately, the Tribunal held that the "franchise fees" should not be included in the assessable value of the "concentrate." They found that the royalty paid was directly related to the manufacture of soft drinks by the buyers, not the manufacture of the "concentrate" by the appellants. Therefore, the Tribunal allowed the appeal and set aside the Collector's order.