1995 (11) TMI 136 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of advertisement and publicity expenses in the assessable value.
2. Inclusion of testing charges in the assessable value.
3. Alleged evasion of duty during price negotiation period.

Issue-wise Detailed Analysis:

1. Inclusion of Advertisement and Publicity Expenses in the Assessable Value:
The primary issue was whether the advertisement and publicity expenses incurred by M/s. Colgate Palmolive (India) Ltd. (C.P.) should be included in the assessable value of the shampoos manufactured by the respondents. The respondents argued that the transactions were on a principal-to-principal basis and that the expenses were incurred by C.P. for promoting their own brand name. The Collector agreed with the respondents, stating that the advertisement expenses incurred by C.P. for their brand's promotion could not be added to the assessable value of the goods manufactured by the respondents. The Tribunal upheld this view, referencing the Supreme Court's decision in *Sidho Sons v. U.O.I.*, which held that excise duty is payable on the market value at the factory gate and not on the augmented value due to the buyer's brand name.

2. Inclusion of Testing Charges in the Assessable Value:
The second issue was whether the testing charges incurred by C.P. on the representative samples of the shampoos should be included in the assessable value. The respondents contended that these charges were incurred by C.P. after the goods were sold and were not related to the manufacturing process. The Collector found that the testing charges incurred by C.P. had no nexus with the manufacturing and sale of the products by the respondents. The Tribunal agreed, noting that the quality control tests done by C.P. post-purchase were not includible in the assessable value, as they were not part of the manufacturing process.

3. Alleged Evasion of Duty During Price Negotiation Period:
The third issue concerned the alleged evasion of duty amounting to Rs. 2,45,815.71 during a period when the respondents were negotiating for a price increase with C.P. The respondents argued that any losses on specific items were offset by profits on others, and they provided a Chartered Accountant-certified statement showing an overall profit. The Collector accepted this explanation, noting that there was no evidence of any additional amount received by the respondents other than the negotiated price. The Tribunal upheld this finding, agreeing that the demand for the alleged evasion was not sustainable.

Conclusion:
The Tribunal confirmed the findings of the Collector, dismissing the appeal. The judgment emphasized that the advertisement and testing expenses incurred by C.P. were not includible in the assessable value of the goods manufactured by the respondents, and there was no evidence of duty evasion during the price negotiation period.