1997 (2) TMI 321 - AT - Central Excise

Issues Involved:
1. Inclusion of advertisement expenses in the assessable value of Non-Alcoholic Beverage Bases.
2. Applicability of the extended period of limitation under Section 11A of the Central Excise Act.
3. Justification for the imposition of penalties.

Issue-Wise Detailed Analysis:

1. Inclusion of Advertisement Expenses in Assessable Value:
The appellants, M/s. Bisleri Beverages Limited and M/s. Parle Exports Pvt. Limited, challenged the inclusion of advertisement expenses in the assessable value of their Non-Alcoholic Beverage Bases. The Collector of Central Excise, Ahmedabad, had included sums paid by their customers towards advertising costs in the assessable value, leading to significant duty demands and penalties.

The appellants argued that the advertised products were aerated waters, not the beverage bases they manufactured. They contended that the advertising costs were paid by the bottlers directly to the advertising agency after 1-3-1986, and thus should not be included in the assessable value of the beverage bases. They cited a three-member bench decision in Pepsi Foods Ltd. v. CCE, which supported their case, although a subsequent two-member bench decision in Delhi Bottling Co. P. Ltd. v. CCE contradicted this view.

The Tribunal, however, found that the decision in Pepsi Foods Ltd. did not support the appellants' case, as the majority view was based on the specific facts that the advertisement costs were already included in the price of the beverage base. The Tribunal agreed with the view in Delhi Bottling Co. P. Ltd. v. CCE, holding that advertisement expenses enhance the marketability of the beverage base and should be included in its assessable value. This view was supported by the Supreme Court judgment in Union of India v. Bombay Tyre International Ltd., which ruled that advertisement expenses are not deductible from the wholesale price for duty purposes.

2. Applicability of Extended Period of Limitation:
The appellants argued that the show cause notice was barred by limitation, claiming a bona fide belief that their goods were exempt from duty. They cited the Tribunal's decision in Parle Exports (P) Ltd. v. CCE, which was later overturned by the Supreme Court, and contended that they had no intention to evade duty.

The Tribunal found that during the material period (1-11-1983 to 26-9-1986), the appellants could not have had a bona fide belief of exemption from duty, as they were paying duty on beverage bases but not including advertisement expenses. The Collector held that the appellants' failure to disclose separate recovery of advertisement expenses constituted suppression, justifying the extended period of limitation under Section 11A of the Central Excise Act. However, the Tribunal noted that the demand for the period before November 1983 was barred by limitation.

3. Justification for Imposition of Penalties:
The appellants argued that there was no motive to evade duty, as any extra duty on beverage bases would reduce the duty burden on aerated waters. They claimed that the non-inclusion of advertisement expenses was due to a bona fide belief.

The Tribunal found that the appellants' deliberate actions, such as setting up a dummy advertising agency and steep price increases, indicated an intention to evade duty. The imposition of penalties was deemed justified and commensurate with the duty amounts involved.

Conclusion:
The Tribunal set aside the duty demand for the period before November 1983 and after 26-9-1986, but upheld the inclusion of advertisement expenses in the assessable value of beverage bases for the remaining period. The extended period of limitation was applicable, and the imposition of penalties was justified. The Commissioner was directed to work out the duty demand for the balance period after hearing the appellants. The appeals were allowed in part.

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