2012 (10) TMI 382 - AT - Central Excise

Valuation of aerated waters - whether rental charges was to be added to the assessable value or to be allowed as deduction - Held that - Renting of containers in the case of packing of gases and liquids in reusable containers is a common trade practice. This is an ancillary or allied venture and the gains or profits from this activity are not to be added to the assessable value of the goods as decided in INDIAN OXYGEN LTD. Versus COLLECTOR OF C.E. 1988 (7) TMI 58 - SUPREME COURT OF INDIA . The show-cause notices issued did not question the correctness of the amount claimed as rental on crates amounting to Rs. 15.23. On behalf of the assessee, it was also submitted that the rental could vary based on the nature of crates such as plastic or wooden. Thus the Commissioner despite having rejected the allegation of relationship, accepted the sale price, and in-principle accepted the deduction towards rental charges, has given no valid reasons to disallow part of the value claimed towards such rental on crates especially in the absence of any allegation that the amount claimed was inflated with a view to suppress the assessable value - in favour of assessee. Commissioner dropped the demand on the portions of value representing cost of advertisement and on the notional interest on advance deposit - Held that - Regarding the dropping of demand on advertisement expenses as these expenses cannot be attributed to activities aimed at promotion of the product. Therefore, the Commissioner s reliance placed on the decision in the case of Philips India Ltd. 1997 (2) TMI 120 - SUPREME COURT OF INDIA cannot be faulted - dropping of the demand relating to advance deposits as the department is presuming that such deposits must have been taken from all dealers on the ground that aerated waters could be supplied only in bottles and carried in crates. Such presumption cannot be the basis for confirming a demand. No evidence was adduced to show that taking a deposit has reduced the assessable value of the subject goods - in favour of assessee.

Issues Involved:
1. Provisional assessment finalization and procedural violations.
2. Inclusion of rental charges for crates in the assessable value.
3. Inclusion of advertisement expenses in the assessable value.
4. Inclusion of notional interest on advance deposits in the assessable value.
5. Relationship between the assessee and distributors affecting the assessable value.

Analysis:

1. Provisional Assessment Finalization and Procedural Violations:
The appellant-assessee challenged the prolonged provisional assessment and procedural violations. The Tribunal found no reason to invalidate the finalization despite the delay, as no statutory time limit was prescribed. The Tribunal also noted that the issuance of a show-cause notice for finalization was in keeping with natural justice, and the Assistant Director (Cost) had the authority to conduct the necessary enquiry.

2. Inclusion of Rental Charges for Crates:
The Commissioner allowed a deduction of Rs. 7.50 per crate from the rental charges of Rs. 15.23 per crate, adding the balance to the assessable value. The Tribunal noted that the show-cause notices did not question the correctness of the rental charges claimed. The Commissioner's decision to allow only Rs. 7.50 per crate was found arbitrary, especially since the rentals could vary based on several factors. The Tribunal concluded that the entire rental charge of Rs. 15.23 per crate should be allowed as a deduction.

3. Inclusion of Advertisement Expenses:
The Commissioner dropped the demand for including advertisement expenses in the assessable value, relying on the Supreme Court's decision in Philips India Ltd. The Tribunal upheld this decision, noting that the advertisement expenses were nominal and related to vehicle painting, which could not be attributed to promoting the product.

4. Inclusion of Notional Interest on Advance Deposits:
The Commissioner also dropped the demand for including notional interest on advance deposits in the assessable value. The Tribunal supported this decision, stating that the department's presumption that deposits must have been taken from all dealers was not substantiated with evidence. The sale price to related persons and other distributors was found to be the same, and no valid grounds were raised to interfere with the Commissioner's findings.

5. Relationship Between the Assessee and Distributors:
The Commissioner rejected the allegation that two distributors were related persons, accepting the sale price to these distributors as the normal price. The Tribunal agreed with this finding, noting that there was no evidence to prove that the distributor firms were dummy or fictitious.

Conclusion:
The Tribunal rejected the appeal filed by the department and allowed the appeal by the assessee, providing consequential relief as per law. The decisions on procedural violations, rental charges, advertisement expenses, notional interest on deposits, and relationship with distributors were all resolved in favor of the assessee.

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