2001 (3) TMI 378

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..... of fabrics which were processed by Garden Silk Mills and returned to it. Vareli Associates (appeal 4566) and Garden Associates (appeal 4567) purchased between them the entire stock of second quality fabrics manufactured by Garden Silk Mills. These five are in appeal against the order of the Commissioner of Central Excise, Surat. In that order, the Commissioner has held that the expenses towards advertising which Garden Silk Mills and owners of the processed fabrics incurred, but passed on to the dealers of these goods, were includible in the assessable value of the processed fabrics. He has further held that the assessable value of the second quality fabrics sold by Garden Silk Mills to Vareli Associates and Garden Associates should be the .....

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..... f the assessable value of that product. Applying the ratio of this judgement, the expenses incurred by the dealers should not form part of the assessable value. Independently of this, the expenses incurred towards advertising by the owner of the fabrics which Garden Silk Mills processed would, in any case, not form part of the assessable value of these goods by application of the Supreme Court's judgement in Ujagar Prints v. Union of India - 1989 (39) E.L.T. 439 laying down in essence that it is the cost of the raw material and the cost incurred by the processor towards its processing that should form the assessable value of the goods. Expenses incurred by the owner of the fabric would thus not form part of the assessable value. 5. Th .....

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..... bviously relies on the definition of "related person" occurring in Section 4 of the Act, which provides that such a related person includes a distributor. The Commissioner has however wrongly read to mean that every distributor is related to the manufacturer. The Supreme Court clarified this in its judgment in Union of India v. Bombay Tyre International, [1983 (14) E.L.T. 1896 (S.C.)] saying in paragraph 44. "...A relative and a distributor of the assessee should be understood to mean a distributor who is a relative of the assessee." The demand for duty therefore is not sustainable and consequently penalties imposed on the appellants are also not sustainable. 7. All the appeals are allowed and the impugned order set aside.
Case la .....

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