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TMI Blog2005 (7) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... at stake. 2. M/s. Garden Silk Mills (GSM) process grey fabrics on job work basis as well as on their own. The suppliers of grey fabrics who get their processing done through GSM are listed in the show cause notice 2 to 17. These are termed as merchant-manufacturers who at the relevant time are exempted from licensing formalities under Rule 174 of the Central Excise Rules provided they give a declaration that the manufacturer (processor) undertakes to abide by all the formalities on their behalf insofar as assessment of goods. All firms (2 to 17) (later amalgamated into three firms) gave these declarations. 3. The show cause notice alleges that these merchant-manufacturers collected sales promotion expenses from their dealers but have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Fabrics processed by M/s. GSM (either their own or the ones belonging to merchant manufacturers) are sold by M/s. Vareli Associates and M/s. Garden Associates in retail sales when they are returned or considered second quality. They incur expenditure towards advertisement to promote their retail sale. The total expenditure thus incurred by them was ascertained, it was added to the assessable value of the goods cleared by M/s. GSM and central excise duty alleged to have been short levied demanded. 7. The department ascertained that a sum of Rs. 3,34,83,466/- was spent on sales promotion during the period 1-4-1984 to 29-4-1987. A show cause notice dated 20-6-1989 was issued to every one concerned (processors, merchant-manufacturers and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its mind before issue of the notice as to the persons who are liable to pay the differential duty. We find considerable force in the appellants contention that the order of the Commissioner does not flow from the allegations made in the show cause notice. Further, the show cause notice alleges that M/s. Garden Associates and M/s. Vareli Associates, the two firms who are engaged in the disposal of returned and seconds have incurred expenses on advertisement of retail sales of rejects/seconds and these expenses should be added to the assessable value of the goods manufactured by M/s. GSM. It has been brought out that the rejected fabrics belonged to both merchant manufacturers and M/s. GSM. The finding of the Commissioner that these advertis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation given to him by the merchant manufacturers. After the goods are cleared, if the merchant manufacturer sells his goods adding other expenses he incurred while marketing the said fabrics no liability on that account befalls the processor. Secondly, a merchant manufacturer s profit or the price at which he sells the goods is not to be considered while arriving at the value of processed fabrics in terms of the Supreme Court s decision in Ujagar Print s case. The Commissioner s attempt to fasten the duty liability on the sales promotion expenses incurred by the merchant manufacturer is untenable and therefore cannot be upheld. 12. The show cause notice also mentions that the value of goods processed by M/s. GSM on their own account ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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