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TMI Blog2012 (10) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... specially 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. - E/1387 of 2005 & 158 of 2006 - - - Dated:- 4-9-2012 - Mr. P.G. Chacko, Mr. M. Veeraiyan, JJ. Appearance : Mr. J.S. Negi, G.M. of the appellant-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inter alia, alleging that two of the distributors viz. M/s. SR Enterprises and M/s. Bell Marketing Corporation were related persons; that they were collecting amounts on behalf of the assessee from the retailers; that they have failed to declare such collections and therefore directing them to show cause as to why (i) M/s. S.R. Enterprises, Visakhapatnam and M/s. Bell Marketing Corporation, Visakhapatnam should not be treated as related persons in terms of Section 4(4)(C) of the Central Excises Salt Act, 1944 and why an Annexure in form-I should not be called for as proviso to Rule 173C(i) read with Notification No.4/94-CE(NT) dt. 01/03/1994 communicated in Trade Notice No.15/94 dt. 25/03/1994 and why the assessable value/sale price adopted by M/s. Bell Marketing Corporation and M/s. S.R. Enterprises should not be adopted for M/s. K.M.B.C. for assessment purposes; (ii). the advertisement charges, rentals, transportation charges and advance deposit with interest collected from the retailers through the above said distributors should not be added to the assessable value of aerated waters manufactured by the assessee from 01/04/1994 onwards as per Rule 6 of Central Excise Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was selling through seven distributors and, out of them, only two were alleged to be related persons as per the show cause notice. The price to the other distributors was found to be the same as the price to the so called related persons and that there was no evidence that the distributor-firms were dummy or fictitious and therefore the allegation that two of the distributors were related persons was not accepted. (iii) On the proposal of the department to include Rs.15.23/- per crate towards rental on crates, the Commissioner on principle held that deduction towards rent was permissible. However, he held that such deduction should be related to the scale of operations, investment on the bottles, cycles/rotation in a period etc. He held that the assessee has arbitrarily claimed deduction of Rs.15.23/- per crate and found that similarly placed assessees had been allowed deduction of Rs.7.5/- per crate only and allowed Rs. 7.5 per crate and the balance was added to the assessable value.. He also noted that, after allowing deduction @ Rs.7.5/- per crate and adding the balance to the assessable value, the assessable value determined was comparable to the assessable value declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sale price is available, the question of adopting assessable value based on costing method does not arise. (b). The demand based on the portion of the realization from the rent on containers is an amendment to the earlier show-cause notice and is a new ground and is well beyond the five year limit under Section 11A of the Central Excise Act. Even when the issue of container rent was raised for the first time after the hearing on 10/05/2004, the question of an excess over Rs.7.50/- had not been stated, and the Commissioner had only wanted to know the basis for the amount of Rs.15.23/- per crate. There is no basis for an assumed upper limit of Rs. 7.50 per crate, which varies from unit to unit. (c). The rent on crate is incurred always after clearance of the goods and therefore cannot be held to be related to manufacture. In the absence of any basis for the loading of Rs.7.73 related to the costs and prices of the appellant s unit, there can be no question of a demand on this ground. (d) In the period 94-95, due to change over from wooden crates to plastic crates in some factories, there would be differences also in container costs and rentals. Much would depend upon the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon ble Supreme Court in the case of VST Industries ltd. Vs. CCE, Hyderabad [1998(97) ELT 395(SC)] is not appropriate as, in the said case, it was found that the prices of credit sales and cash sales were the same and therefore, it was held that the interest on deposits taken from buyers could not be included in the assessable value. 5.2. The learned Additional Commissioner (AR) supports the order of the Commissioner on the other issues challenged by the assessee and seeks dismissal of the appeal filed by the party. He seeks modification of the order of the Commissioner by enhancing the demand attributable to advertisement expenses incurred by the distributors and notional interest on advances received. 6.1. We have carefully considered the submissions from both sides and perused the records. It would be appropriate to decide the following preliminary issues raised by the appellant-assessee before considering the core issues. (a) We do not agree with the submission that there was no reason to resort to provisional assessment in the first place. We find that the assessment has been made provisional pending enquiry as provided under Rule 9B of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted to, the time during which the assessment is provisional does not get accounted for the time frame prescribed under Section 11A for issue of show-cause notice raising the demand. (f) The above show-cause notice dated 5.9.2003 has been issued based on the material gathered by Asst. Director (Cost). Regarding the submission that the conduct of audit under Section 14A was not justified and that, even otherwise, A.D.(Cost) was not shown to have been qualified to conduct such audit under Section 14A and that the procedure prescribed for nomination of Cost Accountant etc. by the Chief Commissioner had not been followed, we note that there is some merit in the submissions. (g) However, it is not in dispute that the Asst. Director (Cost) was appointed to the Central Excise Department and has been invested with the powers of Asst. Commissioner of Central Excise/ Deputy Commissioner in terms of notification 209/1985-CE dated 16.9.1985 as amended by notification No. 67/1994-CE (NT) dated 13.12.1994 and by the later notification 38/2001-CE (NT) dated 26.6.2001. Therefore, Asst. Director (Cost) has the powers of the Asst. Commissioner/Deputy Commissioner of Central Excise and his condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period 1.3.94 to 31.10.95. In this context, it is required to be decided whether part of the amount (namely Rs. 7.73 out of Rs 15.23 per crate) collected as rental charges was to be added to the assessable value as held by the Commissioner or to be allowed as deduction as claimed by the assessee. It is also to be considered as to whether the department s contention that advertisement charges collected by the distributors and notional interest on deposits collected by the distributors are to be added to the assessable value as prayed for in the appeal by the department. 7. Before considering the issues on merits, it would be appropriate to discuss the gist of the following decisions relied upon by the appellant : (a). In the decision by the Hon ble High Court of Calcutta in the matter of M/s. Avery India ltd. anr. Vs. UOI Ors., the relevant facts of the case were that a show-cause notice dated 5.3.92 was issued proposing demand of duty for the period 1986 1991 which was adjudicated by the Commissioner and in an appeal to the Tribunal, the Tribunal vide Order dated 29.9.1993 remanded to the Collector for de novo adjudication noting that the assessment was provisional during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of M/s.Devyani Beverages Ltd. dealt with the valuation of aerated waters and, relying on the decision of the Hon ble Supreme Court in the case of Collector of Central Excise vs. Guru Nanak Refrigeration Corporation reported at 2003 (153) ELT 249 (S.C.), held as under : 7. It is observed that the demand in the case is based on the internal costing analysis of the appellants whereas the normal price of the product was available. In order to make assessment on the basis of costing, the department has to first challenge the genuineness of the factory gate sale price and then exhaust the option of fixing the value as per the value of comparable goods under Rule 6.c of the Valuation Rules, 1975. It is in the record that neither of these has been resorted to. Under the circumstances, Jumping straight to costing method as given in Rule 6-b of the valuation Rules would be improper as well as contrary to the law. (e) Hon ble Supreme Court in the case of Guru Nanak Refrigeration Corporation, considering the valuation issue of excisable goods relating to the period 1975-76, held that merely because the cost of production of the goods was more than the cost of whole sale price, dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abatement of Rs. 17.23 per crate claimed towards rental charges. 8.4. The Commissioner, by the impugned order, rejected the allegation of relationship between the two distributors and the assessee-appellant. As a result, the sale price of the aerated waters cleared by them stands accepted. However, the Commissioner, with reference to the proposal for inclusion of Rs. 15.23 per crate as additional consideration, allowed deduction of Rs. 7.50 and refused the balance. He has held that the rentals shall be related to the scales of operation, investment on the bottles, cycles/rotation in a period etc. Having noted that rental could vary based on several factors, the Commissioner has held that only an amount of Rs. 7.50 per crate taken by manufacturers based in Madurai and Gaziabad is reasonable. Despite having held that rent on crates is admissible abatement and that such rentals vary depending upon several factors, the Commissioner has not disclosed as to how the rentals were to be treated to be equal to those claimed by Madurai Soft Drinks Pvt. Ltd. and Moon Beverages, Gaziabad. As already noted, the show-cause notices issued did not question the correctness of the amount claime ..... X X X X Extracts X X X X X X X X Extracts X X X X
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