9911796707
TMI Blog2000 (1) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the goods and finalised the provisional assessment ordered vide his letter, dated 17-8-1994. The Counsel before the Commissioner had submitted that on the same issue, the Assistant Commissioner had confirmed the demand on account of inclusion of advertisement and sales promotion expenses and also interest on advances for properties, etc. with regard to the month of March, 1994. When the duty became ad valorem they had also gone to the Madras High Court and accordingly the Assistant Commissioner had confirmed the demand vide Order-in-Original No.12/95, dated 24-7-1995. On appeal, the Commissioner had set aside the Assistant Commissioner's order vide Order-in-Appeal No.142/95, dated 25-9-1995. It was represented that since the present show cause notice were on the same lines as per the Order-in-Appeal, the Assistant Commissioner could not pass the order on the same set of circumstances and hence the impugned order should be set aside on this ground itself. It was also represented that although the Assistant Commissioner had directed, to file provisional assessment with bond, they had not agreed to do so since they had filed a declaration for the period April 1994 onwards and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be added in the assessable value and on this basis finalised the provisional assessment and demanded differential duty of Rs. 24,85,258/- for Aerated Waters (250 ml. 300 ml.) including Soda under Rule 9(B) of CE Rules read with Section 11A of the Act. It was pleaded before the Commissioner (Appeals) that the case pertained to advertisement expenses incurred by the wholesaler (the distributor). It is pleaded that the Assistant Commissioner had gone by the judgment of Bombay Tyres International. However, the facts of the case differed with the facts of the Bombay Tyre International as in that case, the expenses were incurred before the sale of the goods. However, in this case, the expenses are subsequent to the clearances of goods on payment of duty. It was also represented that the Tribunal in the case of Havmor Ice Creams (supra) held that expenses like advertisement expenses of the distributors are not includible in the assessable value since the distributor undertook the advertisement to enhance the sale of goods. The advertiser in the present case was Sakhti Soft Drinks Ltd. Another ground made out in the show cause notice by the department was proposing to revise the A.V. on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the buyers can be considered as an additional consideration flowing indirectly from the buyer to the assessee. It was also stated that marketing/advertisement expenses would normally benefit both the manufacturer and the dealers/distributor and hence expenses on this account cannot be taken as that of distributor alone. It is stated that in the case of M/s. Philips India Ltd. (supra) it is seen that the manufacturer (Philips) and dealers have borne the advertisement expenses on a 50:50 basis. And in the case of Havmor Ice Cream, the dealer was free to incur whatever expenses it liked for promotion of the proprietary interest in Ice Cream. Therefore, the ratio decidendi of the above cases would not apply to the facts of this case as facts are different. In the instant case, the buyers have been made to incur huge amount on advertisement and major chunk of sales promotion activities during 1994-95 and 95-96, which had been borne by this assessee only till September, 1993 as admitted by themselves, when all the above four partnership forms were formed. Only after the formation of the above buyer firms, the manufacturer shifted the entire burden of advertising and the most of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales, as specifically mentioned in the Profit and Loss account of them for the years 1993-94, 94-95 and 95-96. It is stated that these advances when obtained free of interest from the buyers could not have been used in any other activity other than the manufacturing activity of the appellant. When such advances/deposits are collected from each and every buyer, the influence it would have on the sale price cannot be determined and the burden to prove that they were not used in the manufacture of excisable goods and kept separately rests squarely on M/s. SBL, in terms of Tribunal judgment in the case of Resistant Alloys (P) Ltd. reported in 1995 (77) E.L.T 721 (T). It is stated that in that case the Tribunal held that such deposit would enhance the working capital and therefore affects the assessable value and is in nature of additional value flowing indirectly from the buyer to the assessee. It is stated that the manufacturer could not substantiate that these deposits/trade advances were not used in the manufacture of the goods. Therefore, Revenue contends that the assessable value of the goods should be loaded with the interest that have accrued on such deposits as the deposits/tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd there was no nexus between the advance and the price charged and thus there can be no question of adding the notional interest on the advance to the assessable value. It was pleaded that the sale was at arms length and the department had not proved the excess commercial consideration with reference to manufacturer's sale price. It was pointed out that nowhere in the show cause notice or in the order-in-original there was an allegation that the sale values are not at arms length as between the manufacturer and the four trading companies. It was also pointed out that the four trading companies are in no way related to the manufacturer and they purchased the entire lot of production from the manufacturer and there was also no allegation that the trading companies are related under excise law. The judgments relied upon by the Commissioner in the memorandum of appeal were all distinguished by the Commissioner (Appeals) on facts and submits that those citations relied upon are not relevant to the facts of the present case. It was pleaded that the order of the authorities below was in consonance with the judgment of the Apex Court and hence appeals are required to be rejected. 12.We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove that the transaction between the respondents and its four dealers are not at arm's length. On the contrary, since the price charged is the same to every buyer, since the sale is only at wholesale level, and in view of Superintendent of Central Excise letter, dated 6-7-1995, these buyers are not related persons and there is no evidence to show that any extra amounts have been flowing back from the buyers to the respondents manufacturer for the sale of these goods, therefore we clearly hold that there is no evidence to show that the price at which these goods were sold was depressed or it did not represent the price in the normal course of wholesale trade etc. as per Section 4(1)(a). In fact, we note that the show cause notice itself contains no allegation to the effect that the buyers are related persons. Merely because over a period of time, the respondents have incurred less less expenditure or advertisement and sales promotion and that it was these four dealers who had borne such expenditure on their own account to further sell the goods purchased in wholesale from the respondents, we cannot come to a conclusion that these post-manufacturing stage expenses incurred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances are used as working capital and therefore should be considered as additional consideration in terms of Tribunal decision in the case of Resistance Alloys Pvt. Ltd. (supra). 15.On a careful consideration of these grounds of appeal, we find that as far as the law on this issue is concerned, it is now well laid down that unless it is clearly shown by the department that there is a nexus between the interest accrued on such advances and the sale price leading to the sale price being artificially depressed, such value of interest cannot be added to the assessable value. The Hon'ble Madras High Court in the case of Lakshmi Machine Works Ltd as reported in 1992 (57) E.L.T. 211 (Mad.) had held that notional interest on such advances would be includible in the assessable value only if such consideration has a nexus to sale price of excisable goods. The Hon'ble Supreme Court in the case of Metal Box India Ltd as in 1995 (75) E.L.T. 449 (S.C.) had considered the facts that M/s. Ponds (I) Ltd. were given 50% discount from the normal price and that Ponds were receiving 90% of the assessee's goods. In those circumstances, the Supreme Court had ruled that interest would be addable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue's only grounds of appeal is that the interest accrued on such advances are used as capital in the manufacture of these goods. Since the law laid down by the Hon'ble Supreme Court in the case of Indian Oxygen Ltd (supra) as well as by Madras High Court in Lakshmi Machine Works (supra) is that unless such a nexus is clearly proved, interest whether notional or actual shall not be added to the assessable value, therefore, applying the ratio of these decisions to the facts of the case before us, we find that merely on a presumption that such interest would have formed part of working capital of the respondents, we cannot include the same in the assessable value. Since the price at which the goods have been sold has been shown to be independent of the quantum of the advances received and since the quantum of these advances have not exceeded the value of these assets supplied to the buyers, therefore the benefit of doubt in this respect would go clearly to the respondent M/s. SBL. 16.As far as the submissions of the department that certain advances have been taken as against sales and not against supply of ice, boxes/ crates/bottles, this is a matter pertaining to verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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