1. The appellants, herein, are aggrieved by the order dated 7-2-1994 passed by the Collector of Customs & Central Excise (Appeals), Chandigarh. The facts, briefly, are that the appellants are engaged in the manufacture of soft drink concentrates. They sell concentrates to various bottlers who produce beverage products out of the concentrates bearing the brand name of the appellants. The appellants have entered into agreement with the bottlers by which they have, inter alia, allowed the bottlers to use their brand name on the beverage products, manufactured by the bottlers out of the concentrate manufactured and supplied to them by the appellants. This royalty is payable @ 2.75 per cent of the maximum retail price of the beverage and is payable for each bottle of the beverage despatched by the bottlers from their plant. The period in dispute in this case is from 1-9-1992 to 31-3-1993. The appellants filed price lists of their product during the relevant period. In answer to a question in the questionnaire annexed to the price list, the appellants informed that they have been receiving royalty as a percentage from turn-over of the product using the brand name 'lehar' belonging to the appellants. Royalty charges were received by the appellants, over and above the value claimed for approval in the price list. The department was of the view that such royalty charges were includible in the assessable value and two show cause notices were issued dated 24-3-1993 and 23-6-1993 covering the period from 1-9-1992 to 31-12-1992 in which duty of Rs. 12,55,687.00 and in the other show cause notice the duty demand of Rs. 20,07,040.00 was demanded on inclusion of the royalty charges in this assessable value. Further, the department found on scrutiny of the appellants' record including the franchise agreement between the appellants and their bottlers which showed that the bottlers were given a licence to use the appellants' brand name 'lehar' on their beverage products and as per Clause 18 of the said agreement, the bottlers were to undertake appropriate advertising and sale promotion activity. The department, further, found that the appellants were also advertising for their product, the expenses of which were not disclosed to the department. In reply to a question in the questionnaire, annexed to the price list, the appellants had answered in the negative to the question as to whether their buyers are incurring advertisement expenses on their behalf. The department's enquiries, further, showed that the scrutiny of their advertisement bill indicated that the appellants were advertising for their final product i.e. soft drink concentrate like 'lehar pepsi', lehar mirinda', etc. Since the word 'lehar' only is the brand name whereas the 'lehar pepsi', 'lehar mirinda', etc., the names of their soft drink concentrates, the department was of the view that under Section 4 of Central Excises & Salt Act, 1944, the expenses incurred on the sale promotion, advertisement of the same are to be included in the assessable value. Therefore, two other show cause notices were issued on this aspect. The notice dated 24-3-1993 was for the period from 1-9-1992 to 31-12-1992 for the amount of Rs. 1,35,30,144.00. The other show cause notice dated 28-6-1993 covering the period from 1-1-1993 to 31-3-1993 was for another sum of Rs. 62,07,566.00. On considering the various contentions, put forth in reply to the show cause notices, the Assistant Collector of Central Excise and Customs, Patiala passed an order dated 11-11-1993. He found that in respect of royalty charges, they are as per the clauses in the Franchise Agreement directly linked with the manufacture of the concentrate and the Assistant Collector noted that the terms of the Agreement indicated that the concentrate is sold only to those, who entered into an Agreement to buy the brand name. In other words, the Assistant Collector found that the condition in the Franchise Agreement is that the buyer has to purchase the concentrate while purchasing the brand name. He, therefore, concluded that the royalty charges are includible in the assessable value of the concentrate. As regards the advertisement expenses, the Assistant Collector gave a finding that these expenses also enriched the value of an article and promoted its marketability in course of wholesale trade and such values, the Assistant Collector observed, were includible in the assessable value on the principles laid down by the Supreme Court in the case of Union of India v. Bombay Tyre International reported in 1983 (14) E.L.T.1896. Therefore, he confirmed the demand as made in the four show cause notices, mentioned above. The Assistant Collector's order was upheld by the Collector (Appeals) in the impugned order leading to the present appeal.
2. The ld. Counsel, Shri Lakshmi Kumaran appearing for the appellants, contended that in respect of the demand by adding advertisement expenses to the assessable value, that the appellants have paid duty on the value inclusive of such expenses on clearance of concentrate. They have deducted only the excise duty element from price of concentrate as per Section 4(4)(d)(ii) Central Excises & Salt Act. The advertisement expenses had been incurred only out of sales income from concentrate.
No abatement had also been claimed on this account in the price list for concentrate. There is no evidence to show that the appellants had collected extra amounts towards advertisement expenses from the bottlers and in this context, the invoices for the sales were shown alongwith the prices declared in the price list in support of the argument. Invoices clearly indicated, the counsel urged, that money collected was as per price list approved. Further, it was argued that the expenses incurred were not for promoting the sales of concentrate and when this is so there is no question of adding the advertisement expenses for the beverage products manufactured by the bottlers to the assessable value of the concentrates manufactured by the appellants.
The bottlers are not related persons and the transaction with them is on a principal to principal basis and hence valuation has to be under Section 4(l)(a) Central Excises & Salt Act and there is, in such a situation, no scope to invoke Section 4(l)(b). There is no evidence of flow back of extra accrual from customers to appellants and hence no addition can be made to the assessable value under Rule 5 of the Valuation Rules. The ld. Counsel urged that department cannot go on the basis of costs for determining assessable value, but regard should be had only to the amount recovered from the customers for the purpose.
Tribunal decision - Order No. 35/92-A, dated 6-2-1992 M/s. Passer (India) (P) Ltd. v. C.C.E., was cited wherein it was held that resort to cost of production for assessment of duty on the excisable goods is one of the last resorts i.e. when the sale price of the goods is not available. The ld. counsel citing the Supreme Court decision in the case of UOI v. Bombay Tyre International (supra) urged that the Supreme Court has laid down that the price charged by the manufacturer on a sale by him represents the measure for assessing the levy. The "value" of an excisable article, the Supreme Court held, has to be computed with reference to the price charged by the manufacturer. Here the price charged for the concentrate being available, the question of adding advertisement expenses incurred for the beverage product manufactured by the bottlers will not arise. The ld. counsel also pleaded that neither the Assistant Collector nor the Collector (Appeals) has considered the various contentions raised before them on this issue by the appellants. As regards the demand on royalty charges, the ld.Counsel urged that royalty was charged from bottlers for using "LEHAR" trade mark belonging to the appellants on the beverage product. The ld.Counsel argued that it had no nexus with the sale of concentrate and pointed out that royalty is charged from bottlers of soda using appellants trade mark although there is no sale of concentrate for the purpose. In law the trade mark owner is entitled to charge royalty on such use of trade mark by others. Further, the royalty amount is payable not immediately but only after the sale of soft drinks made by the bottlers immediately on its sale. Citing the Tribunal decision in the case of Collector v. Birla Yamaha - 1995 (77) E.L.T. 170 the ld.Counsel pointed out that as held in that case here also royalty charged is not a condition for the sale of the concentrate and hence is not includible in the assessable value. The ld. Counsel argued that the department has to show that price is not the sole consideration before they can add any amount as extra accruals to the assessable value. The ld. Counsel cited the Tribunal decision in the case of Collector v.Maruti Udyog - 1987 (28) E.L.T. 390 as confirmed by the Supreme Court in 1989 (22) ECR 482 in the case of Collector v. M/s. Maruti Udyog Ltd. Mere payment of royalty does not create mutuality of interest. These decisions were followed by the Tribunal in an appeal involving the same issue in the case of Duke & Sons v. Collector - 1991 (55) E.L.T. 577 wherein the Tribunal, following the Maruti Udyog decision, held that payment of royalty is relatable directly to the manufacture of soft drinks by the buyers of the 'concentrate' from the appellants therein, but not to the manufacture of 'concentrate' by the appellants therein.
The dispute in that case also related to the includibility of "franchise fees" in the assessable value of the "concentrates". The ratio; urged the ld. Counsel, fully applies to the facts of the present case. The ld. Counsel also drew attention to the Supreme Court decision in the case of UOI v. Mahindra & Mahindra - 1995 (76) E.L.T. 481 holding that in the absence of any nexus between lump sum payment as per collaboration agreement and the price of CKD goods imported, such lump sum payment cannot form part of assessable value. It was the ld.Counsel's submission that in present case also, there being no nexus between sale of concentrate to bottlers and collection of royalty separately from them, such royalty payment cannot be added to the assessable value of the concentrate.
3. Shri T.R. Malik, ld. D.R. contended that the Tribunal decision in the case of Duke & Sons (supra) does not advance the appellants' case which, the ld. DR urged, is distinguishable therefrom. The ld. D.R.referred to the various clauses in the agreement with the bottlers clearly making it obligatory for them to purchase the concentrate only from the appellants as in Clause 6 which says, "The Bottler, in preparing, bottling, selling, and distributing the beverage will use only the units purchased from the seller." There is thus a necessary link-up of sale of concentrate and grant of licence for use of appellants' trade mark. In respect of advertisement expenses also ld.D.R. argued that scrutiny of the bills relating to these expenses had shown that the appellants are advertising for their final product i.e.
soft drink concentrates like Lehar Pepsi, Lehar Mirinda, etc. The statement of Shri Rajan, Vice-President of the appellants, as referred to in the show cause notice, was also adverted to by the ld. D.R. in this context. It was urged that the advertisement expenses incurred for the sales promotion of appellants' product have rightly been included in the assessable value. Ld. D.R. pleaded that there is no scope for interference with the orders of the lower authorities.
4. The submissions made by both the parties have been carefully considered. Taking up the question whether the expenditure incurred on advertisements by the appellants, should form part of the assessable value, it is their claim that the expenditure thereon has been met out of the price received for the sale of the concentrates, and no separate amount has been collected towards such expenses from the bottlers, nor had they claimed any deduction from the assessable value of the advertisement expenses. Their further contention is that they had incurred the expenses on the advertisement of the beverages made out of the concentrates and not for sales promotion of concentrates which is in fact their final product. Tracing the allegation in this regard to the show cause notice, the charge there is, "further enquiries revealed that the assessee is also advertising for their product which was not disclosed by them with intent to evade Central Excise duty on the same.
On being asked, Shri S. Rajan, their President of the assessee's unit,... stated that they advertised for their brand name 'Lehar' only.
However, scrutiny of their advertisement bills revealed that they are advertising for their final product i.e. soft drink concentrate like Lehar Pepsi, lehar 7 Up, etc.
5. Since the word 'Lehar' only is the brand name whereas Lehar Pepsi, Lehar 7 Up, Lehar Mirinda, etc. etc. are the names of their soft drink concentrates as per Section 4 of the Central Excises & Salt Act, 1944, the expenses incurred on sales promotion/advertisement of the same are to be included in the assessable value." The appellants' reply was inter alia, "The advertisement activities undertaken by us are for the brand name Lehar Pepsi, Lehar Mirinda, Lehar 7 Up, etc. The bills referred to and relied upon in the show cause notice would clearly show that the advertisements were done by various advertising agencies for the product with the brand name Lehar 7 Up. From the advertisement actually done, it could easily be seen that the advertisements were undertaken only for the soft drinks and not for the concentrate. The averment made in the show cause notice that the advertisement is for the final product, namely, soft drink concentrate is, therefore, wholly incorrect on facts." The Assistant Collector in his order has recorded this as well as other contentions on the charge by the appellants, and has concluded, "Advertisement expenses in- curred by the party are directly linked to the sale of the concentrate in terms of the Hon'ble Supreme Court in the Bombay Tyre International case (supra). The advertisement expenses also enrich the value of an article and promote its marketability in the course of wholesale trade. Accordingly following the ratio of the Supreme Court decision, the expenses incurred towards advertisement are also liable to be included in the assessable value of the concentrate." The Assistant Collector has omitted to deal with the various arguments put forth by the appellants recorded in his order resisting the demand on this aspect. Nor has the Collector (Appeals) given detailed findings. The Collector (Appeals) has found after noting similar contentions of the appellants as raised before the Assistant Collector, "In the case of advertisement charges also, the case of the appellants fail because advertisements enhance the marketability of the product, and as per the decision of the Hon'ble Supreme Court in the case of Bombay Tyre International (supra), both Royalty and Advertisement charges are to be included in the assessable value." Examining this question, the basis of valuation under Section 4 of the Central Excises & Salt Act, 1944 has been laid down in the Supreme Court judgment in Bombay Tyre International case wherein it has been held that advertising expenses cannot be deducted from the assessable value because these expenses promote the marketability of the article and enter into its value in the trade. The appellants' case is that they are already paying duty on these expenses as they are incurred out of the price realisation on the sale of their concentrates. Their claim is supported by the absence of any deduction claimed towards this in price list (which in any case could not have been allowed deduction). Further, in order to substantiate the case the department has not been able to show evidence of collection of any amount separately for advertisement expenses, as they have been able to do in respect of the other element of cost in dispute in this appeal relating to royalty charges. The price shown in the invoices for the goods was found to be as per that declared in the price list. Shri S.Rajan, Vice-President of the appellants has also said in his statement on 12-11-1991, "Advertisement expenses are incurred by the company on promotion of brand name 'Lehar' used for soft drink products; this is not a promotion of sales of soft drink concentrate." The deptt. also has not been able to dislodge the appellants' assertion that from the advertisements actually done it could easily be seen that the advertisements were undertaken only for the soft drinks and not for the concentrates. Advertisement expenses incurred for the soft drinks products manufactured by the bottlers cannot be included in the assessable value of concentrates manufactured by the appellants even by applying the ratio of Supreme Court judgment in the Bombay Tyre International case (supra) according to which it is only the advertisement and sales promotion expenses incurred for the goods under assessment that can be added to the assessable value. A perusal of the appellants' agreement with the bottlers also shows that the bottler is enjoined to undertake appropriate advertising and sales promotion activities for the beverage, which again indicates that the obligation cast on the bottlers as per the agreement does not extend to or cover the concentrates manufactured by the appellants. In the circumstances, it is held that the department has failed [to] establish their case for addding the advertisement expenses to the assessable value of concentrates manufactued by the appellants with satisfactory evidence, and, as such, the orders of the lower authorities in this regard are not sustainable. The demand on this count is, therefore, set aside.
6. Coming to the next issue in this appeal, relating to the demand by adding royalty charges received by the appellants, it has been contended by them that the royalty charges for use of brand name by the bottlers cannot be held to have nexus with the sale of the concentrates. The answer to this must flow from the terms of their agreement with the Bottlers called, "Bottling Appointment and Trademarks Licence Agreement with the Bottlers." Clause 1 lays down that the appellants grant UPON TERMS HEREIN CONTAINED to the Bottler a licence to use the trade mark 'LEHAR" in conjunction with Pepsico's trademark on and in relation to beverage products. Then the agreement stipulates that in consideration of the licence granted for use of the Trademark, the Bottler shall pay royalty to the appellants @ 2.75% of the Maximum Retail Price of the Beverage. Clause 2 of the Agreement provides the vital linkage between the grant of the licence to use the trademark and the condition prescribing purchase of concentrates ONLY from appellants. This clause reads as follows : "The bottler shall buy only from Pepsi Co's approved manufacturer, PFL, or a manufacturer approved in writing by Pepsico and PFL (PFL and/or a such approved manufacturer hereinafter both called "the Seller") all Units of concentrate (hereinafter called "Units") required for manufacture of the beverage by the Bottler, at a price and other terms and conditions established by the Seller".
7. Again, Clause 6 of the agreement stipulates, "The Bottler, in preparing, bottling, selling and distributing the beverage will use only the units purchased from the seller." Read with Clause 1, it is clear that the purchase of concentrates ONLY from the appellants as stipulated in Clause 2 & 6 above, is among the terms under which only the licence to use the appellants trademark is granted to the Bottler.
Appellants' own perception of the nature and scope of the agreement, as encompassing indivisible twin objects of grant of licence and sale of concentrate is brought in their reply dated 18-5-1993 to the show cause notice relating to the issue of advertising charges, wherein, they have said, "The agreement entered into by us is called as "M/s. Pepsi Foods Limited Bottling Appointment and trademarks licence agreement with bottlers." The purpose of this agreement is the sale of concentrate, production and distribution of the beverage or the soft drink and utilisation of our trademark." It is thus plain that the licence to use the appellants' trademark is granted to the bottlers bound up with the OBLIGATION to purchase the concentrate ONLY from the appellants. The two are inextricably intertwined. The agreement with the bottlers is thus an indivisible and composite agreement for the sale of concentrate to them by the appellants and for the grant of licence to them for the use of the appellants trade mark on the beverages manufactured by the bottlers. It is certainly not as if a party not agreeing to buy the concentrate from the appellants could separately enter into agreement with appellants for manufacture of beverages like Lehar Pepsi, Lehar 7 Up, etc. It may be noticed that it was the absence of such indivisible and composite agreement for the purchase of CKD parts in the collaboration agreement in Mahindra & Mahindra case (supra) decided by the Supreme Court that made the Supreme Court hold that royalty paid to the foreign collaboration in that case had no nexus with the import of CKD parts. In this context, the Supreme Court in that case had observed, "The crucial aspects appearing in the case are... that the CKD packs and spares were supplied to the respondents by the collaborator not at a concessional price but at the price at which they were sold to others, that, as agreed by the respondents, the option was entirely with the respondents to order the parts as per their requirements, that there was no OBLIGATION on the respondents to purchase the CKD packs at all..." (emphasis supplied). The decision of the Tribunal in the case of Duke & Sons (supra) was given in the peculiar facts of that case where the Tribunal observed, "The agreement under which the buyers are permitted to use the trade mark is not filed either before the lower authorities or before us. Therefore, no views can be expressed as to whether it is interlinked with the sale of 'concentrate'. "In para 6 of that decision the Tribunal observed," There is no evidence on record to indicate that the 'concentrate' is sold only to those who also enter into agreement to buy the 'trade mark'." We have seen that in the present case, on the contrary, there is such evidence. Hence, it is in the present case, on the contrary, there is such evidence. Hence, it is clear that the appellants can derive no support at all from the Tribunal decision in the Duke & Sons case (supra). In the result, it is held that the royalty charged for the use of the trade mark of the appellants by the bottlers on the beverage products manufactured by them from the concentrate purchased from the appellants as per a composite and indivisible agreement is an extra accrual over and above price collected for sale of concentrate and is hence includible in the assessable value of the concentrate.
However, in the case of soda manufactured with the appellants' trade mark since there is no concomitant sale of concentrates for the purpose, the royalty paid thereon is not so includible. The appeal is disposed of in the above terms.
8. I have carefully gone through the order proposed by the learned Member (T), Shri K.S. Venkataramani. I am in agreement with the learned Member (T) that "the royality charged for the use of the trade mark of the appellants by the bottlers on the beverage products manufactured by them from the concentrate purchased from the appellants as per a composite and indivisible agreement, is an extra accrual over and above price collected for the sale of concentrate and is hence includible in the assessable value of the concentrate. However, in the case of soda manufactured with the appellant's trade mark since there is no concomitant sale of concentrates for the purpose, the royalty paid thereon is not so includible". However, in so far as the expenditure incurred on advertisements by the appellants, I am not able to persuade myself to agree with the conclusion drawn by the learned Member (T) that 'the orders of the lower authorities in this regard are not Assessable". Hence I am recording my separate order as under.
9. On the question whether the expenditure incurred on advertisements by the appellants, should form part of the assessable value, it is seen that the learned Member (T) had come to a view that "the department has failed (to) establish their case for adding the advertisement expenses to the assessable value of concentrates manufactured by the appellants with satisfactory evidence". In the show cause notice dated 24-3-1993, there was a specific allegation that during the period from 1-9-1992 to 31-12-1992 an amount of Rs. 5,88,26,719/- incurred by M/s. Pepsi Foods Ltd. (Concentrate Division) towards advertisement expenses had not been included in the declared assessable value of their soft drink concentrate. It was stated therein that "the assessee had evaded the aforesaid amount of central excise duty by not including the said advertisement expenses in the assessable value declared under Section 4 of Central Excises and Salt Act 1944 of their soft drink concentrate, which is recoverable from them under the aforesaid provision of Law".
It was alleged that "during the period from 1-9-1992 to 31-12-1992 the assessee had incurred Rs. 5,88,26,719/- on the advertisement of their soft drink concentrate and thus has suppressed the assessable value of their finished product cleared by them to that extent". Similar allegations were levelled against the appellants in the show cause notice dated 28-6-1993 for the period 1-1-1993 to 31-3-1993, during which an amount of Rs. 2,23,34,387/- had been incurred on the advertisement of their final product - that is soft drink concentrate.
For this specific allegation with exact quantification, the appellants had not produced any evidence to establish that the above amounts had been so included in their declared assessable value. They have made general denials but have not produced any proof to disprove the above specific allegation.
10. The appellants had sought to distinguish the advertisement for concentrate, from the advertisement for the beverage, and had contended in their reply to the show cause notice that "the advertisement incurred, if any, for the buyers' product has nothing to do with the product manufactured and cleared by us". They had admitted that "from the advertisement actually done it could be easily seen that the advertisements were undertaken only for the soft drinks and not for the concentrate", (refer para A-6 at page 101 and page 112 of the Paper Book). They had pleaded on that account "the advertisement expenses incurred in respect of the product not manufactured and cleared by us cannot be added to the assessable value of the goods manufactured and cleared by us. In as much as advertisement expenses incurred by us are for the soft drinks, they cannot be held to be includible in the assessable value of the concentrate manufactured by us" (refer para B-5 at page 104 and at pages 115-116 of the Paper Book). In this connection, it may be stated that the Aerated Waters Industry has a number of special features. There are a few giant multinational corporations in the field having a major share of the growing soft drink market. They undertake aggressive advertisement to carve out a market for them. The beverage base formula is a closely guarded secret and these manufacturers zealously guard the secret. A lot of importance is attached by the producers to the brand name and the brand image. The whole business of bottling, advertising and marketing is guided by the brand owners. The bottlers are appointed under agreement for a described territory and for a specific period. There are strict instructions and directions to the bottlers about preparing, bottling, selling and distributing the drink. The agreement is not only for the trade mark but covers the whole area of the product, production and marketing, including the various visible and invisible factors which promote the marketability of the particular branded drink. In fact, the beverage is not known by the name of the bottler. The advertisement in such a situation is directly relatable to the manufacturing activities of the appellants.
2. The Bottler shall buy only from Pepsi Co's approved manufacturer, PFL, or a manufacturer approved in writing by Pepsi Co and PFL (PFL and/or such approved manufacturer hereinafter both called "the Seller") all Units of concentrate (hereinafter called "Units") required for manufacture of the Beverage by the Bottler, at a price and other terms and conditions established by the Seller.
5. The Bottler will strictly follow all instructions and directions issued by PFL from time to time for preparing, bottling, selling and distributing the Beverage.
A reading of these and the various other clauses of the agreement clearly establish that the whole scheme is an integrated one. When the appellant were advertising in any manner, they were advertising for themselves. It could not be said that their advertisement did not enrich the value of their product and did not enhance its marketability in the trade and that the advertisement cost should not form part of the value of their product.
12. It has been contended by the appellants that in order to include any amount in the assessable value on the ground that it is an additional consideration, the burden of proof is on the department. The burden of proof is the obligation to establish a fact by proof. The responsibility of offering convincing proof rests upon the affirmitive side in the case proceedings. According to Section 106 of the Indian Evidence Act when any fact is specially with the knowledge of any person, the burden of providing that fact is upon him. In an adjudicating proceeding, the initial burden of establishing the charge lies on the department but when once this initial burden is discharged then the onus shifts to the delinquent to rebut the evidence against him. In the instant case before us, the appellant had not produced any evidence to establish that the advertisement expenses incurred by them formed part of the value of their product. No correlation with the value of the product and the advertisement component therein, if any, had been established. The Hon'ble Supreme Court in a number of decisions have ruled that it is for the assessee to disclose all the primary facts before the assessing authorities to enable them to arrive at the correct tax liability (refer The Central Provinces Manganese Ore Co. v. Income Tax Officer -1991 (2) SCALE 62 at page 362, and also refer Tribunal's decision in the case of Ruchi Associates v. Collector of Customs 13. Taking all the relevant considerations into account, I hold that the expenditure incurred on advertisements by the appellants should form part of the assessable value.
14. Having had the benefit of going through two separate orders as proposed by two Members, concurring on one of the two issues that have arisen for determination but dissenting on the other, it has become necessary to pass a separate order.
15. The set of facts involved as also the issues that have arisen, have been duly projected in those two proposed orders, and hence need not be re-projected in extenso. Suffice it to mention, for the purpose of maintaining the link, that demands have been raised against the appellants for excise duty payable, because of proposed enhancement in assessable value of their product by inclusion of (i) Royalty charged for use of their brand name for the beverage products manufactured by the bottlers, out of the 'concentrates' supplied by the appellants, and (ii) expenses incurred by the appellants for advertising of the final products of the bottlers, where the 'concentrates' supplied by the appellants are used.
16. With two Members of this Bench holding divergent views on the inclusion of the expenses incurred for advertising the final product and there- by spending for trade promotion in the assessable value, the said issue is dealt with first.
17. It is not under dispute that the appellants manufacture beverage concentrates of various types and supply them to various bottlers, who after processing and manufacturing consumable beverages, put them in the market. The prices at which the concentrates are sold to the bottlers, are duly approved by the competent authorities. The claim of the appellant is that the price so fixed and duly approved is inclusive of all the incidents attached to it, and also includes the expenses incurred by the appellants for advertising the final product, and that no separate amounts are being charged from their customers. They also contend that they have not sought any deductions for such expenses from the assessable value. No evidence is brought on record to disprove this factual claim made by the appellant. It may at the same time, be observed that the appellants have also not disclosed how the costing is worked out to arrive at the specific price. Such non- disclosure, however, in view of admitted position that they have been incurring the expenditure for advertisement and sale promotion and with no evidence to indicate realisation of the same, wholly or partly in cash or otherwise, does not assume any importance and rational presumption can be raised that the appellants have been spending for advertisement and sale promotion from whatever they realise as sale price from their customers.
18. Section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) deals with ascertaining of the assessable value, and as a supplement thereto, Central Excise (Valuation) Rules, 1975 (hereinafter referred to as Valuation Rules) have been framed.
Several modes for ascertaining assessable value, under several different categories and exigencies have been laid down in the said Section. Here however, admittedly the price charged is duly ascertained and price list has also been filed, the exigencies contemplated in the Sub-sections, other than Sub-section (1) need not be considered.
19. Clause (a) of Section 4(1) of the Act, provides that the assessable value shall be the normal price at which such goods are ordinarily sold in course of wholesale trade, where buyer is not a related person and the price is the sole consideration for sale.
20. Clause (b) of the said section provides that when normal price is not ascertainable, the value may be determined on the basis of nearest ascertainable equivalent, in the manner as provided and Rule 3 of the Valuation Rules provides that to ascertain value under these circumstances, provisions of the said Rules be followed.
21. Here, however, the price is ascertainable in view of the fact that the appellants have filed the price list, and the invoices and other documents show the price charged. Provisions of Clause (b), therefore, need not be pressed in service, and the only provisions that need be considered are those contained in Section 4(1) (a) of the Act.
22. As indicated earlier, Section 4(l)(a) of the Act provides for acceptance of the normal price at which the goods are sold by the assessee, in the wholesale trade, except where the buyer is a related person or that the price is not the sole consideration. Price, as defined in Section 2(10) of the Sale of Goods Act, means money consideration for sale of goods. The Supreme Court, however, in Union of India v. Bombay Tyre International Ltd., 1983 (14) E.L.T. 1896 (SC) have, in relation to the assessable value, under Section 4 of the Act, observed that "the price of an article is related to its value (using the term in its general sense) and into that value have poured several components including those which have enriched its value and given to the article its marketability in trade". The said court have, in the same judgment, also held that advertisement and publicity expenses are the additional considerations and have to be considered as includable in arriving at the correct assessable value. Normal price, for being accepted as Assessable Value, therefore, must have been worked out on the basis of cost of raw material, cost of labour, enterpreneure's profit, return on Capital, cost of packing, market research and survey and such other incidental costs including the cost incurred on advertising and sale promotion.
23. The expenses incurred by the appellants, in relation to advertising would therefore become includable in the assessable value. The contention of the appellants that, they are the manufacturers of only 'concentrates' for beverages, and that they have never advertised for sale promotion of such concentrates, or that what they were advertising for, was only for their 'Brand Name, and not the beverages, and because of that, the advertising expenses are not includable in the assessable value, do not appear convincing as, by such advertisements, they have been ultimately enhancing marketability in trade, of their 'concentrates for beverages'.
24. If the price is so fixed, then the same has to be accepted as assessable value, unless it is shown that the price is not the sole consideration.Collector v. Metal Box India Ltd. - 1989 (39) E.L.T. 79 (Tribunal) have held, and which is even otherwise obvious, that price could not be taken as the sole consideration, if some additional consideration has flown, directly or indirectly from the buyer to the assessee, either in cash or in any other form. Thus, if the manufacturer/assessee has received anything, either in cash or in any other way, in relation to the article manufactured, the assessable value for which is to be ascertained, the same should be included in the assessable value.
26. The claim put forward by the appellants is that they are charging only the price as approved under the price list filed by them and the advertisement expenditure is being incurred by them out of the price recovered by them from their customers, and thereby, such expenditure be accepted as the one included in the price. They also assert that they have not been charging anything extra.
27. The Excise authority have though, in the show cause notice, averred that the assessee have not included the advertisement expenses in the assessable value, have failed to establish the same by any cogent or convincing evidence, sufficient enough to dislodge prima facie probable defence that no extra amount is charged from their customers. As already discussed earlier, price charged shall be accepted for determining the assessable value, unless flowing of any consideration other than the sale price has to be duly established by the party alleging.
28. The Excise authority having failed to establish, either of the two essentials, namely (i) price charged is not inclusive of the advertisement expenditure, or (ii) price charged is not the sole consideration, are therefore held to be not entitled to claim enhancement in assessable value on that count.
29. With due respect to Brother Lajja Ram, I agree with the view expressed by brother K.S. Venkataramani, in ordering setting aside of the demand.
30. In relation to the order enhancing assessable value by adding royalty charges received by the appellants, both the members have concurred. Brother K.S. Venkataramani, has given detailed exposition both of law and of facts, and having gone through the same, I find myself in agreement with the same, and hence I also concur with the same.
31. By majority view, the appeal is partly allowed, and the appeal so far as it relates to enhancement in assessable value by addition of expenses incurred for advertisement stands allowed and the order of the adjudicating authority to that extent is set aside, whereas the rest of the order is confirmed subject to modification that royalty recovered in relation to soda water bottles, shall stand excluded.