Commissioner of Central Excise, Pondicherry Vs. Ravishankar Industries Pvt. Ltd - Court Judgment

Per  Mathew John, J.

1. The respondents in this case were engaged in the manufacture of Cinematographic Positive films, Photographic Films and Photographic Paper.  They manufactured the goods and sold it at a price to M/s.Asian Photographic Films Pvt. Ltd., Madras.   (APFP, for short). M/s.APFP were incurring expenses for advertising the products of the respondents to encourage sale of goods. The case of the Revenue is that the advertisement expenses incurred by APFP should have been included in the assessable value of the goods cleared by the respondents because they are doing such advertisement on behalf of the respondents.

2. Revenue relies upon the decision of the Hon’ble Supreme Court in the case of Bombay Tyre International Ltd. reported in 1983 (14) ELT 1896 (SC).  Based on this argument, a SCN was issued and adjudicated. The adjudicating authority confirmed the demand for duty.  Against that order, the respondents filed an appeal with the Commissioner (Appeals). The Commissioner (Appeals) was not in agreement with the argument of Revenue and he set aside the demand.  Aggrieved by the order of Commissioner (Appeals), Revenue has filed this appeal.

3. Learned authorized representative for the Revenue submits that M/s.APFP was the sole selling agent of the respondents.  He also points out that two Directors were common for the manufacturing company as well as the sole selling agent and, therefore, the expenditure incurred by sole selling agent formed part of the assessable value of the goods manufactured by the respondents.

4. The learned counsel appearing for the respondents submits that the cited decision in the case of Bombay Tyre International is applicable only in a situation where the manufacturer himself incurs expenses for advertisement and not in a situation where the sole selling agent incurs such expenses for promotion of his sales because the sole selling agent is promoting his business interest and no case has been made out that sole selling agent was paying anything to the respondent more than the price for which excise duty has already been paid. There is no case either that the respondent was reimbursing the expenses of the sole selling agent.

5. We have considered the arguments from both sides and we find merit in the argument of the respondents inasmuch as there is nothing unusual about the sole selling agent incurring advertising expenditure to promote his business. Such advertisement expenses cannot form part of the assessable value of the goods manufactured by the respondents.  In the facts of the case, the sole selling agent is incurring such expenditure from his profit margin. The decision in Bombay Tyre International Ltd. cannot be interpreted to mean that all expenditure incurred by a sole selling agent will form part of the value of goods sold by a manufacturer. This is not a case where manufacturer is asking for any deduction from consideration realized by them for the reason that the expense is incurred for advertising the product.

6. Therefore, we uphold the order of the Commissioner (Appeals) and dismiss the appeal filed by the department.