1997 (6) TMI 167 - AT - Central Excise

Issues Involved:
1. Whether the expenditure incurred by M/s. Darshak on advertisement and sales promotion is an additional consideration for the sale of Yera Ware glass.
2. Whether the additional consideration should be added to the assessable value of the goods.
3. Whether the demand for duty is sustainable under the proviso to Section 11A of the Central Excise Act due to alleged suppression of facts.
4. Whether the penalty imposed on the appellant and the confiscation of land, building, plant, and machinery are justified.

Detailed Analysis:

1. Expenditure Incurred by M/s. Darshak as Additional Consideration:
The appellants faced proceedings initiated by the department for gradually transferring the expenditure on sales promotion and publicity of their product 'Yera Ware' to M/s. Darshak Ltd. The department argued that the expenditure incurred by Darshak on advertisement and sales promotion should be considered as additional consideration for the sale of the product. This was based on the fact that Darshak purchased a substantial portion of the appellants' products, up to 98% in 1987, and progressively increased their expenditure on advertising the appellants' products. The appellants contended that Darshak incurred these expenses independently and not on their behalf.

2. Addition of Additional Consideration to Assessable Value:
The department's case was that the amount spent by Darshak on publicity and sales promotion should be added to the assessable value of the goods under Rule 5 of the Central Excise (Valuation) Rules, 1975. The Commissioner concluded that the appellants reduced and ultimately stopped their advertisement expenses as part of a well-thought-out policy and that the expenses incurred by Darshak should be added to the assessable value. The Tribunal upheld this view, reasoning that the expenditure on advertisements and sales promotion incurred by Darshak was part of a package deal for the revival of the appellants' factory. This expenditure was considered an additional consideration that should be reflected in the price, supported by the Supreme Court's judgment in Metal Box India Ltd. v. Collector, 1995 (75) E.L.T. 449.

3. Sustainability of Duty Demand under Proviso to Section 11A:
The appellants argued that they had not willfully suppressed any material facts from the department and had made their balance sheet available. However, the Tribunal noted that the appellants' mere negative response to the questionnaire in the price lists did not amount to full disclosure of information. The Tribunal found that the demand for duty under the proviso to Section 11A was sustainable due to the lack of documentation regarding the package deal and the shifting of selling costs to Darshak.

4. Justification of Penalty and Confiscation:
The Commissioner imposed a penalty of Rs. 10 lakhs on the appellant and ordered the confiscation of land, building, plant, and machinery. The Tribunal found the penalty amount to be on the higher side and reduced it to Rs. 2 lakhs. The confiscation order was set aside due to the lack of precise grounds in the adjudication order for such confiscation.

Conclusion:
The Tribunal upheld the addition of the expenditure on advertisement and sales promotion incurred by Darshak to the assessable value of the goods. The demand for duty under the proviso to Section 11A was found to be sustainable. However, the penalty was reduced to Rs. 2 lakhs, and the confiscation of land, building, plant, and machinery was set aside due to procedural infirmities.

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