TMI Blog1987 (11) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... is regarding valuation of their goods for the purpose of assessment of central excise duty. The period of dispute is from 18-3-1978 onwards. During this period, Crompton were the principal distributor of the assessee. They lifted around 80% of the assessee s production. As per agreement between the two parties, Crompton kept Rs. 15 lakhs with the assessee as a security deposit. During the period from 18-3-1978 to 13-8-1978, the assessee was manufacturing two types of goods - (1) Crompton branded goods which were sold only to Crompton; and (2) Toshiba branded goods which the assessee sold to others through its own marketing organisation. Crompton never purchased any Toshiba branded goods. During 1975-78 disputes arose between Crompton and the assessee. Crompton stopped purchasing goods from the assessee. The assessee suffered heavy losses. There was litigation between the two parties and ultimately the dispute was referred for arbitration where it is now pending. Because of the losses, the assessee became a sick unit. Public financial institutions, ICICI IDBI, stepped in and at their instance the assessee company under-went a major re-structuring. Crompton acquired 10% shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to make it a fully commercial price under Rule 5 of the Central Excise (Valuation) Rules, 1975. 5. The assessee s prayers in their one appeal as now pressed, before us are as under :- (1) For the earlier period, i.e., upto 24-3-1982, the finding of the Collector that Crompton was not a related person of the assessee should be upheld. But since the provisional assessments, for whatever reason provisional, were provisional for all purposes, the time bar of six months for consequential refunds applied by the Collector (appeals) should be removed; in other words, consequential refunds, upon re-determination of assessable values by the Assistant Collector under Section 4(l)(a), should accrue to them right from 18-3-1978. (2) As per the directive contained in the judgment, dated 5-8-1987 of the High Court of Kerala on the assessee s O.P. Nos. 4433 7561 of 1982, the Tribunal should clarify that equalised octroi is admissible for deduction from the sale price. (3) For the period from 25-3-1982 onwards, the assessee accepts the position that Crompton was its related person. The assessee stated before us that upto 24-3-1982, their sale prices to Crompton were ex-factory and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We put this judgment to the learned representative of the department and asked him to show as to what interest the assessee had in Crompton s business. The learned representative of the department stated that from 14-8-1978 onwards, the assessee manufactured only Crompton branded goods all of which were sold to Crompton only; the assessee was entirely dependent on Crompton s marketing network and expertise and all advertisement and sale promotion expenses were met by Crompton which caused a lot of savings to the assessee in not having to maintain its own marketing net work and publicity drive. This, according to the learned representative of the department, was the assessee s interest in Crompton s business. He added that this argument advanced by him was a new one which had not been considered by the Supreme Court in the ATIC case aforesaid and, therefore, the Tribunal need not feel bound by the ATIC case judgment. 7. On careful consideration, we find no force in the new plea of the learned representative of the department. The case before us is of manufacture and sale of branded goods where the brand name belonged not to the manufacturer but to the customer. It is in the very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond part of Section 4(4)(c) i.e., as a relative and a distributor. 9. The learned representative of the department then pleaded that when, from 14-8-1978, Crompton virtually controlled the assessee unit, Crompton became the real manufacturer of the lamps and the assessee company became only a dummy of Crompton. At this, the assessee was quick to point out that though there was an allegation to this effect in the show cause notice, the adjudicating Assistant Collector himself did not pursue it. Consequently, there is no finding of fact on record that the assessee produced the goods on Crompton s account or that property in the assessee s raw-materials, machinery and finished goods vested in Crompton or that the assessee company was only a facade created to under-value the goods. In fact, the assessee company had existed for 10 years or more before Crompton acquired 10% shares in it and appointed its 4 Directors, Chief Executive and Works Manager. In the circumstances, it is not possible to re-surrect the show cause notice allegation which the Assistant Collector himself had dropped during adjudication. The assessee stated that prices of their goods sold to Crompton had been determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited case did not apply. Regarding salaries of the Chief Executive and the Works Manager of the assessee company being paid by the Crompton, the assessee had no submission to make. 12. On careful consideration, we agree with the assessee that the first two elements - the security deposit and Crompton spending on marketing and sales promotion of its branded goods - did not amount to any extra consideration accruing from Crompton to the assessee. But the third element - the salaries of the Chief Executive and the Works Manager -did. These salaries have to enter the manufacturing cost of the goods and since they were paid separately by the customer, these have to be added to the assessable value of the goods under Rule 5 of the Central Excise (Valuation) Rules, 1975. 13. The only other point that needs to be looked into for the period prior to 25-3-1982 is the question of time bar. It was the common ground of both parties before us that the assessments were provisional under Rule 9B of the Central Excise Rules, 1944. The department s point is that they were provisional only for the disputed issue of post-manufacturing expenses and not for the disputed issue of related person and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly point which we are required to clarify, in pursuance of the Kerala High Court order, dated 5-8-1987 on the assessee s writ petition, relates to deduction of equalised octroi. The learned representative of the department stated very fairly that he had no objection in principle to equalise octroi being deducted from the assessable value. He pointed out that in the order-in-original, the Assistant Collector had declined to exclude equalised octroi not on the ground of principle but because the assessee had failed to produce the evidence of payment of octroi before him. We agree with the learned representative of the department. We order that subject to verification of the amounts by the Assistant Collector, equalised octroi should be excluded, from the assessable value. 15. To sum up, our orders are that ; (1) Prior to 25-3-1982, Crompton was not a related person of the assessee but the department would be entitled to add the amounts of salaries of the Chief Executive and the Works Manager of the assessee towards the assessee s price realisation from Crompton on pro-rata basis. (2) Consequential refund on re-determination of the assessable value by the Assistant Collector wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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