TMI Blog2008 (10) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Pawan Kumar Agarwal, husband of Mrs. Kala Kejriwal s sister, as its two partners. M/s. National Drinks, Varanasi were the transporters with whom VBCL had an agreement for transportation of aerated water crates to the dealers and subsequently M/s. AMAS entered into an agreement with M/s. National Drinks for transportation. During the period of dispute, M/s. VBCL were collecting from their dealers additional charges of : (a) Rs. 10 per crate of 24 bottles and Rs. 5 per crate of 12 bottle as crate hire charges and (b) 8 per crate as transportation charges. Besides this, AMAS were collecting from all the dealers, including the dealers to whom the crates were being sold by VBCL directly, an amount @ 11.50 per crate as advertisement and sales promotion expenses on the ground that they were organizing the sales promotion and advertisement activities at local level in respect of the goods. The Revenue s allegation is that AMAS were doing this as per their tacit understanding with VBCL, as VBCL, as franchisee of Coca Cola India Ltd., had an obligation in this regard. The Revenue, therefore, has alleged that VBCL and AMAS are related persons within the meaning of this term, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iwal, partners of AMAS and penalty of Rs. 10,00,000/- on Shri K.L. Morarka, partner of M/s. National Drink. It is against this order that the six appeals have been filed. 2. Heard both the sides. 2.1 Shri B.L. Narsimhan, Advocate, the learned Counsel for the Appellants made the following submissions : (1) VBCL and AMAS are two totally different and independent entities. There is no evidence of any kind of financial flowback from AMAS to VBCL. The fact that two partners of AMAS namely Shri Kamlesh Morarka and Shri Pawan Agarwal are relatives of Mrs. Kala Kejriwal, Director of VBCL is of no relevance. (2) There was no agreement between VBCL and AMAS legally binding AMAS to incur advertisement expenses. If AMAS on their own were incurring expenditure for promoting the sales of the goods manufactured by VBCL the advertisement expenses, even if recovered by AMAS from dealers, cannot be added to the assessable value of the goods manufactured by VBCL. (3) There is absolutely no evidence of any mutuality of interest between VBCL and AMAS just because the price at which VBCL sold the goods to AMAS is lower than the price at which the same goods were resold by AMAS to their buyers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CL are related persons . 3.1 As regards M/s. National Drinks, the allegation against them is that earlier they entered into an agreement with VBCL and subsequently when AMAS became VBCL s Distributor, they entered into similar agreement with AMAS for transportation of the goods manufactured by VBCL from the place of removal to the dealer s premises and that they connived with VBCL in inflating the transport charges. 3.1.1 Transport charges were being received from the dealers at the rate of Rs. 8/- per crate whose deduction had been claimed by VBCL in the price list effective from 1-3-94 filed by them and they had clarified to the Department that they have entered into an agreement with M/s. National Drinks for payment of Rs. 8/- per crate, irrespective of the distance for transportation of their product, which they charge from their customers and pay to the transporter as such. When as per the provisions of Section 4 of the Act, as it stood during the period of dispute, the transport charges from the place of removal to the place of delivery were not includible in the assessable and in terms of the Hon ble Supreme court s judgment in case of Baroda Electric Meters v. CCE, Vad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collecting its burden from the dealers obviously benefiting the assessee by way of enriching the marketability of their product. The work of advertisement has not been done on principal to principal basis. It has been admitted by the assessee that they have entrusted the advertisement work to AMAS. Thus there exists mutuality of interest in the business of each other making AMAS a related person within the meaning of Section 4 of Central Excise Act. The above observations of the Commissioner do not make any sense at all. Nowhere in the adjudication order any evidence indicating that the sales promotion and advertisement of the goods was being done by AMAS on the instructions of VBCL, has been brought on record. Moreover when brandname - owner of the aerated waters being manufactured by VBCL are Coca Cola India, VBCL do not get any exclusive gain by sales promotion and advertising being done by AMAS, while increase in volume of sales would benefit AMAS and the dealers also. We, therefore, hold that there is no basis for treating VBCL and AMAS as related person . 3.2.2 Para 2.4.3.1 and Para 5.2.3.2 of the impugned order mentions that it is on record that VBCL were not selli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been consistently held by the Apex Court and this Tribunal that such advertisement charges would not be includible in the assessable value. In this case, it is not the Revenue s case that VBCL have agreement with AMAS making it mandatory for AMAS to incur certain quantum of expenditure on advertisement and sale promotion of the goods manufactured by VBCL or that there is other evidence indicating that AMAS are incurring advertisement expenses and recovering the same from the dealers, on instructions of VBCL. If AMAS, with the dealer s consent incur certain expenses for sales promotion and advertisement of the goods, which will benefit AMAS as well as the dealers and AMAS share the advertisement expenses with the dealers, such advertisement expenses cannot be added to the assessable value of the goods manufactured by VBCL. We, therefore, hold that the advertisement charges being recovered by AMAS from dealers at the rate of Rs. 11.50 per crate are not includible in the assessable value. 6. In view of our above findings, the impugned order is not sustainable and the same is set aside. The appeals are allowed. (Pronounced in open court on 3-10-2008) - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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