TMI Blog2022 (2) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... en by merely relying upon extracts of statements of the KMPs of the Appellant manufacturer confirming receipt of specifications, formulations and brand name from the buyer. We find that these statements were just a reiteration of the understanding between the Appellant and the buyer, as per the said agreement. Moreover, the statements of Binita Agarwal, Manager Accounts and RanjitNath, Accounts Assistant relied upon by the revenue also confirms that the raw material and packaging material required for manufacture of the final products were directly procured by the Appellant; the art work and design work on the packaging material was only approved by the buyer but the cost thereof was incurred by the Appellant; the transaction was on a principal-toprincipal basis and the price charged was the sole consideration for sale - the submission of the Appellant that revenue could not have done a pick and choose from the statement of the same very person, instead of accepting or rejecting the statement in totality, appears plausible. There is also no allegation or evidence of any flow back or extra-commercial consideration from the buyer to the Appellant aside of the negotiated price so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 22 December 2011 passed by the Ld. Commissioner of Central Excise and Service Tax, Guwahati and therefore, being taken-up together. Excise Appeal No. 126/2012 has been filed by the Appellant Company against confirmation of differential excise duty demand of ₹ 2,29,53,977/- along with interest and equivalent penalty whereas Excise Appeal Nos. 127 and 128 have been filed by the two Directors of the Appellant Company against imposition of personal penalty of ₹ 2,00,000/- each. 2. Briefly stated, the facts of the case are that the Appellant Company is a manufacturer of Cosmetic and Ayurvedic products (final products) having its manufacturing facility in the North-East operating under exemption Notification No. 32/1999 dated 08 July 1999. The Appellant Company entered an agreement dated 3 December 1999 with the buyer, M/s. Emami Limited for manufacture and sale of the said final products bearing the brand name Emami and Himani owned by the buyer. Excise duty on the said final products was discharged by the Appellant Company on the basis of the negotiated rates i.e. the transaction value with the buyer under Section 4(1)(a) of the Central Excise Act, 1944. It has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved by the buyer but the cost of procuring such packaging material along with design and artwork was also borne by the Appellant himself and the same is evident from para 13 of the O-I-O and the statement of Smt. Binita Agarwal. Therefore, the provision of these specifications/formulation is only a condition to the contract and not an additional consideration. B. The revenue has also not adduced any evidence of any flowback of consideration from the buyer to the Appellant and neither is there any allegation of the Appellant and the buyer being related. Therefore, excise duty was correctly discharged by the Appellant on the transaction value being the sole consideration for sale. Rule 6 of the Valuation Rules has no application to the facts of the present case as specifications are not included therein (refer illustration 2) and the Commissioner s finding at para 15 of the OIO as regards brand name/trade name being covered by Clause (i) of Rule 6 at para is completely contrary to the Circular dated 1 July 2002 and the following authoritative pronouncements: (i) Sidhosons Anr. Vs. Union of India Ors. 1986 (26) ELT 881 (S.C.) (ii) Kemwell Pvt. Ltd. Vs. Commr. of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed on the part of the Appellant. Moreover, records were audited from time to time and the agreement dated 3 December 1999 was always in the knowledge of the authorities. Hence, the entire demand is hit by limitation. G. Assuming without admitting that the provisions of Rule 6 are at all applicable in the instant case with respect to R D expenses incurred by the buyer, the Ld. Commissioner could not have discarded the certificate of the expert prorating such expenses incurred during the relevant period to the total turnover of the buyer, and quantifying the differential duty at ₹ 1,01,228/- by applying the same proportion to the transaction value of the goods cleared by the Appellant on the superfluous ground that the brand name is the outcome of the expenditure incurred by the buyer consistently over years, more so when the value of such brand name/trade name could not otherwise be included in view of the Circular dated 1 July 2002. H. Facts and circumstances of the case does not justify imposition of any personal penalty upon the Directors of the Company, under Rule 26 of the Central Excise Rules 4. Shri K.Chowdhury, Ld.Authorized Representative for the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the Appellant manufacturer was upon the revenue and the same had to be discharged through cogent evidences. The learned Commissioner has sought to discharge the said burden by merely relying upon extracts of statements of the KMPs of the Appellant manufacturer confirming receipt of specifications, formulations and brand name from the buyer. We find that these statements were just a reiteration of the understanding between the Appellant and the buyer, as per the said agreement. Moreover, the statements of Binita Agarwal, Manager Accounts and RanjitNath, Accounts Assistant relied upon by the revenue also confirms that the raw material and packaging material required for manufacture of the final products were directly procured by the Appellant; the art work and design work on the packaging material was only approved by the buyer but the cost thereof was incurred by the Appellant; the transaction was on a principal-toprincipal basis and the price charged was the sole consideration for sale. Therefore, the submission of the Appellant that revenue could not have done a pick and choose from the statement of the same very person, instead of accepting or rejecting the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ltd. 1985 (22) ELT 324 (S.C.) (ii) Sidhosons Anr 1986 (26) ELT 881 The Hon ble Supreme Court in these cases have conspicuously held that enhancement in the value of goods by reason of the application of the brand name is because of the augmentation attributable to the value of the goodwill of the brand name, which does not belong to the manufacturer and which added market value does not go into its coffers but accrues to the buyer to whom the brand name belongs and to whom the fruits of the goodwill belong. Excise duty cannot be assessed on the basis of the market value obtained by the buyers who also add to the value of the manufactured goods the value of their own property in the good-will of the brand name. Although, these decisions were rendered in the assessable value regime, the ratio thereof has been followed even under the transaction value regime. We notice that similar facts as is involved in this proceeding had fallen for consideration of the Tribunal in the case ofCCE Vs. Hagel Capsule Industries Ltd. reported in 2007 (220) ELT 220.In this case also the Respondent therein was engaged in the manufacture of medicines as per the orders and specifications pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that it is not the case of the revenue that the buyer is the manufacturer of the said final products, so as to justify levy of excise duty on the value addition in the hands of the buyer. Rule 6 of the Valuation Rules only provides for inclusion of money value of the additional consideration flowing directly or indirectly from the buyer to the manufacturer and does not authorize recovery of excise duty with reference to the buyer s selling price. There is considerable force in the submissions of the Appellant that levy of excise duty with reference to the buyer s selling price is permissible only in terms of Rule 9 of the Valuation Rules, for which essential pre-requisite is that the Appellant manufacturer and the brand name owner should be related, which is not at all an allegation in this proceeding. 10. We are also in agreement with the contention of the Appellant that the demand for differential duty is unsustainable even on the point of limitation given that the Appellant was entitled to full refund of the excise duty paid in cash under Notification No. 32/1999 as evident from the sample refund orders. The Ld. Commissioner has rejected the plea of revenue neutrality o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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