TMI Blog2006 (8) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... wholesale sales. The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sales may be few or scanty does not alter the true position. That being so, there is no scope for making any addition as done the Central Excise Authorities and upheld by CEGAT. In view of the above-said findings it is not necessary to consider the question whether the extended period of limitation applied. The appeals deserve to be allowed which we direct by setting aside the impugned orders of CEGAT. - 43-44 of 1998 - - - Dated:- 14-8-2006 - Arijit Pasayat and Tarun Chatterjee, JJ. [Judgment per : Arijit Pasayat, J.]. - Challenge in these appeals is to the orders passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Bombay (in short 'CEGAT'). While appellate order dated 13-6-1997 is the subject-matter of challenge in Civil Appeal No. 43 of 1998, the other appeal relates to the order dated 28-11-1997 passed on an application for rectification of errors filed by the appellant. 2. Background facts in a nutshell essentially are as follows : The appellant-company, incorporated under the Companies Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1991 pointing out that the price list, submitted by the appellant had been approved by the Department. The stand of the appellant was not accepted by the Collector and Order-in-Original confirming the show-cause notice was passed. Reference was made to the statement of Mr. R.S. Guard, General Manager Marketing of M/s. Darshak Ltd. to the effect that upward trend in expenses for publicity was attributable to increase in sales. Though the buyer was not incurring any advertisement, expenses on their behalf under any express or implied instructions, yet the fact that, the advertisement expenses by the appellant were reduced/stopped indicated that the same was part of a well thought out policy. M/s. Darshak Ltd. was a customer of the appellant since 1985. Expenses for advertisement and sales promotion were exclusively made by M/s. Darshak Ltd. which led to increase in volume of sales. Expenses on advertisement are unavoidable for marketing the goods irrespective of the fact as to who incurs the expenses. It was held that once it is established that the expenses for advertisement are additional considerations, the, question of related person is immaterial. It was a case of implied instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the findings of the Revenue authorities on the question of valuation as well as suppression. However, the quantum of penalty was reduced to Rs. 2 lacs from Rs. 10 lacs, it was noted by the CEGAT that the reasons why M/s. Darshak Ltd. came to make a bulk purchases resulted from economic crisis, as bulk purchase was one of the methods of rehabilitation. Brand name "Yera" is owned by the appellant and packing is done by M/s. Darshak Ltd. It is clearly indicated that the appellant, was the owner. The advertising expenses by M/s. Darshak Ltd. are nothing but a deal for revival of the appellant's factory. Reference was made to the accepted position that if M/s. Darshak Ltd. was not to make bulk purchases the appellant would have incurred advertisement expenses to promote sales. It was held that if price is not the sole consideration, then additional consideration has to be included in assessable value. Though M/s. Darshak Ltd. is not a favoured buyer/related person, that is really of no consequence. Since the response of the appellant, was 'No' to question No. 19 in questionnaire in the price list. Section 11A has been rightly invoked. Reference was made by the CEGAT to Rule 5 of Valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted persons to the appellant. In the Collector of Central Excise, Baroda v. Besta Cosmetics Ltd. [2005 (3) SCC 792] this Court held that where advertisement cost is incurred by the manufactures/customers compulsorily or mandatorily and where manufacturer has enforceable legal right against the customers to insist on incurring of such advertisement expenditure by the customers, the advertisement cost would be includible in the assessable value. In Besta Cosmetics case (supra) it was observed by a three-Judge Bench that without affirming the view taken in CCE v. Surat Textile Mills Ltd. [2004 (5) SCC 201] it is clear even on the basis of the judgment that the agreement should give the manufacturers/marketing agent, the discretion whether or not to advertise the assessee's product. There was no enforceable legal right with the assessee to insist on the advertisement under the agreement. In the instant case there was no finding recorded by CEGAT that the assessee had any enforceable legal right. On the contrary the CEGAT proceeded on the basis that till 1987 the assessee was incurring the expenses. The circumstances under which M/s. Darshak Ltd. gave an assurance of bulk purchase and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the advertisement which the dealer was required to make at its own cost benefited in equal degree the appellant and the dealer and that for this reason the cost of such advertisement was borne half and half by the appellant and the dealer. Making a deduction out of the trade discount on this account was, therefore, uncalled for. 6. As to the after-sales service that the dealer was required under the agreement to provide, it did of course enhance in the eyes of intending purchasers the value of the appellant's product, but such enhancement of value enured not only for the benefit of the appellant; it also enured for the benefit of the dealer for, by reason thereof, the dealer got to sell more and earn a larger profit. The guarantee attached to the appellant's products specified that they could be repaired during the guarantee period by the appellant's dealers anywhere in the country. Thus, though one dealer might have to repair goods sold by another dealer and incur costs in that, regard, he also had the benefit of having the goods he sold reparable throughout the country. The provision as to after-sales service, therefore, benefited not only the appellant; it was a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit, arising from post-manufacturing operation, namely selling profit. The section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. As already stated it is not necessary for attracting the operation of Section 4(a) that there should be a large number of wholesale sales. The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. The mere fact that such sales may be few or scanty does not alter the true position. 14. That being so, there is no scope for making any addition as done the Central Excise Authorities and upheld by CEGAT. In view of the above-said findings it is not necessary to consider the question whether the extended period of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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